Shipping Need Systems Thinking, not Sound Bytes

Welcome to the 44th edition of The LogTech Letter, a weekly look at the impact technology is having on the world of global and domestic logistics. Last week, I looked at whether venture capital could play a role in shortening logistics sales cycles. This week, I’m digging into the mainstream media’s fascination with the current global shipping mess.

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.

Still wrapping my head around how viral the shipping industry has gone the past few months. The Ever Given situation has catalyzed an ongoing fascination with the space I’ve not seen in my 18 years covering it. Previous “mainstream moments” for shipping never seemed to stick, and the industry eventually receded into the background, where it feels most comfortable.

Is this time different? I was struck by a conversation this week between CNN’s Paula Newton and Xeneta CEO Patrik Berglund, and the thing that struck me was not the industry insight that Berglund provided (more on Xeneta below, incidentally), but rather a scene-setting comment by Newton: “We’re not used to hearing about shipping, really, until there’s a problem.”

That sums it up nicely.

What’s different this time? We’ve seen blogs about the industry go viral, mostly by ripping things down to the studs for the newbies. Those blogs, and the breathless coverage of broken supply chains on virtually every mainstream news outlet, are designed to target an audience largely unaware of the physical and digital systems that enable goods to move almost imperceptibly around the globe.

It’s like how those of us not in finance got a crash course in subprime mortgages 13 years ago. We were fascinated, we felt we needed to understand what was going on, and then we moved on to the next. Despite reading a lot about that crisis, I’d struggle today to actually explain what caused it. I suspect many of the passersby, both journalists and their audiences, who have become temporarily fascinated with supply chains will experience the same thing.

I write to an audience that doesn’t need to have it explained to them that containerships are getting bigger, that ships move containers, that containerships berth at ports. I, and a cohort of other seasoned journalists, have done the hard work of examining a highly complex industry in a nuanced way. We all feel a bit like Andy Dufresne at the minute, chiseling away at a wall that no one notices. I guess that makes it a little annoying when we see others controlling the narrative around one of the most disruptive periods in our history.

But hey, if I was in this for the glory, I’d be writing about meme stonks, and weird crypto platforms, and how great Miami is. Instead, I’d rather keep doing what I’m doing, which is to take the under-appreciated aspect of how technology and logistics are converging, and give people a framework for understanding it a bit more.

In that light, “boats are big” and “there are containers and ports” is not very illustrative, at least in my eyes. But there is something deeper that’s worth considering: how might broader adoption and deployment of technology in the container shipping industry have helped avoid the current situation shippers and 3PL capacity buyers are experiencing?

Let’s level set here for a sec. Space on a container ship is going through what I’ll dub an overvaluation phase right now (to say the least). A surge of imports, dislocation of physical assets, and a lack of operational congruity between ports in Asia and elsewhere are the chief drivers of the story. But so is the seemingly insurmountable interplay between time and space in physical logistics.

There is a physical ceiling of available ocean freight capacity at any given point in time. There is also a window of time before a ship departs that is perishable. None of this is new. But the pressures these realities create in a situation such as we are seeing now has had a cascading effect. Chassis shortages in Chicago create pileups of laden containers at rail yards. The cargo is delayed, but so is the return of the empty containers into the system. A shutdown in Yantian redirects vessel calls and container discharges in nearby terminals, pushing those terminals past their operational max. It’s like when a patient has one organ that fails and it creates a breakdown in other organs.

It’s a bit of a pointless hypothetical to ask whether deeper investment in technology five or 10 years ago could have prevented this, but let’s indulge ourselves nonetheless. What would have needed to be done digitally to have made things more resilient?

I’d start with harmonizing port operations – meaning mostly automated physical and data operations - at key gateways globally. I’d then move to universal adoption of vessel call optimization software globally. Then, let’s layer in door-to-door passive visibility, meaning a system that captures data with minimal identifiers as it goes from production facility to port to vessel to port to dray/rail to warehouse/DC. Let’s add procurement automation, where bots run an unending number of scenarios to figure out the right price with the right provider, dynamically.

And yet, even all that leaves out critical elements, like risk analysis of sourcing and production locations, demand sensing, purchase order management, container allocation software, inventory management. And do you have a platform to integrate all of this? You see, even if we hop in the time machine and get our mythical organization ready for the disasters about to happen in 2020 and 2021, the hypothetical fails. No amount of technology spend could have solved every leak that has sprung in the global supply chain system since March 2020.

But that’s what makes this fun, and also what will evade most of the tourists gawking at the current global logistics car crash on the side of the highway. There are a million dynamics at play, and a thousand type of systems in which to invest, and hundreds of new disruptions lurking around the corner. The game is not identifying how to solve this all, but rather how to survive and live to tell the tale.

If anything, the current situation underscores the role that human ingenuity and experience play in managing crises layered on top of one another. The more technology that enters global logistics, the more we’ll need systems thinkers and problem solvers. Not just hustlers, but hustlers that can juggle an interconnected set of problems. Not big boats, but big dynamics. And these are the discussions you’re not really seeing in four-minute cable news sound bytes.

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

• It’s not the biggest funding round of the week, but in terms of impacting a core part of the industry I cover, I was most interested in Xeneta getting a $28.5 million round this week. Xeneta has big name customers, and it did something no one else that has tackled the ocean freight pricing benchmark problem has been able to do: base it on long-term rates, not just the spot market. Current pricing upheaval does not hurt Xeneta’s value prop one bit.

• TradeLens is making progress in China, but more interestingly, it also told me they are attracting around five new forwarder or shipper customers per week.

• I spoke this week with Eric Beckwitt of Freightera, who is convinced that choosing the lowest-emitting trucking carriers does not have to come at the expense of choosing the most cost-effective carriers.

• I’ve written frequently the past year about forwarders using APIs from visibility data providers, and I expect this trend to keep on keepin’ on. An integration between Terminal49 and Shifl, the digital forwarder you may not have heard about, is another example.

• Another issue that isn’t going anywhere is cyber attacks, with HMM joining the ranks of shipping lines to have been affected.

• Finally, Cathy Roberson wrote this week about Bringg’s $100 million funding round that vaults it into unicorn territory (joining project44 and Shippo among logistics tech providers to recently make that growing list). And yet it wasn’t even the biggest or second biggest round of the week. PayCargo got a $125 million Series B (!!!) and KeepTruckin got a $190 Series E (and a $2.3 billion valuation) this week.

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

• Andre Simha, who I’ll be talking to next week about electronic bills of lading, penned a very notable piece on what shippers actually want.

• Ryan Petersen goes long-form on merging the physical and digital worlds of logistics for A16Z’s new media arm.

• Interesting behind the scenes view on Flexport’s aim to automate logistics.

• Great podcast here with Girish Rishi as Blue Yonder moves under the Panasonic umbrella.

• ECU Line is surveying the market on APIs.

Some upcoming events I’ll be involved in:

• I’ll be hosting a JOC webcast 2 pm ET June 24 that dives into our Top 100 Exporters list. Joining me are my expert colleagues, including Dustin Braden, Ari Ashe, Bill Mongelluzzo, and Michael Angell, to dissect the findings. The webcast is free to attend and you can register here.

• The IAPH World Ports Conference starts Monday and runs through June 25. I’ll be involved in various technology-related elements of the program, including sessions on how ports should prepare for automation, demystifying data collaboration, a session on how ports of all sizes can embrace the technology on offer, and accelerating collaboration in the maritime industry. Register here.

• I’ll be moderating a session on where TMS is headed at 10 am CET June 29 (this moved from the original June 22 date) as part of SupplyStack’s TMS Insight Series.

• I’m also moderating two sessions at the SMC³ Connections conference June 28-30, one interviewing Chad Crotty, chief operating officer of DDC, and another talking to Steve Blough, president of MercuryGate. 

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