"Home services a large growth area for Locus," says Nishith Rastogi
Learn the story and motivation behind the technology company Locus that solves last-mile logistics challenges.
Since its launch in 2015, Locus has always been into route optimization. However, in June 2022, Locus announced the launch of an order-to-delivery dispatch management platform during the 2022 Gartner Supply Chain Symposium/Xpo in Orlando, Florida.
We asked the founder and chief executive of Locus, Nishith Rastogi, why, what the need is and what this really means. The conversation also took us deep into the very motivation behind Locus, the complications of last-mile delivery, the need for empathy, the focus on research, the need for increased transaction time, the importance of predictability in customer experience, the rise of home services as a large growth area, the algorithmic intelligence of their solutions, the style of recruiting and the interesting yet-to-launch solutions in their arsenal.
Order-to-delivery dispatch management platform
Delivering the last mile is very different from Locus' first generation of routing solutions that were available in transport management systems designed for large vehicles carrying freight within +/- one day. However, the last mile is carrying a few kgs within the precision of +/- five minutes.
"That requires new tooling, new constraints to solve. When started, we were primarily focused on the algorithms for route optimizations. Over the last couple of years, we looked at what many of our existing clients built around these routing algorithms," Rastogi said.
Now Locus offers the entire stack from order to delivery as one single platform. Any brand starting home deliveries can integrate their current order management systems with Locus to get orders. Then it can use the outsourced delivery model where Locus has many carriers integrated into the platform. The brands can also start doing captive deliveries to further improve their costing or provide customized brand experiences.
"This entire transition of capturing the order, figuring out which channel of delivery to use, optimising channel for delivery, tracking, providing customer experience and support to all the stakeholders, doing the insights and reporting like whether it was delivered on time or what was the proof of delivery and strategic analysis like was the right warehouse used, should we open a new warehouse are now available as one single stack to any company," he said.
When we asked to give us an example, Rastogi took that of the famous grocery delivery company BigBasket.
"BigBasket had manual GPS tracking on the trucks. So, they knew where their trucks were. But every morning there is a different kind of demand in each of the city centres. Previously, they had static routes, for instance in Mumbai, three vehicles for Ghatkopar and four vehicles for Andheri. This is fine when you're delivering to shops. Today companies like BigBasket push our packages to us. This increases randomness in the demand and you cannot use fixed routes which they were previously using," he said.
He described why it is difficult to make route optimization solutions and why some of the available solutions are not really used by stating that "it is very different in theory and on the ground."
"I may think that the problem is that I have 100 grocery deliveries and 10 trucks, what the best truck is. The real problem is that I have 100 orders I don't know how many trucks to use today, what should be the size of the trucks, to begin with?" he said.
He also gave some examples.
"I have to deliver at your home at 9:30 am and but your neighbour has demanded at 11 am. Should it go in the same vehicle? Should the same vehicle come back again? Then, for example, drivers don't like crossing the railway line multiple times. So the first, last and all deliveries should ideally start on the same side of the rails. In certain areas between 7 am and 11 pm certain size trucks can't enter. So either you go in before or you go in after. If a computer doesn't solve this, you have to go back to the manual route which is what was happening?" he said.
He also notes that in logistics and the last mile, it is very important to understand that the buyer of the software is different from the user of the software.
Need for empathy
"Unlike a mobile app on your phone, where you are the buyer and the user is the same, in last mile, the buyer is the chief executive or the chief of the product while the user is the warehouse manager or the delivery agent which creates different constraints," he added.
Another example he gave was of lunch breaks.
"If routing software says take a lunch break from 1 to 2 pm, and puts it, that's not how it works in the real life. In real life, you will take an hour for lunch anywhere between 12 and 3, depending on the deliveries. They would rather finish their delivery by 1.15 and then take an hour over stopping in middle. And if the driver is not following your route, then there is a lack of predictability in the system. So it is very important for software to have empathy for the actual driver and the warehouse staff on the ground," he said.
We asked him how he ensures that the people who create this software have empathy, and he took us back to the very motivation behind his company and the way it operated. Locus understood the demand for route optimization but the problem was that none of the logistics companies was using the software even after buying them.
How it all started
"So the genesis of the company was to make real-world solutions. Our difference is the focus on research. So even as a young company, when we were just 10 people, we had three or four PhDs. Our chief of data science previously worked on the mRNA HIV vaccine, we got neuroscientist, operations research people and computer scientists. We picked multiple optimization models, open them to their core fabric and combined them with full understanding," he said.
While talking about the intelligence of their solutions and the level of analytics and insights they could provide, he noted that they will be soon launching the first routing engine in the world, which tells the dispatch manager why a certain order remained anonymous.
First-ever routing engine in the world
"It is called explainable routing. It's one of the leading areas of research in this field and we are about to launch one of the first production engines in that area, where we can explain to our dispatch manager why a certain order was unallocated," he said.
Again he gave an example.
"When you search something in Google, you get the first result, but you don't know how did that algorithm work? In the case of Google search, it is not important. But in the case of a dispatch manager, it is important to understand how the algorithm works. And that is what is called explainable routing," he added.
While talking about the trends of how many leading brands around the world have started their own home deliveries, he noted that these companies are happy that transaction time, the time delivery personnel takes at the gate, is increasing.
Need for increased transaction time
"We work with one of the biggest clothing retailers in the world for their captive deliveries in the oriental markets. Typically, companies like FedEx and UPS always like to minimize transaction time. This company actually wants to increase that time because when the delivery personnel is delivering, they're collecting feedback about the product from the user, they are collecting input about the future demand. They're not just delivering, they are becoming salespeople. Your delivery is no more your cost centre, it's your primary growth and retention centre," he said.
"It is further validated by the fact that they demanded that the data from the delivery app does not just go to the logistics team, but goes to the product design team because they want input from what customers are saying at the point of delivery," he added.
He also spoke about the most important thing in customer experience to him, even though there are many.
Ability to predictably deliver
"That is not the speed of delivery or the cost of delivery, it is predictability. If I told you that I will deliver between 3.30 to 4.30 pm on Wednesday that is much better than I say I will deliver any time on Tuesday," he said.
"After solving for predictability, if you can also ask delivery slot from the customer and have the operations digitised to have the ability to predictably deliver within that delivery slot is what leads to amazing customer experience," he added.
Locus has logistics companies like Bluedart and large brands and retailers like Unilever and Tata Croma as their clients. However, he particularly mentioned an industry which is becoming a large growth area for them: home services.
Rise of home services clientele
"This is about coming to your home and performing a service, like collecting a blood sample or installing a dish TV, or performing an eye test, or fixing your auto rickshaw or bike or car. In addition to this, we specifically look at e-commerce and grocery companies as a dedicated segment where the primary outbound logistics is limited on the last mile," Rastogi said.
Currently, Locus operates around the world with a small team across Bangalore, Mumbai, Delhi, Jakarta, Ho Chi Minh, Dubai., Berlin, London and the United States.
"India and Southeast Asia are the key cash cow areas for us and North America is a key growth area," he noted.
A year back in June 2021, Locus raised $50 million in a Series-C funding round led by Singapore's sovereign wealth fund GIC on a company valuation of $300 million.
"This provides us with a long runway. In addition to the investment from GIC, with our revenues, we currently have sufficient capital for the next three years. And we're not looking to raise any additional funds right now," he said.
Rastogi also mentioned that the order-to-delivery dispatch management platform is a giant leap toward their vision to automate all human decisions in the supply chain.
"Today we operate only on the surface. We will soon be developing our technology for other modes of transport and building a full stack logistics platform," he added.