Bitcoin may be all the rage but at a total market cap of some $66 billion dollars, it pales in comparison to something far less sexy—freight.
We owe a vast majority of what we own, wear, and consume to the (literally) trillion shipping industry. Global logistics literally runs the world’s economy—creating jobs, boosting productivity, and energizing international economies. Yet, for the past 20 years, as e-commerce and social dominated tech, the sector remained complacent in technology adoption, leaving it ripe for disruption. In an age that increasingly leverages technology to operate efficiently and at an on-demand pace (hello, Uber and Airbnb), the logistics technology sector is rapidly gaining momentum. Supply chain technology funding continues to grow each year, not to mention the $16 billion Alibaba plans to inject into logistics over the next 5 to 8 years, proving that Jack Ma is fully on board.
Over at Amazon, Jeff Bezos isn’t missing the ship either. Over the past few years, Amazon has rigorously upped its logistics game, formally registering as an international freight forwarder, rolling out a fleet of dozens of airplanes, creating a global network of warehouses, and regularly patenting new futuristic last-mile delivery options, spanning floating blimp warehouses and household drone landing pads. On a personal level, Bezos invested in logistics trucking startup Convoy Inc. And if that’s not enough, so did Bill Gates.
Technology (and Capital) in the Logistics Sector
Logtech venture capital investments have been growing rapidly these past years: CB Insights reports that in 2016 over $5 billion was invested in logistics technology, across 315 deals. Though these deals went to various branches of logistics technology (quite a large umbrella), the three that seem to get the most attention are e-commerce logistics (companies like Best Inc., a little known Alibaba-backed logistics company planning a US IPO), freight and supply chain visibility (such as Freightos and ShipBob, an Amazon fulfillment competitor), and last mile delivery (Uber Freight, anybody?).
While the type of logistics that gets packages to your door ticks like a Swiss clock, freight is a little farther back. Trucking embraced enhanced connectivity in the mid-90’s. As a matter of fact, one of the largest logistics exits to date was Freightquote, a company that connected trucking companies to customers, which sold for $365 million in 2014. Today’s generation is doing the same with Uber-like utilization by connecting trucks and customers in real-time, enabling on-demand booking and shipment management.
In the freight and supply chain area, we are seeing companies connecting importers directly with freight companies. Like the trucking marketplace startups, they are democratizing shipping by creating an open, competitive marketplace. Technology helps to optimize logistics costs and support better decision making by providing access to, and transparency for, key logistics cost drivers.
Where E-Commerce and Technology Meet
Companies—especially capital-rich companies with sprawling supply chains, like Alibaba, Amazon and Chinese online retailer JD.com—are increasingly recognizing logistics holds the key to their marketplace operations. For most consumers, the visible front of the battle for improved freight is last-mile delivery—a full 50% of customers admit that delivery factors, like delays or costs, are enough to tank a purchase. As a result, two-day, same day and then two-hour delivery have gradually rolled out across the ecosystem, first as a benefit and increasingly as a bare minimum.
For tech companies, global reliance on a logistics sector that requires innovation is a huge driver—whether through mobile platforms, smart technology, enhanced performance measures, or algorithmic matching. What’s more, this has the potential to overhaul the very fundamentals of how global retail takes place. Any person living in their parent’s basement can now source from China on platforms like Alibaba or Sourcify, import with online freight platforms, sell on e-commerce platforms like Amazon or WooCommerce, and ship it with companies like ShipBob.
Unlocking Logistics Potential
Urbanization, population growth, and aging infrastructure have diminished the efficacy of the “business as usual” model, and large international markets demand more efficient, cost-effective, and sustainable business models. Companies’ success or failure depends on managing the details of logistics execution. Leveraging the advantages of technology is the best way to meet service demands, maintain margins, and differentiate service.
This will require joint participation from both the retail and tech sectors, and though we are well on our way, there is still much innovating that must be done before logistics technology reaches its full potential. Knowing that Jeff, Jack and Bill are three forces spearheading the movement, however, certainly helps.
Freightos operates an international online freight marketplace that offers instant freight quotes.