A new type of logistics provider is on the prowl, and the new kids on the block claim the future of forwarding is theirs. Technology-based outfits, backed by investment firms, are gaining ground with their logistics offerings based on process automation and are pushing deeper into the international arena.
One exponent of this new breed is Flexport, a US-based licensed forwarder built on an online system that provides real-time shipment visibility and analytics for international routes, rates, speeds and customs compliance data. Importers are provided with a web-based dashboard that lets them compare pricing by typing in variables – different ports on different days of the week, railcar versus tractor-trailer etc. – and displays price quotes from transport companies.
In late August, it opened an Asian regional headquarters in Hong Kong. Its first target is air cargo moving from southern China through Hong Kong.
Barely one month later it raised US$65 million for further international expansion, which boosted its war chest to a total of US$94 million. Its backers include Founders Fund, Google Ventures and Bloomberg Beta.
Technology start-ups have been able to attract corporate investors, who are increasingly targeting the logistics and supply chain arena, noted Zvi Schreiber, CEO of pricing platform Freightos.
In September, two technology-focused venture capital groups pumped US$10.5 million into project44, a Chicago-based provider of web-service application program interfaces for the freight industry, which has since doubled its headcount.
The idea that technology is going to play a significant role in logistics is gaining ground among established players too. Essa Al-Saleh, CEO of Agility, recently described the logistics firm as being on a trajectory to become “a technology company which does freight.”
“This is a data-based future. It ties in with RFID, with piece-level tracking,” said Christopher Shawdon, vice-president of logistics solutions at IT provider Unisys.
A huge factor in this development is the shift in the use of data, which has become increasingly collaborative, Schreiber said. In the past, software providers treated data essentially as proprietary to individual companies, but they are now increasingly shared, he added.
The pressure from customers to make data readily available and provide instant visibility of pricing and shipment status information is bound to build up further, he predicted. “More information, more online access, more transparency will be the expectation of the next generation of shippers,” he said.
Forwarders are watching these developments unfold with a mixture of hope and apprehension. The State of Global Logistics Report for 2016 released in August by Eyefortransport shows logistics firms feel threatened by technological innovation, yet are looking to it as a tool to attract customers. Of the logistics providers that participated in the survey, 27% reported that in the past 12 months they had gained new business through leveraging technology to expand or develop new services, and 46.1% expect to gain most of their new business in the 12 months ahead through innovation.
On the other hand, 11% regard technology advancement in automation and intelligent software as a potential threat to their business; 43.3% of them identified people as their most important asset, well ahead of technology, which was favoured by 27.7%.
“While undoubtedly logistics is a people business, as automation and digitization continue to drive significant ROI, we might start to see this scale shift,” the authors of the study wrote.
Schreiber views attempts to cling to the emphasis on people to the point of avoiding automation as a doomed effort, likening them to the reasons given by travel agents 15 years ago why people would continue to rely on them to book their travel. While good employees enable them to up their service level, logistics firms should embrace technology to automate aspects that can be dealt with more efficiently through technology, such as searching rate information. As supply chains are becoming more dynamic, more pricing is obtained ad hoc, which is time-consuming and cumbersome on a manual basis, he argued.
“Forwarders love to say how complex their business is, but it is not too complex to automate with modern IT,” he commented.
The Freightos rate platform has been gaining traction, he claimed, and dismissed suggestions that it was mostly large multinational logistics firms that embrace it. “The difference is not between large and small firms; it is between forward-looking and conservative firms,” he stated, adding that the company’s clientele is a mix of large and small forwarders.
By Ian Putzger
Correspondent | Toronto