Shippers' Divided Technology Attention

Welcome to the 40th edition of The LogTech Letter, a weekly look at the impact technology is having on the world of global and domestic logistics. Last week, Eytan Buchman, chief marketing officer at Freightos, took the bridge here to discuss the value of platforms in logistics. This week, I’m wading into the vast differences in technology prioritization between shippers and the service providers that cater to them.

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.

Logistics technology is a broad umbrella term not just for a wide range of software types, but also for a wide range of potential user types. Even within this niche universe, there are a host of different motivations and constraints for software buyers. And a critical first step in understanding those differences is first delineating what makes shipper buyers different than logistics service provider (LSP) or asset-based carrier buyers.

I’m going to focus on one fundamental difference that I think drives the entire industry: LSPs and carriers get to channel all their technology spend toward serving their customers, while the logistics department at a shipper has many competing technology priorities within its organization. You have to internalize this to fully appreciate why adoption may be faster, more complete, or more enthusiastic from service providers.

Let’s dig into this more deeply, starting with an non-asset-based or asset-light LSP. You can view their technology strategy as being almost wholly driven by the need to serve shipper customers. The only areas of technology investment that might lie outside serving shippers are admin functions like human resources and accounting. Other than that, you can essentially draw a straight line from all LSP technology activity to a shipper.

Even technology that connects an LSP to a carrier, which on the surface does not directly involve a shipper, is based on the need for the LSP to secure capacity, or rates, or shipment information that it then needs to convey to a shipper. So if an LSP buys a rate management system, or sets up a bespoke transit time API with a carrier, or develops a visibility portal, those investments directly impact its ability to serve a shipper. The links between an investment in a customer relationship management system (CRM), TMS or a purchase order (PO) management system are more clear and direct.

Now let’s look at an asset-based carrier’s technology priorities. They will have similar demands for basic admin and business operations software, a CRM, and maybe some of the same logistics management tools as a non-asset LSP. They will also need to invest in asset management tools, whether telematics for a truck, vessel operations-related for a ship, yield management systems, or the like across modes. Often the benefits of these tools can overlap with the requirements to serve shippers. A telematics system provides data around the truck that might track fuel usage, or maintenance and repair schedules, or compliance issues like hours of service. But it can also be used for freight and capacity visibility. Again, most of the technology into which an asset-based carrier invests can be bracketed under a “cost-to-serve” designation, not a “fixed cost to run the business” designation.

But the picture for shippers is entirely different. A logistics team is one of any number of individual units within a company that require some sort of technology investment. At some shippers, logistics is a key function, a differentiating pillar into which investment is regularly prioritized. At other organizations, supply chain is prioritized, but logistics (being a part of supply chain) is low priority relative to other aspects. And at some companies, supply chain is not a priority at all, at least in terms of technology investment.

This relatively low level of prioritization makes sense: the core function of a shipper of physical goods is to make and/or sell products. Product development, sourcing, buying, merchandising, sales, marketing, customer support - these all tend to take priority over logistics from a technology investment perspective. Then there are the same business operations functions that LSPs and carriers have to manage. Sometimes, when a technology can impact both logistics and another, higher-priority function, that equation can change.

But most of the time, a logistics director is competing internally with a range of other planned or wanted technology initiatives across the business. And this part is really crucial: shippers tend to focus their logistics technology spend on their own customers. That means they need technology that benefits their customers. They don’t want to spend money to be better customers to LSPs and carriers. This often gets lost in the haze of talk about shipper-LSP-carrier collaboration and being a shipper of choice. It is ultimately up to LSPs and carriers to spend on technology that benefits shippers while shippers spend on technology - inside and out of logistics - that benefits their customers.

This means that software aimed purely at shippers has to be sold differently than it does to LSPs or carriers - sales cycle length and deal size need to reflect the often niche nature of logistics within a larger shipper organization relative to the all-consuming nature of a technology that enables an entire logistics service organization. But, it also means that LSPs, and logistics management-focused carriers, themselves have a greater ability to serve as technology providers to shippers. They can step in and be an option for shippers that’s potentially more affordable, requires less management of the technology after purchase, and comes associated with access to capacity.

🚨Guess what, live events are back! We announced the dates for TPM22 this week. Details here. Mark your calendars (and book your hotel rooms)! 

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

• Convoy has been banking for a while on its ability to turn data into a new model around drop-and-hook. It walked me through the latest developments on that this week.

• Zencargo landed a big funding round 10 days ago, and because things are so nuts I only got a chance to write about it a week after the announcement.

• Another player on the scene in the burgeoning world of logistics data integration and automation - I spoke with the founders of Norfolk, VA-based Splyc about their approach.

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

• More details here on the port performance index project, pulled together by my IHS Markit colleagues, that I’ve mentioned a few times in recent newsletters.

• A couple weeks old from Loadsmart, but there is so much action in the logistics decarbonization space, it felt worth revisiting.

• Two blogs from Chain.io CEO Brian Glick this week, one on differentiating in a “saturated market,” and the other praising the DCSA blueprint as a backbone for application development (something I’ve heard other software developers do as well).

• A blog from Flexport on the jump in customs enforcement (validated elsewhere this week to me by the digital customs broker Zeus Logics.)

• David Gonzalez at Gartner explains a bit about this year’s 3PL Magic Quadrant ranking.

• A very long treatise on digital freight models. Still making my way through this myself.

• A look at a range of maritime markets, including containers, by Danish Ship Finance.

• This looks like a good webinar, involving our friend Sarah Barnes-Humphrey, Josh Dolan at Cardinal Healthcare and Priya Rajagopalan at FourKites.

• Finally, a worthwhile look at the ongoing skirmish between some in the tech community and some in the world of journalism. I have to emphasize this is a very niche battle, as I discuss in this Twitter thread.

Some upcoming events I’ll be involved in:

The JOC Breakbulk and Project Cargo Conference is happening May 25-26. Check the agenda here. I’ll be moderating a session on project logistics digitization with Voyager Portal, e2log and the Global Shippers Association.

Registration is open for the IAPH World Ports Conference June 21-25. I’ll be involved in various technology-related elements of the program. The CEOs of MSC, CMA CGM and Hapag-Lloyd are scheduled to speak, among a huge range of influential ports and experts in the maritime sector. Don’t miss out!

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