"Balancing Growth With Profitability Is A Big Challenge In The Logistics Sector," Says Karan Dhillon Of DFC Logistics

In Conversation with Karan Dhillon, CEO of DFC Logistics - Understanding the Indian Logistics Sector

1.What are the primary services offered by DFC Logistics?
DFC Logistics is primarily a tech-enabled B2B and B2C logistics service provider. We are a full-stack logistics service provider whereby we do the first-mile pick-up, mid-mile, and last-mile delivery for our clients.

We have three business verticals: parcel service, full truck/contract logistics, and warehousing. DFC Logistics also provides SMEs with shortterm and longterm warehousing facilities ranging from 1 month to 11 months.

2.How do they benefit small retailers across India/areas of operations?
India has over 65 million MSMEs, but these SMEs can only process limited orders due to size and capital constraints. DFC provides a cost-efficient, fast and reliable logistics solution for these smaller orders, ranging from a single parcel to a full truck. We allow smaller retailers to keep their cost of transportation low by allowing them to call for goods as per the demand in their local markets. This way, they block less capital and don’t have to spend excess capital on storage facilities.

We are launching a first mile and last mile service for the metropolitan cities

Our current operations are in NCR, Punjab, Uttar Pradesh, Bihar, Jharkhand, and West Bengal, but we have ambitions to go pan India in the next five years. We currently have 3 sorting centres, 35 booking offices, and 32 branches. Our goal for this year is to open 30 new delivery offices in West Bengal and Uttar Pradesh. Furthermore, we also plan to open booking offices in Rajasthan.

3.How do you maintain DFC Logistics'growth? Also, could you please shed some light on your expansion plans?
To maintain growth, DFC has to continue increasing its branch count and the number of pin codes we serve. We currently deliver to over 6000 pin codes covering 32 districts. There are 755 districts in India. By 2027, we have a target of expanding our presence to 300 cities and towns across India. As the number of branches increases, we have to ensure positive unit economics of each branch, as we have done in the past. DFC Logistics is a bootstrapped startup. We will continue to reinvest our profits into building our infrastructure, like warehouse capacity and fleet size, to better serve our partners.

4.What tech tools and software do you use for seamless operations in your business?
Customers can request a pick up after logging into our website or Whatsapp. After goods are booked, customers get SMS and email notifications. All our vehicles are equipped with GPS tracking and telematics. This allows timely delivery of goods. Clients can also track their consignments from our website. Clients have the option to pay for their shipments online after delivery. DFC has developed its own mobile application, which is currently in the beta testing stage.

5.How did you establish DFC Logistics in the Indian market? Which other challenges do you foresee in your expansion plans?
Since logistics is not a highly regulated industry, the barrier to entry is extremely low. Despite this, I would say it is fairly tough for newcomers to break into this industry. This is because, like any commoditized industry, logistics is sensitive to scale. Newcomers must look at the big picture and blitz scale, or they will eventually get out-priced by their competition.

Newer companies talk about being asset light; we need to remember that logistics companies are only as good as their infrastructure, and the infrastructure acts as a moat in the long run.

VRL Logistics has over 4,800 owned vehicles. Similarly, TCI Express, which has the best net profit margin of 10% in the industry, owns the land of its key sorting centres. Delhivery has proved that scale can be achieved by being asset-light. However, even Delhi very is now investing in CAPEX as it looks to become profitable. So, by being asset-light, we can stretch a dollar when trying to scale, but achieving profitability requires prudent capital allocation into the business.

So to answer your question, I see balancing growth with profitability as one of the biggest challenges going forward.

6.There have been several new disruptions in the logistics market in terms of sustainability and automation. How do you plan to stay in line with the latest trends?
We are launching a first mile and last mile service for the metropolitan cities. We are going to be providing this service using smart EVs as a solution for e-commerce, e-grocery, FMCG, and D2C companies. All the major cities in India are going to have to restrict ICE (Internal Combustion Engines) vehicles from entering city limits to smoothen traffic and improve air quality. We are looking to evolve before we are mandated to do so by government regulation.