Kumwe: Using Digital Technology to Improve Rwandan Supply Chains

By: Yonatan Avivi and Kenneth Kou

If you were a smallholder farmer at harvest season in rural Rwanda, getting your crops to market would present a serious existential threat. Lacking capital, there’s no chance that you could own your own vehicle. Public transportation options are not accessible, as they don’t service many rural communities. Therefore, you’d have to hire local transporters to pick up your harvest and drive it 100km to Kimironko market, the major grocery market in Kigali.

However, due to the weak existing infrastructure, there are many persisting challenges in the Rwandan supply chain.

Three major issues plaguing the Rwandan supply chain:

Expensive: In Rwanda, sending freight from one village to the next is an expensive process. Transportation costs in developed economies increase prices by 2-3%; in undeveloped sub-Saharan African countries, the pricing premium from delivery costs can account for up to 40% of the final sale price, a financial burden that is passed onto customers who typically earn less than $2 per day. This creates a massive drag on economic growth and development.

Inefficient: Delivery vehicles in Rwanda are often underutilized as truck owners are poor planners of their own fleet. Often, the vehicles sit idle for several hours of the day in a bus station, anxiously waiting for the next customer to arrive with their shipment. The sales networks are fragmented, and business is often conducted only through word-of-mouth advertising and referrals.

Opaque: Due to the lack of an established marketplace, no formal pricing structure has emerged – the same trip on two different days can range in price by 20%. Negotiations with drivers take up much time and energy, and companies are unable to plan their future deliveries or budgets. Truck drivers are often unreliable and unaccountable, as most transactions are one-off. Once the freight is on a truck, shippers have no visibility into the status of the delivery, resulting in high wastage and late arrivals.

Given these market challenges, an opportunity exists for a competitor to offer a new service that better addresses the customers’ needs. Leveraging technology that already exists in the developed world, Kumwe Logistics is able to satisfy the needs of the major stakeholders in the value chain through, resulting in significant long-term social benefits to the Rwandan population.

Developed at MIT’s delta v accelerator, Kumwe Logistics is aiming to simplify the complexities that shippers and transporters face within the country. As a centralized freight brokerage, Kumwe has the benefit of pooling demand, while also gaining the advantages that come with operating as a marketplace. Over its first 10 months of operations, Kumwe has delivered 1,000 truckloads with revenues exceeding US $200,000, with ambitious growth targets set for the next two years. To reach these goals, Kumwe is relying upon a suite of technological tools to allow them to scale their operations more effectively.

Digital tools to improve supply chain operations

Digital Marketplace: Kumwe’s internally-developed load board allows clients with freight needing to be shipped (“shippers”) to submit their RFP by outlining a few simple features: quantity to be delivered (in megatonnes), pick-up and drop-off locations, and the timing of delivery. Requests are submitted via SMS, the mobile app and other means. Kumwe staff will review the request, and then mass-message the available drivers within their network of 300+ trucks. Interested drivers can respond with their price quote, and then Kumwe will perform the matching between transporter and shipper. The introduction of this system has brought many benefits, addressing the major gaps in the existing supply chain:

• Price competition: formerly, there was a lack of transparency in pricing, resulting in inconsistent fees being charged to the same routes. Now that bids are crowd-sourced, it’s assured that the shipper will be getting the best possible price, and that efficiency among transporters will be rewarded. Most importantly, this results in a lower retail price to the end customer.
• Simplicity: shippers no longer need to deal and negotiate directly with the transporters. Instead, they can simply submit an RFP, and wait for the top bidder to emerge. This reduces transaction costs, and allows the shippers to concentrate on their daily business.
• Increase in fleet utilization: rather than waiting at parking lots for shippers to approach them, transporters can bid on multiple jobs at once. This reduces the amount of idle capacity in the overall system, and allows for increased productivity for the truck drivers.

Job Tracking App: Furthermore, Kumwe also has a mobile application that allows their operations team to easily track the status of deliveries. The transporter is responsible for using the app to report their location, status and any potential delays, increasing transparency throughout the system. If the transporter experiences a flat tire, traffic jam, or washed-away road, he will be able to alert the Kumwe staff, so that the estimated time of arrival can be updated accordingly. This reduces the information symmetry between stakeholders and [insert POM concept].

Moving forward, Kumwe would like to introduce GPS trackers to all of the transporters in its network. Most of the drivers do not own smartphones and there is no durable, affordable GPS device available in the market yet; however, in the longer-term, this will reduce transaction costs even further for the shippers.

Additionally, Kumwe is hoping to increase their data collection and usage in two critical areas: traffic flows and fleet utilization. Understanding the traffic patterns around the country would allow Kumwe to better focus its transporters in areas with higher demand and needs. It would also allow them to provide a better level of service to the shippers through more competition and higher availability of supply. A stronger grasp of fleet utilization will allow Kumwe to direct empty trucks towards unserved loads, and improve overall efficiency within the network. This would reduce service time and lead to the platform ideal of maximal utilization.

In a country with no pooling agents of freight delivery, Kumwe is bringing a sea-change to Rwanda. The long-term social benefits are enormous, positively impacting all major players in the value chain.

• End customers: reduced shipping costs are passed-through to the consumer, in the form of cheaper goods
• Shippers (companies / farmers): Kumwe’s brokerage platform allows them to focus on their core business, resulting in higher productivity and efficiency. Lower transaction costs allow them to get their products to market faster and cheaper.
• Transporters: higher utilization through the pooling of demand, which allows them to maintain a steady income