If suppliers in China fail to collect freight containers to fulfill an order for MediaShop, Marcel Schneider receives an alert through a digital freight system, allowing the retailer to contact and resolve the issue quickly.
Before July 2020, Austria-based MediaShop’s deputy supply chain director said he would only discover problems in its supply chain when containers did not arrive in Hamburg as planned.
“It was like being in a tunnel where you only had a limited view of what was going on,” Schneider said.
The loss of containers means lost sales for MediaShop, which sells consumer goods ranging from kitchen knives to fitness equipment. A missing load can mean the company is paying penalties to wholesale customers for late shipments.
Grunts in the global supply chain, from a shortage of cargo containers in China to a blockage in the Suez Canal, have thrown a wrench into the resumption of the COVID-19 pandemic. They also accelerated the freight industry’s exit from the digital dark age. This benefits a growing group of start-ups that have struggled to sell their software-powered cargo tracking technology, until now.
Reuters analysis of digital freight startups shows there are nearly 250 companies around the world, including the logistics arm of Uber (UBER.N), Uber Freight, and some Chinese operators looking to go public like Full Truck Alliance.
“Really, the pandemic has given us a chance to shine, with capacity being taken offline and demand increasing unpredictably,” says Ryan Petersen, CEO of San Francisco-based Flexport, a freight forwarder whose revenue nearly doubled for reach $ 1.27 billion. and which raised $ 1.3 billion from investors. MediaShop is a customer.
Digitization in the freight industry has been going on for years, but the expense of grafting digital tracking systems onto legacy databases has discouraged many companies.
Now, a number of startups made up of alumni of tech companies like Facebook, Amazon, and Uber have developed platforms that integrate with customers’ transportation management systems, making them easy to use from home. them.
“We’ve seen a massive acceleration of products that wouldn’t normally have been adopted for three, four or five years because people had to figure out how to operate remotely,” said Sune Stilling, former chief growth officer for the company. ‘business. capital arm of shipping giant Maersk (MAERSKb.CO), which has invested in several of these startups.
Traditional freight giants with deep pockets are also strengthening their own systems to be competitive. But small businesses may find it difficult to finance the digital transition, which should drive consolidation, especially in the freight forwarding sector.
‘RUN YOU OVER’
Before Michael Wax founded Berlin-based digital freight forwarder Forto five years ago, he visited the offices of a traditional company in Hamburg and was shocked at the outdated operations.
“We saw a bunch of white men out there handling a lot of colorful Post-It notes stuck around their computer screens and running around with scraps of paper,” Wax said.
Forto has raised $ 53 million from investors, including Maersk Growth. Like Flexport, Forto has developed a software platform to manage factory-to-warehouse shipments – including cumbersome customs declarations – online, with customers being able to track containers as they go. are scanned at different times along the way.
“We’ll orchestrate your entire supply chain for you,” Wax said. “This is the future of logistics.”
Forto’s system integrates with transportation management systems developed by Oracle (ORCL.N) and SAP (SAPG.DE) for major customers, making them easier to use.
It also sells software to shippers as a stand-alone supply chain tool. The company tripled its activity in 2020.
Integration with transportation management systems has also been key for Loadsmart, a digital truck brokerage company in the United States, and Ofload, an Australian equivalent.
When U.S. customers, which include Home Depot (HD.N), Coca-Cola (KO.N), and Kraft Heinz (KHC.O), place an order on their own transportation management systems, rather than having to contact a truck broker, they get a guaranteed instant quote from Loadsmart.
Loadsmart raised $ 150 million from investors and saw its revenue jump 208% in the fourth quarter of 2020.
“Digitization was once thought of as a vitamin, now it’s a pain reliever,” says Ricardo Salgado, CEO of Loadsmart. “If you don’t, your competition will crush you.”
Ofload launched in Australia in March 2020 as the pandemic hit hard and has businesses with around 15,000 combined trucks using its system. Maersk Australia – also an investor – uses it to handle all of its freight, not just loads booked through Ofload.
CEO Geoffroy Henry says Australia’s trucking industry is very fragmented, so about one in three trucks “is running empty at all times and we aim to tackle those empty miles directly.”
And Hong Kong-based digital freight start-up Freightos saw twenty times more bookings between freight companies and airlines on its WebCargo platform from March 2020 to March 2021, as the airline industry Air freight was online during the pandemic.
The large traditional operators of the global supply chain are not left out either.
U.S. logistics service provider XPO (XPO.N), for example, said its own digital platform delivered 83% year-over-year growth in truck brokerage revenue in the first quarter.
The increased digitization also comes amid a wave of consolidation in the industry, particularly in China, triggered by the boom in e-commerce during the COVID-19 pandemic.
Swiss logistics firm Kuehne & Nagel (KNIN.S) announced Monday that it will acquire Asian logistics provider Apex International Corp from private equity firm MBK Partners, making it the largest air freight forwarder in the world. world.
And last month, DSV Panalpina (DSV.CO) announced that it would acquire the logistics division of Agility Public Warehousing Co (AGLT.KW) of Kuwait in a stock deal valued at 4.1 billion dollars, creating the third largest freight forwarding company in the world.
After arranging a meeting with the CEO of Forto Wax last month, analysts at Credit Suisse wrote in a client note that the rise of digital freight forwarders means more transactions are likely.
“Continued use of existing systems and processes by incumbent freight forwarders suggests market share opportunities for new digital operators,” the analysts wrote. “It can also offer consolidation opportunities for the upper level.”
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