LONDON (Reuters) – When suppliers in China fail to pick up freight containers to fulfill an order for MediaShop, Marcel Schneider is notified via a digital freight system so the retailer can quickly fix the problem.
Before July 2020, the deputy head of the supply chain at MediaShop in Austria said he would only discover problems in his supply chain if the 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,” said Schneider.
Lost containers mean lost sales for MediaShop, which sells consumer goods from kitchen knives to fitness equipment. Missing loads can mean the company pays wholesale customers penalties for late deliveries.
Global growls in the supply chain, from bottlenecks in freight containers in China to clogging in the Suez Canal, have been key to the recovery from the COVID-19 pandemic. They have also accelerated the freight industry’s shift from the digital dark age. This is benefiting a rapidly growing cluster of startups that have previously struggled to sell their software-based freight tracking technology.
A Reuters analysis of digital freight startups shows that there are nearly 250 companies worldwide, including Uber’s logistics division Uber Freight and some Chinese operators looking to go public like the Full Truck Alliance.
“The pandemic really gave us a chance to shine. Capacity went offline and demand increased in unpredictable ways, ”said Ryan Petersen, chief executive officer of Flexport in San Francisco, a freight forwarder whose revenue last doubled to $ 1.27 billion a year and the $ 1.3 billion Raised US dollars from investors. MediaShop is a client.
Digitization in the freight industry has been going on for years, but the cost of moving digital tracking systems to legacy databases has discouraged many companies.
Meanwhile, a number of startups, staffed by alumni of technology companies like Facebook, Amazon and Uber, have developed platforms that can be integrated into customers’ transport management systems and make them easier to use from home.
“We saw a massive acceleration in products that normally wouldn’t have been launched in three, four or five years because people had to figure out how to work remotely,” said Sune Stilling, former growth director for the company’s Capital Arm Shipping giant Maersk, which has invested in several of these startups.
Traditional deep pocket cargo giants are also upgrading their own systems to be competitive. However, smaller businesses may find it difficult to fund the transition to digital, which should drive consolidation, especially in the freight forwarding industry.
“RUN YOU OVER”
Before Michael Wax founded the Berlin-based digital freight forwarder Forto five years ago, he toured the offices of a traditional company in Hamburg and was shocked by the outdated operations.
“We saw a couple of white men there who kept lots of colored post-it notes stuck on their computer screens and walking around with scraps of paper,” said Wax.
Forto has raised $ 53 million from investors, including Maersk Growth. Like Flexport, Forto has developed a software platform with which shipments from the factory to the warehouse – including cumbersome customs declarations – can be processed online. Customers can track containers as they are scanned at various points along the way.
“We will coordinate your entire supply chain for you,” said Wax. “This is the future of logistics.”
The Forto system integrates with transport management systems developed by Oracle and SAP for large customers and makes them easier to use.
In addition, software is sold to shippers as a stand-alone tool for the supply chain. The company tripled its business in 2020.
Integration with transportation management systems was also critical for Loadsmart, a US trucking broker, and Ofload, an Australian equivalent.
When U.S. customers, which include Home Depot, Coca-Cola, and Kraft Heinz, book an order through their own transportation management systems instead of having to contact a trucking broker, they receive an instant guaranteed quote from Loadsmart.
Loadsmart raised $ 150 million from investors and saw sales jump 208% in the fourth quarter of 2020.
“The move to digital used to be seen as a vitamin, now it’s a pain reliever,” says Ricardo Salgado, CEO of Loadsmart. “If you don’t, your competitors will run you over.”
Ofload was launched in Australia in March 2020 when the pandemic was badly hit and companies with around 15,000 trucks are using their system together. Maersk Australia – also an investor – uses it to manage all freight, not just the loads booked with Ofload.
CEO Geoffroy Henry says the Australian trucking sector is highly fragmented, with roughly one in three trucks “being empty at all times and we’re trying to tackle those empty miles right away”.
Hong Kong-based digital cargo startup Freightos saw a 20-fold increase in bookings between freight carriers and airlines on its WebCargo platform from March 2020 to March 2021 when the air cargo industry went online during the pandemic.
Large traditional operators in the global supply chain are not standing still either.
For example, US logistics service provider XPO announced that its own digital platform saw revenue grow 83% year over year in the first quarter.
Increasing digitization is also taking place amid a wave of consolidation in the industry, particularly in China, triggered by the e-commerce boom during the COVID-19 pandemic.
The Swiss logistics company Kühne & Nagel announced on Monday that it would buy the Asian logistics service provider Apex International Corp from the private equity company MBK Partners. This makes it the world’s largest air freight forwarder.
And last month, DSV Panalpina announced it would take over the logistics division of Kuwait’s Agility Public Warehousing Co valued at $ 4.1 billion, creating the world’s third largest freight forwarding company.
After meeting Fortos CEO Wax last month, Credit Suisse analysts wrote in a customer announcement that the rise of digital freight forwarders means more business is likely.
“The continued use of older systems and processes by established freight forwarders indicates market share opportunities for new digital operators,” the analysts write. “It can also provide top-level consolidation opportunities.”
Reporting by Nick Carey, editing by Nick Zieminski