Container Sensors a Path to Dynamic Pricing?
Welcome to the 82nd 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 asked the question: are we in a cold war or a cold relationship with China, all with a little help from Magic Johnson. This week, I’m digging further into a story that broke this week, news that Hapag-Lloyd will be equipping its entire container fleet with sensors by 2023.
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@spglobal.com or on Twitter at @LogTechEric.
I don’t normally write here on topics that I’ve recently written about for JOC.com but felt this was worth exploring more. This week, Hapag-Lloyd announced it was equipping its entire fleet of dry containers with sensors from two different technology providers (ORBCOMM and Nexxiot).
In a logistics and transportation market absolutely flooded with solutions and accompanying press releases, this stood out as a big deal.
I explored the implications of this further in a piece on JOC.com today, mostly around the secondary effects of this move. That includes what it will likely compel other container lines to do, and how the data might be used beyond pure location status. One of the areas I mentioned is how having proprietary, granular data around the inventory of boxes will ultimately allow a shipping line to make a more informed instant quoting decision. As such, you can view what Hapag-Lloyd is doing as a major bit of progress toward dynamic pricing.
Let me explain.
Having an innate understanding of where containers are is a key part of being able to quote a shipper or forwarder dynamically because the container is part of the quote. If a line gets a quote request from a forwarder for a sailing where it has space, it also needs to determine if it has an available box to provide. Being able to track the entire fleet in real-time gives Hapag-Lloyd the ability to make better informed decisions about whether it makes sense to provide a quote, and at what price, given the cost to position an associated container.
I’ve not had anyone explain this to me better than Jon Charles, CEO of Sydney-based technology provider Mizzen, which helps carriers with dynamic pricing. My mind immediately flashed to his perspective on this when I thought about the down-the-road impacts of having better data around container inventory.
Jon Charles, managing director of the spot quote technology provider Mizzen, told JOC.com in September (‘20) that leveraging dynamic pricing requires three components.
“You need trade lane forecasting and optimizing software to guide trade managers on what rate level and how much allocation to sell dynamically on a specific vessel voyage,” he said. “You need trade management execution software to manage and give effect to these optimizing decisions, and you need a customer digital interface to make rate requests, deliver dynamic quotes, and book.”
Being able to quote dynamically, Charles said, requires container lines to think about their equipment repositioning costs, not just about available capacity on a specific sailing.
We may look back on Hapag-Lloyd’s decision as a catalyst for other carriers to overlook the cost of deployment and see the benefits of what the underlying data can provide. The excuse of being a capex-heavy operator in a low-margin, often non-compensatory industry no longer applies. Carriers raked in a decade’s worth of profits in 2021, not to mention the second half of ‘20. They are on course for another bumper year in 2022. A failure to invest in digitization in this period will be conspicuous when the market normalizes and shippers have more options in terms of who they choose to work with.
Here’s a roundup of recent pieces on JOC.com from my colleagues and myself (note: there is a paywall):
Small carriers and independent owner-operators are facing a tough few months as demand for truckload freight comes back down to earth. Whether we’re headed for a freight recession or not, the operators on the margins are the ones most at risk. It should be interesting to see whether all the technology that’s come on the market the last two years geared toward small fleets can indeed help them weather the fallow part of the cycle. To that end, SmartHop (one of those tech providers) this week released research it did on driver sentiment and technology usage, which I summarized here.
I don’t often write earnings stories. For one, there are just not that many companies I cover that are public. And second, it’s frankly not my forte. But I did dig into E2open’s first full fiscal year report as a once again public company. Both the analyst call transcript and a discussion I had earlier this week with CEO Michael Farlekas were informative. Big picture, the company is seeing subscription revenue growth race past services revenue growth, and is leveraging opportunities to expand relationships with existing customers and ones it acquired through its purchase of BluJay Solutions in mid-2021. But that positive momentum is not translating to a freaked out public market (which probably still undervalues the importance of supply chain management software anyway).
There was an article this past week in the WSJ that weirdly seemed to characterize de minimis (also known as Section 321) as a duty exemption policy for tourists when it in fact is an established trade policy of CBP to allow single shipments to single consignees per day, valued at less $800, to enter duty-free. This is not subterfuge, or duty dodging. This is leveraging available legal mechanisms to minimize duties. With China tariffs still in place on virtually every good from that country, it’s no wonder sellers in China are using the tool, and no wonder that 3PLs focused on proficiency in it are enabling those shipments. I wrote last Friday about how ShipHero is helping importers use Canada as a Section 321 staging ground for US orders.
ZEBOX has officially opened its US office (very close to me) in Arlington, VA. As part of the opening, the accelerator named its first cohort of participating startups, including a few familiar faces in OpenEnvoy, Throughtput.AI, and DFM Data. My former colleague at American Shipper Patrick Duffy is also involved at ZEBOX as chief operating officer.
Blume Global was hit mid-week by an ongoing cyber attack, covered here by my new colleague Teri Errico Griffis. We’ve heard the impact to IMCs has been particularly noticeable.
And here are some recent discussions, reports, and analysis I found interesting:
For those following the saga of the on-again, off-again real-time transportation visibility provider (RTTVP) Magic Quadrant from Gartner, here’s the latest via a Twitter thread this morning. Full disclosure: I’ve known Bart for a long time and trusted his knowledge and neutrality as an analyst at Gartner. Analysts from time to time move to companies in the industry they cover - it happens. That said, I do empathize with competitive vendors. It’s a delicate situation.
Interesting post here on the four flows of supply chain from Sean Simons at Newark Venture Partners, though I do have to chide him for starting this with “the supply chain.” There is no single supply chain! Each shipper has its own supply chain!
My friend Nick Chubb took the time to explain the numbers and perspective his consultancy Thetius put out regarding AI in the maritime industry, after it was questioned by Lloyd’s List (no dig at LL, which was asking honest questions). Appreciate Nick taking the time to respond thoughtfully here. As an aside, Nick will be joining me on a panel at the World Ports Conference in Vancouver May 17. Also on the panel is Mike Zayonc, founding partner at the Plug and Play Supply Chain Fund, which recently announced its $25.5 million closing last week.
Also notable, Optimal Dynamics closed a $33 million round earlier this month that I wasn’t able to report on as I was sitting on a beach in Puerto Rico. Priorities, people.
Snapped a pic of the port in San Juan too, because logistics follows me everywhere…
My colleague Ari Ashe’s Substack Please Haul My Freight is can’t miss at any time, but particularly when there’s so much fog in the air as to where surface transportation rates are and what that means. Ari pours his heart and soul into a series of pricing indexes he compiles for us at JOC.com. He knows his stuff.
This is a pretty solid assessment of the opportunities and challenges facing Flexport as it balances trying to become a massive forwarder and a neutral platform. And if you cannot get enough Flexport content, you can check out Sanne Manders’ conversation with McKinsey. There’s also a frankly psychedelic set of tweets by CEO Ryan Petersen using some AI art tool that focuses on lions and containers and, yeah, well…I’m confused.
My weekly Jason Miller post.
Some upcoming events I’ll be involved in:
I’m leading five sessions on digitization in global ports at the IAPH World Ports Conference May 16-19 in Vancouver, including discussions with FMC Commissioner Carl Bentzel, MSC Chief Global Digital and Information Officer Andre Simha, Hamburg Port Authority CEO Jens Meier, Singapore Port Authority CIO Koh Chin Yong, DP World Canada CEO Maksim Mihic, as well as a group of technology vendors. This is going to be a fantastic gathering of the world’s leading ports, terminals and maritime decision makers. Here’s the agenda, and click here to register.
I’ll be moderating a panel on how the freight industry can gird itself against the threat of cyber attacks at the NITL Virtual Transportation Summit May 24-26. See the full agenda here. Especially pertinent given the Blume incident and another recent attack on Expeditors International earlier this year.
If you’re at Reuters’ Supply Chain Execution conference June 2 in Chicago, come and say hello. I’ll be interviewing Port of Long Beach Executive Director Mario Cordero about the port’s Supply Chain Information Highway initiative.
Disclaimer: This newsletter is in no way affiliated with The Journal of Commerce or S&P Global, and any opinions are mine only.
Well said yet again Eric. It really is all about the data.
This was a good one, top to bottom.