FrontRunner Pvt. Ltd. (FPL) traces its origins back to its beginnings as a proprietorship firm founded by Hansraj several decades ago. What started…

FrontRunner Pvt. Ltd. (FPL) traces its origins back to its beginnings as a proprietorship firm founded by Hansraj several decades ago. What started as a modest venture has grown steadily over the years, evolving into a prominent trucking company specializing in transporting commercial goods across various destinations within the state of Gujarat. FPL is a registered Goods Transport Agency (GTA). Recognizing the competitive landscape in which it operates, FPL has consistently aimed at maintaining high-quality delivery standards to establish its reputation in the market. Due to its sustained growth and expanding operations, FPL transitioned from a proprietorship firm to a registered private limited company. This transformation allowed the company to formalize its structure, enhance operational efficiency, and position itself strategically within the logistics and transportation industry in Gujarat. Today, FPL continues to uphold its commitment to excellence in service delivery, leveraging its experience and infrastructure to meet the logistical needs of its diverse clientele effectively. This historical evolution underscores FPL's journey from humble beginnings to its current standing as a respected player in the competitive transportation sector of Gujarat, driven by a dedication to quality and customer satisfaction. Overview of FPL's Current Operations FPL operates its fleet of 9 trucks from Ahmedabad (Refer Annexure for the information about the 9 trucks it owns). The shipments are primarily focused on B2B deliveries, that is one business enterprise to another business enterprise within the state of Gujarat. The business enterprises are mid-size companies that have to make frequent shipments to their clients. Once the goods are delivered at the destination, the company uses the services of agents who can arrange to have a shipment for the return journey back to Ahmedabad. In trucking jargon, a truck on the road without carrying any load is called "deadheading". A trucking company will try to minimize the kilometres covered in a deadhead because it is unproductive. Therefore, the company has agents on the ground, who can find appropriate shipments within a few days' time. This way the utility of the truck and productivity of each shipment journey improves. All shipments thus far have been “Full Truck Load” (FTL) shipments. This means that the entire truck is booked for the shipment of goods of just one client. The goods collected from the client are delivered directly to the destination. Advantages of FTL shipments are→ minimum handling of goods, loading and unloading will be from that single vehicle and fast delivery of goods with minimum damage. Due to low fuel prices, the company has been enjoying reasonable profits from this business. However, fuel prices have increased over the last few months. Due to stiff competition, the number of shipments have been stagnant for a while. Clients have different transporters to choose from, resulting in a possibility downtrend in the number of shipments for FPL in the coming year. Introducing LTL Shipments for Competitive Advantage To gain a competitive edge, FPL plans to offer "Less than Truck Load" (LTL) shipments to many of its clients. Here, shipments by the clients will be larger than a parcel carrier can handle, but not enough to require an FTL shipment. Shipment loads from various clients will be collected at a common collection area in Ahmedabad. Once the truck load is filled, shipments will be made to the respective destinations of each of the clients. Given the piecemeal orders that are aggregated to form a full truck load (FTL), typically an LTL client is willing to wait for maximum 7 days from the time goods are handed over for delivery to the actual delivery at the designated destination. Like the FTL model, the LTL model also focuses on mid-sized companies that need to make small shipments to their clients on a regular basis. The advantage of LTL of shipment is that it facilitates smaller consignments to be shipped at economical cost to the company. This brings flexibility in operations to the business. At the same time smaller shipments provide an opportunity of widening the clientele base. Presently, it typically takes 4 days to get an FTL order. Due to the increase in volume of shipments on account of a wider clientele base under the LTL model, the full truck load capacity is achieved in 3 days' time instead. This decision to introduce LTL shipments in addition to FTL shipments has been a strategic change for the business. At present, FPL handles about 15% of the total consignments that are made from within Gujarat. It wants to maintain and if possible, grow its market share using both the FTL as well as LTL models. However, competition is stiff in this sector. To get a larger clientele base, it has increased its advertising spend to make its presence known in the market. Advertisement in specific trade publications, membership on trucking load boards that help to find clientele online, participating in trade association events etc. The company plans to target mid-sized companies as customers that can give shipment loads at regular intervals. Where the client requires, FPL can provide packing services to help the client manage its outbound shipments efficiently. Also, where the client requires, FPL is also planning to offer transport insurance advisory services that will help its clients choose an appropriate plan as per its requirements. This will be done for a small fee payable to FPL along with the invoice value for transportation. For both FTL and LTL shipments, the senior management has targeted: Cost-per-kilometre rate of 500.Revenue per kilometre rate of 800.Average accounts receivables collection period of 10 working days.Average customer lifetime value:20 lakhs and above. The senior management acknowledges the need to track non-financial metrics to sustain and improve the business. Proposed operational metrics to be collated separately for FTL and LTL include: (a) Customer claims filed for damaged goods (absolute numbers and % of shipments). (b) Time taken to resolve the above claims (days from date of customer filing claim). (c) Delays in delivery beyond the agreed delivery time (% of shipments made). (d) Number of days truck was not on the road (due to maintenance or insufficient load). (e) Average time taken to get exclusive FTL orders as well as full truck load under LTL (days). (f) Deadheads (kilometres): Kilometres during journeys when the truck had no load to carry. (g) Number of orders turned down due to non-availability of trucks. (h) Ability to deliver within 7 days from the date of receiving client's goods under the LTL system (% of shipments under the LTL system). Lease Agreement To manage increasing rental costs, FPL had on April 1, 2020, entered into a 5-year lease with Spaces Pvt. Limited (SPL) for 2,000 square meters of area to be used as parking lot for its trucks. The lease payments of 10,00,000 is payable at the end of each year. The interest rate implicit in the lease cannot be readily determined. FPL's incremental borrowing rate at the commencement date is 6% p.a. At the beginning of Year 4, FPL and SPL agree to amend the original lease by extending the contractual lease term by 3 years. The annual lease payments are unchanged (i.e.10,00,000 payable at the end of each year from Year 4 to Year 8). FPL's incremental borrowing rate at the beginning of Year 4 is 7% p.a. FPL wants to reduce the administrative burden of maintaining books of account for Income Tax purpose. Operational Challenges It has now been a few years since the implementation of FTL and LTL shipments, and business volumes for FrontRunner have picked up. Two years ago, the company hired R. Venkatesh to manage the truck operations. The operations team, which consists of truck drivers, laborers for loading and unloading deliveries, and maintenance personnel, currently has 20 members. R. Venkatesh implemented Total Quality Management (TQM) within the operations to meet internal performance benchmarks and service delivery quality standards. However, adherence to these benchmarks for truck utilization and delivery standards has left very little time for periodic truck maintenance and repair. Minimizing downtime and deadheads requires the trucks to be constantly on the road. Due to the small size of the operations team, there is only one person available who can handle maintenance: Mr. Soni. Because of the lack of appropriate training and tools, truck drivers are not equipped to handle maintenance work themselves, creating a high dependence on Mr. Soni's availability. It has also been observed that R. Venkatesh was not always available to oversee the truck loading process. Consequently, truck drivers tended to overload the trucks to expedite deliveries, which has led to some negative publicity and put the company in a less favorable light. Refer to Annexure for the news article about this issue. The management has called an urgent meeting, and the Chairman has asked R. Venkatesh to attend as well. During the meeting, the Chairman says, “I understand that you have successfully implemented TQM in our operations. If that is the case, why are we still facing breakdown problems despite having TQM in place?” R. Venkatesh replies, “Since the operations have been running smoothly, there was no perceived need for preventive maintenance. Such activities incur costs and result in loss of time, which could otherwise be used to keep the trucks on the road.” ANNEXURE AHMEDABAD DAILY Motorway chaos disrupts travelers' plans Beware! Travelers heading to Ahmedabad Airport should prepare for potential delays caused by oversized trucks blocking the motorway. These moving obstacles belong to FrontRunner, the logistics company, and are frequently seen on National Highway 8, the crucial route connecting the city to the airport. Yesterday, passengers faced an excruciating two-hour wait due to a major traffic jam caused by two FrontRunner trucks carrying oversized loads. The delay occurred because the trucks, which were scheduled to depart at 5:30 AM, experienced a mechanical issue that postponed their departure by two hours. This unexpected breakdown not only delayed their journey but also caused a significant ripple effect on the surrounding traffic. As a result, the trucks and their escorts were on the road during the busy morning rush hour, exacerbating traffic congestion near the airport. The situation was further compounded by the fact that the oversized loads required special escort vehicles, which took additional time to navigate through the already congested area. Consequently, the influx of vehicles and the slow-moving convoys created a bottleneck that impacted travelers and local businesses alike. Strict regulations govern the transport of oversized loads on public roads. These include requirements for drivers to be accompanied by attendants, trucks to be equipped with marker boards and additional lighting, and the provision of escort vehicles to ensure road users maintain a safe distance from the load. There are also specific limits on the maximum size and weight of loads. Ahmedabad Police confirmed they were aware of the situation and noted that FrontRunner had complied with all relevant regulations. Despite no reported accidents, there is growing public concern about frequent road congestion and safety issues caused by these oversized trucks. A traveler remarked, when "FrontRunner" runs in “front" we are left to lag behind! Fleet of Trucks Truck Gross Vehicle Weight (in Kilograms) Number of trucks Date of purchase 7,000 kilograms 3 April 1, 2020 10,000 kilograms 2 April 1, 2020 15,000 kilograms 3 April 1, 2021 20,000 kilograms 1 April 1, 2023 The 20,000 kilogram truck needed some modifications to be done. It was put to use on June 1, 2023.