Welcome to the 39th 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 the logistics industry can ever escape its fragmented nature. This week, Eytan Buchman, chief marketing officer at Freightos and one of the sharpest thinkers in the LogTech space, guest writes about the value of platforms in logistics.
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.
In mid-April, Logitech pulled the plug on Harmony, a universal remote control company it had acquired a few years back. Harmony remotes, if you never had one, compacted remote control proliferation by letting you combine all your remotes - DVDs, stereos, TVs, Xboxes and VCRs(?!) into one device that could be programmed to trigger workflows. As an early Harmony owner, I was bummed. But as a freight technology junkie, it made sense.
Bear with me, we’ll get to the freight in a second.
Not such a remote problem after all
Harmony remotes aimed to solve a fragmentation problem. To play Tony Hawk’s Pro Skater 2 on my Playstation, turn my TV and stereo system on, and choose the right input, I needed way too many remotes. Harmony brought that all together, which was fun (and geeky). It was an elegant solution, stitching together disparate systems, where even the right thing happening in the wrong order could doom my PlayStation session.
To some extent, it was global freight in a nutshell. At this point, carriers have their own automation and data under control. The point of failure always comes from the coordination between systems. This is one of the main raison d'etres for freight forwarders. Doom, whether a mangled video game session or lost cargo, lurks in the handoffs.
Wait, what happens to Harmony?
Before we talk about what this has to do with the future of global freight, let me go back to my remote control for a second. Over the past few years, a standard - HDMI Arc - has progressively ensured that your devices can talk with each other. It’s how your Amazon Fire or Xbox can wake up your TV. It’s how your TV can raise your sleeping stereo. And while most of us don’t pay attention to it, it spelled the death of Harmony.
Video killed the radio star, standards killed the video’s remote. Just check out this timeline of Google searches for Harmony Remote and HDMI Arc.
Back to freight
In an excellent article a few weeks ago, Jan Philipp Harnisch of Rhenus shared his thoughts on where disruption in freight is at (or, more accurately, isn’t). I wanted to double click on what he shared about a major drive for innovation - the need for platforms. I also want to nitpick a small component of his claim, which is that logistics isn’t an industry that can truly be disrupted.
With dozens of ocean liners, hundreds of airlines, more than 100,000 forwarders, and millions of truckers, global freight is inherently fragmented. Again, the problems typically lie in the handoff. The physical aspect of fragmentation has been slowly bridged with better IOT integration and tracking, which means that each company generally (and I use that liberally) knows where their goods are.
High school-level probability underscores exactly how necessary this is. If every player involved in an eight-player shipment provides accurate data 97 percent of the time, 20 percent of all shipments will still have problems. In a shockingly high number of cases, the root cause is data sharing, not physically lost goods.
This digital integration challenge has been bridged with a hodgepodge combination of jury rigged integrations with carriers, third-party tools, and manual updates. It is a realm where EDIs and APIs reign supreme. This is one of the biggest IT projects that any forwarder undertakes. Having the right architecture from the get go, together with the ability to share updates with customers, may actually be one of the biggest differentiators that “digital forwarders” have.
The Solution
As Harnisch rightfully points out, platforms are one answer to this:
“The undeniable future is an industry-wide master data management structure that compiles and analyzes data so we can use it for automation, coordination and insight. It will be a platform for major logistics companies and small players alike. And while this isn’t a reality yet, one of the ways to get there would be to build an underlying platform and provide access to as many players as possible in the market at no or low costs.”
I love platforms. Freightos and WebCargo have put out a unified global freight booking platform, connecting carrier pricing, capacity, and booking with forwarders (that’s WebCargo), while connecting forwarders with importers (freightos.com). No, it’s not the tracking piece but it’s enough for me to give Hanisch a hell yeah. Of course, we’re not the only solution.
To some extent, cross-industry standards can help resolve some improved integration. Take the Digitial Container Shipping Association’s (DCSA) standards for ocean container tracking, a move to roll out one standard across key players. It could help, but ocean tracking may be an edge case, giving the unique situation of liner shipping, where 65 percent of global capacity is controlled by the top five ocean carriers.
But what about disruption?
Clayton Christensen, the father of innovative disruption in the tech world, defined disruption as:
“A process by which a product or service initially takes root in simple applications at the bottom of a market—typically by being less expensive and more accessible—and then relentlessly moves upmarket, eventually displacing established competitors.”
Harnisch makes some excellent points about why innovation, not disruption, is what’s necessary. But then he jumps to:
“But so long as cargo still needs to be moved from A to B, logistics can never be replaced or truly disrupted.”
And that’s where I disagree.
Yes, until teleportation or viable large-scale 3D printing becomes the norm, physical logistics disruption is unlikely. But a huge component of logistics is the digital layer - the connectivity, tracking, booking, and coordination. And many of the cases of disruption we know, where new business models or markets emerged, were based on new ways for information to travel, not physical products – things like internet piping for streaming TV or digitization of accommodations for Airbnb.
The Digital Layer of Global Freight
It is the digital layer unifying global freight - standards, platforms, or both - that I’m excited about. And it’s where I think potential disruption lies. Think of how incredible the new Apple AirTag tracker tag is. The ability to find anything using a distributed network of global iPhones, is the kind of innovation that can only be unlocked across global data platforms.
When extrapolated across a global network of carriers and logistics providers, the potential for disruption is even more real. I don’t know what it looks like. Real-time capacity availability, flexible rerouting, consolidation and deconsolidation, agile 3PL last mile fulfillment center routing...there’s so many efficiencies for an increasingly stratified user base of logistics consumers that the sky's the limit.
That flexibility can radically lower the cost of shipping goods, make it more viable for different businesses, and create new opportunities that we can’t even comprehend.
It’s kinda exciting.
🚨 LogTech Market Map Project
Time is running out for any company that wants to submit to be considered for the LogTech Market Map I’m helping to put together with some of the sharpest minds in the LogTech space. The goal is to produce something that I think has long eluded the industry: a map that categorizes startups in the logistics technology area in a way that makes sense for practitioners and potential software buyers. Most maps I see struggle to properly contextualize early stage providers in the space. It’s because the landscape is inherently confusing (everybody says they do more than they do, everybody says their strengths are more numerous than they are).
So Nick Chubb of Thetius, Brian Laung Aoaeh of Refashiond VC, Ben Gordon of Cambridge Capital, Radu Palamariu of Alcott Global and I have set out to build the defining LogTech Market Map, one that highlights companies along a number of key buying categories, one that prioritizes significance based on customer traction, funding, and size, and one that properly contextualizes startups in a highly fragmented space.
We are collecting submissions for companies that want to be considered for the map here, and thanks for your support in helping us build something that we believe will benefit the entire industry. Early stage, mid-stage, or mature, we want to hear from all of you. To be absolutely clear, there is no submission fee and there is no fee for companies that are eventually chosen to appear on the map. This is not a pay-for-play endeavor.
Here’s a roundup of pieces on JOC.com the past week from my colleagues and myself (note: there is a paywall):
I’ve forgotten how much I’ve written over the years about the freight rate management software space, one that’s integral to forwarders and has been defined by a relatively small group of widely-used players. The last of a sort of big three in that group, Portrix, was acquired this week by Descartes, which I dig into here.
The day after that acquisition was announced, Descartes made further news when its Kontainers subsidiary announced it had pulled in the liner carrier Ocean Network Express (ONE) as a customer for its instant quoting tool. There’s hardly a major container line now that doesn’t have such capability.
Optimal Dynamics has one of those business models that’s tough to fit in a single sentence, but broadly speaking it’s aiming to totally transform the way transportation assets are optimized using a machine learning approach that’s literally been developed over decades. This week, it got what I see as the single biggest LogTech SaaS series A ever. The only companies to have raised more money at this stage have all been tech-oriented 3PLs. I compiled a list of notable LogTech series A rounds for reference (sorry if I missed anybody!).
My colleague Ari Ashe dives into CCM’s spinoff of its chassis management software division, as it seeks to tap into demand from shippers that are increasingly managing their own equipment.
Interesting partnership between Trucker Tools and MercuryGate, in that Trucker Tools has generally enlisted brokers as customers but now has created a direct connection for its Book It Now tool into a TMS used widely by both brokers and shippers.
BluJay Solutions expanded its modal reach and its managed transportation services capabilities with the addition of a rail TMS last week.
Digital freight broker sennder’s consolidation march in Europe continues, this time with the acquisition of a Benelux-based dedicated broker Cars&Cargo.
And here are some recent discussions, reports, and analysis I found interesting:
Great blog here from AWS and Gnosis Freight, co-authored by AWS’ Michele Sancricca and Gnosis CEO Austin McCombs (both of whom were speakers at TPM21 in March).
An oldie on how to raise capital that Ben Gordon at Cambridge Capital turned me toward this week.
Of course I’m going to promote this. It’s Eytan from Freightos (see above) and my colleague Cathy Roberson riffing on e-commerce and the final mile.
Some upcoming events I’ll be involved in:
I’ll be chatting with Guilherme Luz about forwarding technology at Parnity’s Forwarders Online Conference May 19-20.
On May 20, I’ll be joining an interesting panel called Containerization and False Red Flags at the 2021 Annual Trade Finance Compliance Conference.
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
Great article Eric, as always.
This exact reason, is why I still think if a solution company can create a common (TMS) platform that is easy to become a part of, and covers all the key parts of the complex forwarding process, on a pay-as-you-go model, it will simply take over.
I see so many freight forwarders all involved in hugely complex TMS projects, all setting up the same thing over and over and over again, at massive cost. The solution they all need is not so different.
My bet is, that if one of the digital forwarders can get enough industry know-how into their systems (end-to-end), and then open it up to all at a reasonable cost, it will cause a massive change in the industry. That would be the true AirBnB moment, where every FF asks themselves the same question that every rental agency did, why should I create my own service portal when I can live off the margins that I get from a pre-built portal?
Thanks again for your great work.
Christian
Fascinating, once again! I continue to consider you the smartest freight tech writer out there, Eric! Your ability to relate to the reader and draw parallels to get your point across is the icing on the cake.
Regarding standards, for years I've suggested to the largest global freight players to sit down together, formally announce an open "standards project", and invite all comers to join. Yes - it's a long road, but it's been done in other industries before and the prospects are worth the effort.
In a prior life I was DEEPLY involved in the digitization of the insurance industry (over 30 years ago). While I won't get into the details here, what used to be 5,000+ different proprietary "forms" for a claim to be filed, an insurance quote to be started, or for the "declarations" of what an insurance policy actually contained, the industry led project turned all this into ONE single form for each transaction, used in both paper and digital format, to get the same job done faster, cheaper, and across different industry entities.
It worked - and it still works today...and the organization that started it (ACORD) still exists and the ENTIRE industry relies on them for standards today (see acord.org). They are an INDUSTRY OWNED non-profit, and have transformed the insurance business into a DIGITAL case study on how an industry can work together IF LED FROM THE FRONT BY INDUSTRY LEADERS TO MAKE THINGS BETTER.
Tim Higham
CEO
AscendTMS