The Hidden Importance of Logistics
Imagine reaching for your favorite box of cereal at the corner store and instead being greeted by an empty shelf. What happened? Well, getting that box there at the right time is a lot more complicated than you might think. Inventory forecasting, warehouse processing, last mile drop-off — logistics is an intricate web that consumers often take for granted.
It may be passable when you don’t have cereal for a few days, but logistics, in some instances, has significantly higher stakes and far lower margins for error. There’s the hospital worker who depends on steady shipments of medical supplies to treat chronically ill patients, the mechanic who needs a spare part order to arrive on time and maintain his reputation as someone who can complete repairs quickly, or the farmer who needs a replenishment of seeds, fertilizer, and pesticides to bring his crops to harvest and put food on his family’s table. Getting something from A to B can be of paramount importance.
In all these cases, logistics is the backbone for delivery. The efficiency of transporting goods has been something that countless businesses in the developed world have been able to count on. We have even become accustomed to companies pushing the frontier of speed and quality through initiatives like Amazon Prime Now and drone technology.
A Mirror Image in Emerging Markets
From the perspective of emerging markets, logistics becomes less of a crutch and much more of a hindrance. Logistics in Africa, in particular, is notoriously inefficient and difficult. According to a World Bank study, moving goods in Africa is more expensive and done at a lower standard of quality compared to almost anywhere else on Earth. For example, compared to the United States or Europe, the cost of moving goods in Africa is up to 300% more expensive. Key variables creating high cost include a fragmented vehicle supply base, low utilization, and truck overloading (causing damage to infrastructure and vehicles).¹
These problems only become magnified when you consider the timing of African development. Africa is rapidly changing and there is much to be excited about right now: a young and growing population, the world’s fastest urbanization rate, and accelerating technological change — the continent is primed for growth.
Logistics is crucial to realizing this potential: The World Bank LPI reports that “for countries at the same level of per capita income, those with the best logistics performance experience additional growth: 1 percent in gross domestic product and 2 percent in trade.”²
When transport systems are efficient, they provide economic and social opportunities and benefits that result in positive multiplier effects such as better accessibility to markets, employment, and additional investments. When transport systems are deficient in terms of capacity or reliability, they can have an economic cost such as reduced or missed opportunities and lower quality of life.³
In short, economic development in Africa will not reach full scale unless logistics becomes an enabler of business, rather than a hurdle that businesses must overcome.
Enter Sendy
In the context of this challenging environment, VestedWorld is excited to announce our investment in Sendy, a Kenya-based on-demand logistics services platform.
Sendy is a one-stop logistics platform for enterprises and merchants — it covers the full portfolio of delivery needs, from small items and small distances (e.g., moving legal envelopes across the city), to large items across long distances (e.g., cargo moved from the port to Nairobi, or from Nairobi to Kisumu).
Through Sendy’s platform, a customer can connect with thousands of Transporters of different sized vehicles — in order to move their goods anywhere across the country, at anytime. Sendy does not own any assets, but instead aggregates a network of transport partners that can accept deliveries in an Uber-like manner. The partner network creates a high variety pool of delivery options, including motorcycles, vans, pickup trucks, 3 ton, 14 ton, to 28 ton trucks.
A sample delivery journey with Sendy is shown below:
For Customers, the platform lowers delivery cost, empowers them to reduce their in-house transport assets, eases payment/reconciliation, and provides transparency in the form of tracking. For Drivers, the Company offers unique benefits, including improved payment terms, package and driver/accident insurance, better vehicle utilization, increased take-home pay, access to fuel and spare part financing, and a more consistent supply of shipments.
Malaika Judd, Sendy’s CFO, sums up the problem and Sendy’s value proposition as such: “Many Kenyan firms previously had no reliable logistics partner, so they depended on an expensive in-house fleet or on informal partners who would show up in the morning with the hope of getting an order. Managing these trucking partners required entire departments to figure out where the trucks should go and how much petty cash to pay them. There was no trust, no security. Chaos. Sendy takes away that stress for the business through transparent rates and tracking services, and also reduces idle fleets and empty space in trucks. We’re taking the assets that exist and optimizing them. Firms now pay only for the marginal cost of what they use.”
Leveraging “Enabling-Technology” for Inclusive Growth
This solution is exciting to us because of the alignment in Sendy’s and VestedWorld’s view on the role of technology in the African business ecosystem. We believe that the right approach is a focus on “enabling technologies” that address issues in core industrial sectors, starting with a clear understanding of the problem in the ecosystem or value chain, identifying the pain points, and only then bringing technology into the picture.
By starting with the problem at its most foundational level, the right technological solution can then create a tide that lifts businesses of all shapes and sizes, helping to create inclusive development in the market. As our co-investor DOB Equity aptly describes: “access to Sendy’s affordable, high-quality distribution services can be a game-changer, enabling companies in every sector of Kenya’s economy to accelerate their growth and create jobs with confidence that a key challenge — high transport costs — can be overcome”.
Taking 3 case studies from our own interviews with Sendy customers, we show that enabling technology, working at its best, eases small business development, creates agility for more established players, and fosters an innovation environment to propel future growth.
Enabling small business development: Purpink
When a new company enters a market, it needs to figure out what its core capabilities are. What value does it provide to customers and how it can it focus on the activities that differentiate it from the status quo? For Purpink, an online-gift-store startup, this differentiation was in providing a curated assortment of gifts for special occasions and ensuring a seamless experience of delivering the gift.
However, as Purpink gained traction, the company realized that logistics created a bottleneck for growth and put a damper on customer experience, especially during the peak holiday seasons. Purpink CEO’s Ayrton Bett told us that: “at first, we had our own delivery teams and bikes, but the costs and the stress was too much to handle. We all of a sudden had to deal with repairs, bureaucracy of local authorities, and difficulties with drivers (sometimes you pay them and then they go off to do their own jobs)”. Purpink has since partnered with Sendy for deliveries and also arranges for dedicated riders during peak times, allowing the company to focus more on other essential activities, such as gift selection and marketing. In addition, Ayrton explains that Sendy’s tracking tools helped Purpink create the customer experience it expects to offer: “from the customer perspective, they can see exactly where the rider is. This is especially important for us as a gift provider because the timing of the delivery is very important”.
Enabling agility for established firms: ConsumerCo*
The relationship between the Sendy and ConsumerCo, a leading Kenyan FMCG company with 25+ years of operations, began when ConsumerCo was re-evaluating their distribution model. ConsumerCo had been using pickup trucks to facilitate a direct sales process but the trucks ran into issues of not having the right amount of inventory at the right time. The company wanted to adjust its route-to-market strategy with a focus on speeding up fulfillment time: agents would now focus solely on selling orders, and ConsumerCo promised that fulfillment for those orders would arrive within 24 hours.
The only problem was that in order to quickly shift to the new transportation process, ConsumerCo would have to develop a new asset base and organizational know-how, capabilities that don’t just appear overnight. In Sendy, ConsumerCo found their ideal partner. ConsumerCo’s CEO said: “we have a great relationship with Sendy built on the fact that our needs have been evolving in terms of volumes and vehicle complexity. They have been very keen in understanding how these needs have evolved.”
Operating in a volatile business environment, Sendy provides a reliable partner for African businesses, creating a flexible logistics solution that allows for smooth transitions along a company’s growth trajectory.
Enabling an environment to foster innovation: SkyGarden
One of the most interesting partnerships we learned about was Sendy’s work with SkyGarden, a fellow Kenyan startup that enables small shops in the informal economy to establish an online presence through SkyGarden’s ecommerce platform. The informal economy is huge in Kenya (representing 83% of employment) and improving the productivity of this sector is essential for employment, growth, and poverty reduction in the region[4].
SkyGarden’s platform aims to address the productivity challenge by expanding the universe of sellers available to informal merchants, but initially faced difficulties getting off the ground without a logistics partner. Daniel Maison, SkyGarden’s CEO explained to us: “when we initially started off, we gave merchants the ability to do their own delivery and this did not work well. We saw that we had to take over the fulfillment option for the shipping. Sendy had the technology for us to plug into, plug in our dashboard, and integrate quickly. It was pretty much plug and play from day one.”
This story and partnership really excite us at VestedWorld because it shows the multiplicative power of enabling technology. SkyGarden created a new digital market for shop owners in the informal economy through ecommerce and was able to do so with a lower barrier of entry because Sendy changed the game — logistics was no longer high cost or high risk.
What Does the Future Hold and How Will It Be Built?
To sharpen VestedWorld’s view on the future roadmap of logistics innovation, we talked to leading global players such as GO JEK, Delhivery, Convoy, NinjaVan, and Shipbob during our due diligence process. The Sendy executive team takes a similar approach, actively traveling to other markets and collaborating with up-and-coming logistics startups (e.g. Brazil’s Loggi) to share knowledge and optimize their own processes. While each market is different, we thought that one of the most encouraging signs was this commitment by Sendy to integrate best practices within its organization and the team’s willingness and capacity to learn from global leaders.
However, these insights from global players need a local tailoring to successfully be implemented at home, and to this measure, Sendy has all the right capabilities in place. The team largely consists of local Kenyans, has deep integration into the Kenyan business community, and has regulatory cooperation.
Leading Sendy forward are the Company’s co-founders, Meshack Alloys (CEO), Evanson Biwott (CTO), and, Malaika Judd (CFO). The team is rapidly growing and already has one of the largest tech departments in the Kenya startup ecosystem, a testament to Sendy’s ability to continually attract top talent as it evolves into its next stage of growth.
In summary, we have the utmost confidence in Sendy’s ability to build on their current success, set the foundation for scale, and improve the logistics environment in East Africa with the outcome of inclusive growth. With each fulfilled order, Sendy raises the effectiveness and reliability of the logistics sector. Transporting goods, whether they be that everyday box of cereal or the emergency delivery for a hospital worker, mechanic, or farmer, can, and will be a service that African companies can 100% depend on with Sendy’s help.
Next steps of scaling this vision include an expansion into Uganda and other parts of East Africa, where Sendy will lead with its easy to use product design, customer support, and best in industry tracking services. The Company has done an exceptional job building these capabilities to date and we know that it will meet any challenge head on. We are extremely excited to be supporting the team and can’t wait to see what the future holds.
*Actual name withheld for confidentiality
Sources:
1. World Bank Report (2009): Transport Prices and Costs in Africa- A Review of the Main International Corridors
2. World Bank Report (2010): Connecting to Compete, Trade Logistics in the Global Economy
3. Rodrigue, Jean-Paul (2013): The Geography of Transport Systems
4. World Bank Report (2016): Informal Enterprises in Kenya
