Moving Logistics

4 months ago . 6 min read
MP
Marella Putri
Writer at Forbes Indonesia
Moving Logistics
Tiger Fang, founder and CEO of Kargo. Photo courtesy of Kargo.

Research by Mordor Intelligence expects the Indonesian freight and logistics market value to reach $383 billion by 2023. A large part of the sector is road freight forwarding which is heavily dependent on trucks. Although truckers play an imperative role in the distribution flow of manufactured products, they have yet to truly benefit from its growth. The sector is still poorly digitized, allowing its current business framework, which lacks transparency, is fragmented, inefficient, and inhibits truckers from optimizing their income potential. Online trucking marketplace, PT Kargo Online System (Kargo), has developed its platform to help address this challenge to enable truckers to improve their livelihoods and to improve the efficiency of road transportation logistics.

Although Kargo is a relatively new player, only starting its operation in the first quarter of 2019, the startup is built by a strong team. One of the cofounders, Tiger Fang, was a general manager for Uber in Western China, before coming to Indonesia in 2017 and leading Uber to scale its operations across the country. Before Uber, he also held key positions at Rocket Internet and Lazada in Thailand and Vietnam. The turning point for Tiger and his team followed Grab’s acquisition of Uber’s Southeast Asia operation in 2018. Despite many opportunities to work at other big companies (including Grab), the team, which consisted of around 150 people then, wanted to do something more entrepreneurial and were motivated to build a startup. Tiger eventually met Yodi Aditya, who has a strong tech background and they cofounded the business. They now lead the company as CEO and CTO, respectively.

Initially, they visited one city after another, talking to truck companies, drivers, warehouses and industrial area players to understand their problems and pain points. Through this research, they saw several major issues in the trucking space. In addition to identifying how truckers’ profit is cut by the number of brokers involved in an order, they also saw truckers lack access to working capital and wait for months to receive payments which are needed to cover expenses. In Indonesia, trucks are also very inefficiently used, Tiger says, often stuck waiting long periods for their next job or carrying empty hauls on return journeys.

“We believe that if we can provide better earnings for these trucking companies, and hopefully, that means they will be able to pay their drivers better. We will make trucking a better profession than it is today. It’s one of those very important professions that no one thinks about. We’re all sleeping when the trucks are moving, but almost everything that you have is delivered by trucks, you just don’t know it,” Tiger says.

Kargo’s trucking marketplace platform connects shippers and customers with trucking companies. Orders from customers will be broadcasted on the marketplace. There, verified vendors and trucking companies can bid to drive down the price. The bidding system is applied because many circumstances can affect pricing, leaving it entirely to the market to decide a fair price. For instance, someone who can accept the job as their backhaul likely offers a lower price than someone who needs to make a round trip. The price will go up when most trucks are occupied, and vice versa. After the customer chooses the most suitable bid for their order, they will have to make payment to Kargo’s escrow account and can track their order throughout the trip. Vendors will receive the payment within three working days after the delivery is completed and approved by the customer, much faster than the conventional 90-day process. Recently, Kargo also enabled truckers to receive advance partial payment upfront after loading the goods, with the remaining payment to be collected after the delivery completion. Tiger says that Kargo takes around 10% cut from the agreed price.

During the first year of its operation, Kargo focused only on wing box truck types and served only the fast-moving consumer goods (FMCG) industry. However, starting this year, it is expanding its services to all types of trucks and industries–from ecommerce, textiles, agriculture, automotive, pharmaceutical, cigarettes, to mining. Kargo’s customer scale ranges from small to medium businesses to FMCG giants such as Amatil Coca-Cola (which has become one of Kargo’s strategic investors), Kino Indonesia, Mayora Indah, Procter & Gamble Indonesia, Unilever Indonesia, DHL Express, JD.ID and Lazada.

By July, Kargo had a network of 50,000 trucks from more than a thousand trucking companies registered on its platform. It mostly handles middle-mile delivery, moving goods from warehouses to distribution centers, and to retailers. Kargo says that an FMCG shipper can order around 100 trucks to ship their products on a typical day. While total shipments can’t be disclosed, Kargo claims that the number has grown by 37% on average from month-to-month. It also experienced brief contractions during the early months of the COVID-19 outbreak. However, starting at the end of the second quarter, Kargo has seen its growth rate bounce back close to 40%.

The trucking business was one of the severely impacted spaces during the pandemic, with up to a 60% decline from an average volume in normal conditions, vice-chairperson of Indonesian Trucking Association said in a statement. At the same time, Kargo saw its registered truckers grow double-digit month-over-month as they were trying to get more orders. To fill the gap, Kargo looked for more demand by delivering imported personal protective equipment and consumer staples as well as finding charitable organizations that needed food deliveries to hospitals.

Even amid the challenging times, Kargo’s vision to solve logistics challenges in a market as big as Indonesia, powered by its experienced team, has attracted investors’ confidence. In April, Kargo managed to raise a $31 million series A capital injection led by Tenaya Capital and other participating investors. Previously, in its $7.6 million seed round in May 2019, Kargo was supported by Uber cofounder Travis Kalanick’s 10100 Fund, Patrick Walujo of Northstar Group, and CEO of Cardig International Nurhadijono Nurjadin. A month afterwards, Kargo announced it was raising a $1 million logistics relief fund (LRF) to support its truckers’ welfare and ensure essential supplies movement in Indonesia.

“We have partners with alternative lenders and banks to provide working capital cash flow, we call it supply-chain financing to our truckers. That’s one of the areas that we’re really excited about. If truckers have less money tied up, they can reinvest the money into getting more trucks onto our platform or paying the drivers more. That’s our hope with the financing program,” Tiger says. The LRF itself came from a portion of Kargo employees’ salaries, and Tiger himself contributed 100% of his salary.

Tiger envisions Kargo as a full-stack platform for trucking, a one-stop-shop for all the truckers in Indonesia, with a goal to bring down Indonesia’s logistics cost. He believes that the way to achieve that is by complementing the physical infrastructures that the government has been massively building, with a digital infrastructure that can empower customers and achieve efficiencies through technology.

MP
Written By
Marella Putri
Writer at Forbes Indonesia
Topics
Technology