Founded in March 2015, ForU Trucking (as known as Fuyoukache, 福佑卡车) is an intercity truck logistics company that focuses on truckload transportation in China. We’ve discussed about the company’s business model and its comparison with another player in trucking Manbang Group before. In 2019, the company has reconstructed its organization internally as its business model changed as developing.
Trends and developments in e-commerce retail, rising consumer expectations and amplified demand for fast deliveries are shaping the ways the e-commerce retail supply chain and logistics industry function, by all means. Many local reports on the work of the government indicated that trains, roadways, airlines, and subways, or one type of so-called New Commercial Infrastructure, remain the utmost important duties. What ForU is working on represents the new commercial infrastructure building trend.
ForU's Developing Stage
Once served as freight platform, ForU provided information services for truck drivers and shippers, however, in a different way with Manbang Group (满帮集团) or Manbang’s subsidiary Huochebang (货车帮), which more focus on matching business. ForU chose to work with intermediaries in the transport sector so that drivers can get orders via agents and conventional intermediaries can get more orders. ForU sent operation team to monitor each deal to avoid possible corruption problem between shipper representative and drivers, which bought true value for its clients and marked its core competence was the offline operation ability.
In this stage, or so-called Stage 1.0, ForU served as platform and accumulated the most valuable thing: historical data- transaction prices, vehicle parameters, transport line, cargo, peak/offseason, supply and demand and so on.
ForU continued to do the matching business at Stage 2.0. The company adopted anonymous bidding system then, which forwarded orders to qualified agents for anonymous bidding and then quote automatically based on historical data. In this way, the company pocketed the difference and moved on to Stage 2.0 completely. The problem is, ForU recorded a low gross profit for the relatively low price gap ratio, which is often 5% of the gross merchandise volume. ForU registered north of CNY 4 billion (USD 599 million) of gross merchandise volume and 500,000 orders in 2017.
ForU decided to build its own transportation ability and enhance logistics asset efficiency since last September. The company invited drivers who had their own trucks already to join the fleets and also provided drivers without cars rent-to-own (also known as rental-purchase), which is a type of transaction that the truck is leased in exchange for a weekly or monthly payment, with the option to purchase at some point. In ForU’s case, risk of this service is limited for drivers are willing to be a member as long as ForU keeps handing out consistent and sufficient orders for them. Average cost of one truck is from CNY 300,000 (USD 44,907) to CNY 500,000 (USD 74,846). Most drivers are able to buy the vehicles after two to three years. ForU used to rely on intermediaries and the firm can cut its cost on credit guarantee. For now, the firm has started to rearrange its downstream resources by adding more contracted trucks and rent-to-own service. Trucks were usually running 3,000 kilometers monthly in the past, while the number grew to 11,000 in ForU’s Stage 3.0 era.
The point is, ForU must have sufficient order resources from shippers and also a reliable quotation system to sustain such a huge amount of orders. As for cargo, ForU has nothing to worry about for the company has provided shippers with competitive price and high-quality service for the past years so it can quickly have access to upstream resources. As for the system, or so-called Engine, the company applies big data and AI to restructure orders. However, running the engine requires not only algorithms but operation capability. As we mentioned before, ForU has a powerful operation team in Stage 1.0, which can observe many hurdles that engineers or programmers tend to neglect because of the lack of practical experiences. The algorithms iteration happens in the process to find problems when applicating algorithms in practical situations and solve them.
The New Commercial Infrastructure
Social e-commerce Nasdaq listed-company Pinduoduo put China’s tech giants Alibaba and JD.com on guard. Alibaba and JD.com compete for increasingly wealthy customers, offering them overseas expensive products. Pinduoduo caught both of them by surprise. Pinduoduo has long lived under the shadow of Consumption Downgrade for it targets the real average Chinese consumers who lived in tier 3 or tier 4 cities and aren’t looking for overseas goods or quality.
The Central Economic Work Conference pointed out the country needs to stimulate and strengthen its domestic market to weather outside uncertainties. To reach into more remote, poorer communities, Pinduoduo found the valuable market that those older-generation businesses neglected. Apart from the accurate insight on China’s economy, what lies behind the success of Pinduoduo is the powerful self-built supply chain, logistics capabilities, which has become one of the Chinese governments’ main mission in 2019.
Served as an intercity trucking platform, ForU aims to restructure the whole transportation process in the truckload logistics sector and the Engine designing program marks the next step in leveraging the intercity logistics network that ForU has built over the past four years.