Cancel Culture

Welcome to the 75th edition of The LogTech Letter. TLL is a weekly look at the impact technology is having on the world of global and domestic logistics. Last week, I wrote about the proper roles for systems and people in logistics. This week,

As a reminder, this is the place to turn on Fridays for quick reflection on a dynamic, software category, or specific company that’s on my mind. You’ll also find a collection of links to stories, videos and podcasts from me, my colleagues at the Journal of Commerce, and other analysis I find interesting.

For those that don’t know me, I’m Eric Johnson, senior technology editor at the Journal of Commerce and JOC.com. I can be reached at eric.johnson@ihsmarkit.com or on Twitter at @LogTechEric.

I was in Vegas this past week for the Manifest conference, where I saw so many familiar faces over 36 hours that I lost count. It felt great to be in the the real world and away from the Zoomiverse and Twitter for a couple days. It also subjected me to the soul-sucking vagaries of business travel once again, even though, truth be told, everything went off without a hitch, so I have nothing to complain about.

But it got me thinking: the core processes of booking travel are pretty simple. You need a hotel, a flight, sometimes a rental car. You can book them together in a bundle, or two of the three in a bundle, or all separately. You can use three different platforms or systems to book them. You can use an aggregator system or go direct to the provider for each of them individually. The analogy of travel to freight is trite and overused, but it is interesting that there are some overlapping environments the more digital that freight becomes.

As a shipper, you can go to platforms to manage air, ocean, and trucking legs. You can bundle freight, trade compliance and payment/trade finance. Or you can handle those all separately. You can use an aggregator for some or all of those things, or you can go direct to the providers for some or all those things.

The wrinkle I found the most interesting as I thought about this was around cancellation. And more specifically, around what cancellation policies are expected and palatable. When you book a flight, there’s an expectation that it will be 100 percent non-refundable. You pre-pay, which conditions the nature of your expectations on flexibility. You can change your flight, and you can cancel it and get a voucher for future travel. But you never expect to be able to get your money back, and you certainly wouldn’t expect to just no-show on a flight and get reimbursed in any way. 

Hotels are, of course, a different story. You can book non-refundable rates, usually at a discount, but there are generally refundable options, sometimes as late as 24 hours before check-in. You can pay ahead and be fully reimbursed, or you can pay at the hotel upon check-in or check-out. That flexibility allows you to book an “anchor” reservation and keep shopping to see if a better rate or more preferred hotel opens up. Pricing aside, it’s very much a buyer’s market because of the volume of hotel providers in any one location.

The most interesting one, to me, is rental cars. For some reason, the prevailing expectation is that there is literally no penalty for making a booking and not using it. Not only can you cancel last minute, you can make a booking, no-show and there are no repercussions. What is it that separates the car rental market from a seat on an airplane? If a car goes unused due to a no-show, is there enough demand to rent that car to someone else?

Perhaps some of the variance in cancellation optionality is that a flight is not fungible. Once it takes off, there is no way to sell that empty seat an hour later. A car sitting in a parking lot can theoretically be rented at any moment. Its value is not immediately perishable. Hotels lie somewhere in the middle. An unused hotel room, one that the hotel presumed would be occupied right up until 24 hours prior to check-in, can be resold to another customer, but every minute the clock ticks closer to night, the less chance that room will be sold.

Where am I going with this? Let’s overlay this on the logistics market and understand why and where cancelation expectations may be changing. A booking made with a shipping line that goes unused - often called no-shows, fall downs, or phantom bookings - has traditionally not incurred any penalties. It has historically been analogous to the rental car situation, where a booking can be ignored without even communicating to the line that it is no longer needed.

But there’s a shift in the works because of two changes in recent years. First is a shift toward digital transactions, which brings with them two benefits to the service provider: an electronic record of a booking in a structured format; and data that makes it more easy to scrutinize customer behavior. That means that a shipping line can say to a shipper, you failed to use 30 percent of the bookings you made with us, and are therefore a mediocre business partner.

The second shift is that carriers have all the leverage in the current market. Beyond elevating rate levels, they can also start to dictate behavior. They can say that not only will we be minimizing our exposure to you if your booking and no-show behavior is detrimental to us, we can apply penalties if you no-show. Is it out of the realm of possibility for carriers to start requiring pre-payment of ocean freight at the time of booking?

The sands are shifting under the feet of global supply chain operators, and there are some interesting dynamics to consider in other areas of our lives. Areas that we sometimes don’t even think about, like why there’s no penalty for not using a rental car booking and why there’s a 100 percent penalty for not using an airline booking. How did our expectations develop in that way, and how will they change in the years ahead?

Here’s a roundup of recent pieces on JOC.com from my colleagues and myself (note: there is a paywall):

• When I first chatted with BasicBlock CEO Taylor Monks in 2018, it seemed a long shot he’d be where he is today. A small factoring-focused company in Lincoln, Nebraska, one with only a limited exposure to the trucking market. But this week, in a sign of how far things have come, Monks and BasicBlock announced a debt-heavy cash infusion of $78 million as they drive toward a zero-cost factoring model and into financial services for small carriers.

• Logixboard is continuing to build a trove of funding to expand its reach with forwarders. The company, founder Julian Alvarez told me, has two overarching focuses: help forwarders improve the way they interface with shippers, and by doing so, help them augment their revenue opportunities. Alvarez says mid-market forwarders are now seeing investment in tech as a means to top line expansion, not as a bottom line cost.

• The rapid growth of cross-border e-commerce has meant that brands need a resource to help juggle the logistics and trade compliance associated with international orders. Passport has attacked this market by focusing on US outbound parcel orders to Europe, Canada and Australia. This week, it landed a $39 million funding round.

And here are some recent discussions, reports, and analysis I found interesting:

• Two podcasts to point to this week. First is a chat between Jonah McIntire of Transporeon and Tobias Larsson of Altana AI on what the value of visibility is.

• Second is a chat between Charley Dehoney of ZeBox and Kyle Henderson of Vizion API, where Charley goes into more detail on what ZeBox hopes to get accomplished.

TPMTech Session in Focus:

From now until TPMTech in late February, I’ll be spotlighting a different session at our upcoming event, to be held Feb 24-25 in Long Beach, Calif. The ports of Los Angeles and Long Beach have been under extreme duress the past year - that you know. But what’s less commonly discussed is that technology is both a help and a hindrance to the congestion. A help in that there are powerful tools on the market to help shippers, drayage operators and others critical to the flow of goods. A hindrance because of the sheer number of systems, sometimes redundant with one another. Nowhere is this more clear than in the detention and demurrage situation, a massive thorn in the side for shippers. In this session, three technology providers will help us understand where technology can help guide cargo owners and their representatives.

Disclaimer: This newsletter is in no way affiliated with The Journal of Commerce or IHS Markit, and any opinions are mine only.