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Creating a Technology Backbone for MSMEs in India

Purnendu Shekhar
4th May, 2020

Purnendu Shekhar, Founder Cogoport spoke to Dr. Rakesh Singh, SCMPro Knowledge on how they created a technology platform for MSMEs

In India, technology penetration in supply chains is low. Even more so when it comes to the MSME sector. A combination of affordability and inability to keep pace with technology deters many MSMEs from adopting technology. Cogoport has created a technology platform that helps MSMEs Import and export products even without in-house logistics expertise, discover freight rates, book containers and track shipments in real time.

What is your view on the Indian Logistics Market? What are the trends you are seeing?

The Indian logistics market is growing at an astonishing pace. According to the Economic Survey 2017-18 of India, the logistics market is expected to touch nearly $215 billion by 2020. However, the logistics industry was a conventionally run industry marred by many operational inefficiencies in the past. Many small players who shunned the use of technology always dominated it.

Many such inefficiencies have been brought to limelight by the ongoing COVID-19 situation as nearly three fourth of the logistics companies are claiming to have some form of disturbance in their supply chain process. People and businesses are suffering, as they are not receiving their consignments on time which is affecting their business heavily. The worst part is most of the companies do not have a contingency plan to implement in case of emergencies like this. Corona virus has been successful in showing the vulnerable state of many companies in the Indian logistics market.

Without any doubt, technology is going to play a major role in the logistics industry in the coming future.

However, if the unexpected impact of COVID-19 is ignored, then we can safely claim that the Indian Logistics Market is experiencing a slow turnaround. The Indian Customs Department has plans to fully digitize all the transactions in the coming days. This will not only improve operational efficiency but also improve transparency in the overall process. 

Without any doubt, technology is going to play a major role in the logistics industry in the coming future. For example, many tech companies are inducting Block chain technology into the industry. Apart from digitizing the entire operation, this technology will ensure maintenance of a transparent ledger on all transactions that can be viewed by any stakeholder in the transaction. 

What is the philosophy and approach behind Cogoport? What is the genesis of its evolution? What is the business model? What are the products that you offer?

Today, 90% of all companies are in the category of Micro, Small and Medium-size Enterprises (MSME). They offer 70% of all jobs and generate 50% of the global GDP. In terms of ocean freight, they only represent ~40% of shipped volumes as global average (India 68%) as about less than 1% of the MSMEs trade internationally, mostly because of their limited reach and range, an opaque and complicated shipping process and a lack of an international network through which new customers can be found. The MSMEs receive little attention from logistics providers and shipping lines and are mostly considered an avenue to make up for the substantial margin discounts generally offered the large and ultra-large shippers. Correctly enabled the MSMEs could double their ocean freight footprint over the next 5-10 years, lifting their share of global ocean freight to ~60%. This would deliver a significant contribution to global trade and prosperity and have an impact on the life quality of the more than 4 billion people working in MSMEs.

We started Cogoport to impact the lives of billions of SMEs around the world by bringing data and transparency.

In its own right, this is an exciting problem to solve, and in combination with the challenges of the MSMEs, these problems are both exciting and lucrative to solve. We started Cogoport to impact the lives of billions of SMEs around the world by bringing data and transparency.

We help SME exporters and Importers with their complete logistics requirements with the following products/services:

  1. Discover Freight Rates 
  2. Book and Track Shipment 
  3. Pay Later with up 120 Credit days
  4. Pay in USD and save on margin
  5. Create, Store and Share Trade Documents

How has Cogoport evolved over time? What has been the changing dynamic of the strategy?

The age-old shipping industry is fraught with friction, caused primarily by information opacity. The industry has grown massively with different stakeholders doing their best, but incrementally and without leveraging technology.  

We strongly believe there is a huge opportunity that can be unlocked by changing the way the world moves cargo by designing and refining global freight market leveraging smart technology and smart people

We, at Cogoport, believe the power of real-time infused supply chains can work wonders for our users. Giving accurate insight into every shipment of yours will help you to operate more efficiently.

On founding Cogoport a Minimum Viable Proposition (MVP) was developed and launched to both test the business idea and to gain a foothold in the market. This early effort can be referred to as Cogoport 1.0, a number of key learnings were captured, and key decisions were subsequently made:

  1. We will be a product company
  2. We will be technology-led, not enabled
  3. We will be a platform and our business model will be a marketplace
  4. Restrict the platform to serve the Indian market, only

This led us to validate our MVP, got transacting customers and achieved close to break-even bottom-line; revenue run-rate of $6 mill and gross margin of 7%. At this point in time, we raised our first institutional capital with Accel partners for product development.

Through MVP expansion additional customer insight was earned, which enabled iterative improvements and sequencing towards our current platform; what can be considered Cogoport 2.0, with functionalities such as:

  • Very efficient price discovery with all desired information to book in a few seconds
  • Intelligent Machine to customize and predict
  • Track and trace  
  • The number of Buyers on the platform grew tremendously during 2.0 and our insight on which customers are available for business increased rapidly, enjoying especially the ability to look up rates and the resulting market visibility
  • 8,000 customers discover rates on the platform by themselves on a monthly basis, enabling shippers to adhere to the strict timeline of reverting on the inquiries which they receive from their buyers. We wanted to add more value to our customers. Every time a customer visited Cogoport’s platform we wanted him to achieve a WOW factor.

Lastly, build a small but efficient team that is passionate about working in a growing industry like supply chain and is also an ideal fit for the company.

Version 2.0 proved to be a necessary stepping-stone on our continued journey, and without these efforts, learnings- and new insights, we would not have discovered and validated critical and essential elements of the market, providing us with the base- and opportunity to accelerate Cogoport, while also creating moats towards the competition. 

Cogoport 3.0, the current platform is an inclusive global freight market- and collaboration place, connecting importers and exporters with the service providers moving goods internationally, as well as their consignees. 

There are a number of aggregators coming up. How do you distinguish yourselves?

Currently, many startups have come up in this sector to add value to the whole ecosystem. They have found their unique space by either focusing on the large players or providing a SAAS solution to Freight Forwarders.

Cogoport is a true marketplace for logistics services and is currently focused only to solve the problems of the SMEs. Today we are not just an SME’s logistics partner rather we are his trade partner. Not only we help an SME exporter or importer with his logistics but also with his financial capability by providing him credit facilities. 

What are the major markets and players you serve? How have these firms benefitted?

Currently, we are operating in India and Europe.  We are majorly focused on adding value to SMEs. Since inception, we have achieved the below. 

  1. Containers Sailed 349,704 TEUs
  2. Platform Searches 1,195,738
  3. Signed-up Users 35077

Some of our well-known customers are Range Ceramic, Rajputana Rice. We have been able to reduce their logistics cost by 10-15% and helped them increase their bottom line. Today our customers enjoy up to 120 credit days. This means they have more cash in hand to serve a new customer.

Do you have any examples of how real-time information has helped supply chain performance?

When we talk about supply chain management, it is easy to guess that time is king here. Everyone transports products from one place to another, but what differentiates the best from the rest is the availability of useful ancillary services.

We, at Cogoport, believe the power of real-time infused supply chains can work wonders for our users. Giving accurate insight into every shipment of yours will help you to operate more efficiently.

Such innovation can allow organizations to have a better view of their services and find out the possible loopholes, solve them before they run deep, and affect your sales and goodwill.

It is essential to adjust your marketing goals based on the new demographics to increase your ROI.

For example, in export business, your customer is in touch with more than 15 vendors at any given point of time. In such a scenario, quoting him faster can decide win or lose of a business order. Our ‘Discover Rate’ feature gives the ability to SME exporters to get freight rates instantly so that he can quote his customer faster than his competitors can. He can also take advantage of our ‘Trade Document’ feature to create an instant professional looking Quotation. 

How do you ensure the security of your platform?

Data security is utmost important for our business. To keep the data secured, we use the devops service from AWS and use Rails Framework to manage and store confidential information. 

What are the next game changers for Technology in Supply Chain services?

It has been a long time since industries are trying to digitize their services, not only for their convenience but for their users as well. Supply Chain 4.0 will primarily be about cloud computing and its ability to change the way we look at this sector. The early adopters of it should gain a significant competitive advantage and rope in more customers in no time. 

At Cogoport, we believe that it is imperative to drive the digital growth of the supply chain services too. If we want to achieve it, we would need the help of cloud computing and our ability to handle data in real-time. If we succeed in passing through important information to our users as soon as something takes place, it will benefit their business strategy as a whole.

We have actively taken steps to ensure that our users get the benefit of real-time tracking of their shipment, and chat with the requisite personnel involved in the supply chain process. Additionally, we have utilized cloud computing prowess to let our clients handle their essential documents anytime and anywhere.

Supply Chain 4.0 or Digital Supply Chain will not only drive improved workflow, but it will also reduce the costs associated with the processes. We, at Cogoport, are continually trying to be at the forefront of innovation and provide better services to our customers. We believe that improved integration and real-time information to the users will drive the way forward and open a new dimension for this sector.

What strategic recommendations can you give to supply chain startups?

Supply chain as an industry has a perennial growth. The demand for transportation of goods increases every day as new businesses across the world keep spurting up and existing businesses keep expanding to new hubs. However, on the flip side, the competition in the logistics industry is peaking as more and more supply chain start-ups emerge. For all such start-ups, it is essential to have a well-defined operational strategy to succeed in the industry.

First and foremost, establish your primary and secondary markets. Keep revisiting this every year to cater to the change in the market. Markets in a supply chain industry keep changing constantly along with the changes in the demand and supply of products and the demographics.  It is essential to adjust your marketing goals based on the new demographics to increase your ROI.

The next step is to thoroughly analyze your competitors.  After evaluation, you will be able to clearly define what the USP of your company is, for example, it could be timely delivery or low prices or even delivery to remote places. This should be articulated to the customers in a way that they will choose you over your competitors.

Once you have identified your USP, you should start marketing yourself. Before that, you need to determine your marketing budget and how much will you be spending on each market. Along with your marketing efforts, you should focus on improving the strength of your network. In an industry like supply chain that requires interaction with various people and agencies such as port officials, truck drivers, distributors, customs officials, etc., it is critical to establish good connections with all of them to ensure a smooth operation. 

Lastly, build a small but efficient team that is passionate about working in a growing industry like supply chain and is also an ideal fit for the company.

How is your service useful during a pandemic like during the Covid -19?

On Cogoport, you are not an SME exporter/ importer rather you are a Digital SME Exporter/Importer. Your Entire logistics are taken care of by easy to use technology. Especially during a pandemic situation like COVID-19, where the country is under lockdown and companies can’t operate the usual way, Cogoport acts like a boon for the SMEs due to the following reasons:

  1. It is accessible 24* 7. Working from home is easy using Cogoport
  2. You don’t even need a laptop as it works well on your Smartphone.
  3. You can find freight rates, book containers and track shipment all with a click
  4. The ‘Pay Later’ option ensures an SME has cash in hand especially during this situation where cash is king

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