Business plan for fleet x-change provision of freight exchange services

Abstract

The Indian road transport industry, which accounts for 60% of the Indian freight transport industry, is a highly fragmented market with multiple small truck operators, brokers and booking agents operating in the industry. The industry is characterized by low prices but it is not efficient by any means. The pricing is not transparent and is controlled by middle-men including brokers. Information asymmetry leads to operational inefficiencies such as long time waiting time for loads, high margins to middle men, lower number of trips, low guarantee of return trips etc. The industry is in need of an organized player to bring in competition and increase transparency in pricing while ensuring that the needs of all the existing stakeholders in the industry are addressed. It is to address this need that Fleet Xchange, a road freight service exchange has been proposed. Fleet X-change is a virtual commodity exchange which brings together the truck user (Corporate, Operator in need of trucks or SMEs) in contact with truck operators and brokers. Through competitive bidding for the services available, the best price for a truck service is obtained. Unlike previous attempts at such exchanges, Fleet X-change attempts to include the broker in the overall transaction, wherein the local broker is incentivized with promise of more transactions and an access to a larger market across the country. Fleet X-change is expected to improve the operational efficiency of freight movement across the country by reducing the waiting time of trucks, more trips in a fixed period of time and access to larger customer base for truckers. Fleet X-change will have a nation-wide presence with agents in 100 locations within the next 3 years of operation. Fleet X-change will be managed by a professional management team led by Kaushik Somanathan, a serial entrepreneur who founded a start-up Novire which developed vehicle management system catering primarily to the logistics industry. Kaushik will also be joined by Vinod, Anindya and Narendra. Vinod has 13+ years of experience spanning across multiple areas of management including entrepreneurship. Vinod has experience in the financial services space. Anindya has experience of over 12 years in the realization of enterprise systems. He is currently involved with a securities and mutual funds management platform for a large multi-national finance firm. Narendra has more than 14 years of experience in IT and is currently working as AVP for Deloitte Consulting responsible for delivery and account management. From a marketing standpoint, SMEs and corporate will be approached through a direct sales force while the brokers and SMEs will approached through vernacular media. F Fleet X-change X is expected to generate profits from the third year of operation and is also expected to generate positive cash flows from around the same time. Fleet X-change will need an initial funding of INR 3.29 Crores apart from line of credit for INR 4.511 Crores. It is expected to generate revenues of INR 7.25 Crores in the first year of operation which is expected to increase to INR 14.2 Crores INR by the second year of operation. The net profit margin is expected to be 21% in the third year. Repayment of the loan is expected to begin in the fourth year of operation when the cash flows will be positive through the year