While the U.S. spends about 7.5 percent of its GDP on logistics and transportation, many emerging market economies spend much more on this sector. Because of this cost structure, goods from emerging markets are often uncompetitive on the global markets and unaffordable in their local markets.
Lori, a Kenya-based e-logistics startup, is looking to drive efficiency in the trucking industry by seamlessly connecting cargo owners, shippers and transporters via a digital freight marketplace.
Josh Sandler, CEO and co-founder of Lori, explained that the startup idea evolved from his graduate school experience writing a dissertation on development economics in East Africa. “We were doing a project with the Kenyan government on supply chain analysis in agriculture. There, I saw that you could buy a mango at the farm for half a penny, when the same mango would cost you 60 cents at the grocery store. I realized that the cost of logistics here is driven by a lack of coordination across these systems. The current complexity of the system is apparent – and the opportunity to streamline it and cut costs for everyday consumers is even more so,” Sandler said.
The opacity-driven chaos in the logistics market results in accusations that echo between shippers and carriers, with each pointing fingers at the other for the extended delays and inefficiencies in freight movement.
“In Kenya, global forwarders like DHL have a list of hundreds of transporters who could be a local partner for moving cargo. And when there’s cargo, they’ll call 60 of them, about 40 will pick up the call, 20 will say they’re available, price negotiations will push that to 10, and in the end, only about three transporters show up at the right time on the right day,” said Sandler.
However, the cargo owners almost always blame the transporters for the delays. Even when a few carriers do turn up at the port or the loading facility on time, they get to hear that the cargo is not ready for hauling. Since there is no centralized coordination between parties through data sharing, these carriers may end up waiting three to four days to make their haul.
“Due to this, you see immense costs added to the system. It is here we saw a huge opportunity to come in, provide centralized coordination, create flexibility in the system where it never existed, and build a system that will ensure that every truck gets matched to the right cargo ready for hauling,” said Sandler. “You can then load quicker, haul quicker, improve efficiency by increased asset utilization and finally, reduce costs.”
Sandler mentioned that Lori was developed as a system for frontier and emerging markets, where technology alone isn’t sufficient and thus can capture data and make decisions within such an environment. Though the technology behind creating a digital logistics platform is somewhat similar in more developed economies as in Africa, the needs of frontier and emerging markets are particular and require technology and processes that are specific to those ecosystems. There are countless examples of players like Didi in China or Careem in the Middle East proving the importance of local knowledge and customization.
“In East African markets, we lack fluidity of information, visibility and transparency into operations. When Lori first launched, we spent a lot of time on the ground, working with the biggest cargo owners in the region like Kuehne + Nagel and Cargill, and working with the transporters. We used that experience to drive the business model and work out a viable solution,” said Sandler.
Lori has also been actively seeking feedback from its customers. Jean-Claude Homawoo, Lori co-founder and chief product officer, explained that one of the core teams within the startup was their customer success team. “We spend time meeting with shippers and carriers every week. And this touches every aspect of our business – from the core operations of matching carriers and shippers, to how we provide our customers with data,” he said.
Homawoo added that optimizing an industry that is so fundamental to the economy and ingrained in its well-worn habits, requires patience and a user-first iterative approach to developing technology solutions. The opacity within such legacy models is one of the primary challenges that Lori as a startup has to contend with regularly. However, taking on this challenge has allowed Lori to expand quickly; the company now has a presence across six African countries.
What perhaps would be remarkable testimony to the success of the company is the fact that more than 40 percent of certain key commodities moving through Kenya to Uganda now runs through Lori. “We have reduced expenses drastically in the system, especially in inter-regional logistics. We have brought down the direct costs of moving bulk grains in Uganda by 18 percent and some additional indirect costs. In essence, our objective is to bring down product costs by decreasing the cost of logistics,” said Sandler. “We strongly believe our processes, systems and technology can be adapted across other frontier markets and this Kenyan-developed system will have global applicability.”