The Partnership vs Competition Decision
Welcome to the 53rd 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 how the fog of information is a constraint in logistics as it is in a pandemic. This week, it’s a two-parter: first I look at logistics tech companies weighing partnerships against competition; second, I address a couple overlooked parts of the crazy ocean freight environment right now.
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.
Partnership is a funny word in business. In press releases, commercial relationships are often described as partnerships. “Superfast Logistics announced a multi-year partnership with Widget Manufacturing, Inc.” That’s a customer-supplier relationship, not a partnership. In my view, partnerships are when two companies find a way to work together that doesn’t only involve the direct sale of goods or services from one party to another.
So let me focus on particular partnership in the world of logistics technology that I have seen flourish in recent years, and also talk about what aspects of those relationships are actual partnerships and what are buyer-seller relationships. And through that lens, we’ll also dig into how software providers are now more acutely aware than ever of when it’s wiser to partner up, and when it’s wiser to compete.
Good example of actual partnerships? When a rate benchmarking data provider integrates an index into a freight procurement platform. When a visibility provider flows its data into a forwarder’s customer interface. When a broker provides native capacity in a TMS. These are only some of many such examples.
Some of these arrangement are designed to increased system usage for one or both providers. Some are essentially channel partnerships. Some are aimed at creating a 1+1=3 situation, where the two individual systems are useful in a standalone manner, but more powerful when used together.
Things get tricky, though, even in those more real partnerships. Is that forwarder paying retail, wholesale, or a deep “partner” discount level for the data from the visibility provider? If the forwarder is a small, regional 3PL, that answer might be different than if it’s a top five global 3PL, where having a “powered by” logo attached to a logistics brand with high reputational value might mean more to an upstart technology provider than a six-figure-per-year deal.
In reality, there are very few true partnerships that are not actually glorified buyer-seller arrangements. And that brings me to how this intersects with competition. The logistics technology landscape is moving at such pace, in so many different directors, with so many new categories, and so much funding, it’s incumbent upon providers to be constantly scrutinizing their competitive landscape. This is basic SWOT analysis stuff in hyper-drive mode.
A competitor today could be a customer or partner tomorrow, and vice versa. A company that lies in an adjacent category could become a competitor or it could be a window into a new line of business that it didn’t even realize was in its grasp. The challenging side of this environment is that a company needs intense situational awareness at all times. The positive is that companies can sort of legitimately exaggerate on their reachable TAM because…
That is, by the way, the only time you’ll ever see me post that meme because…
Either way, most companies are pretty savvy about who might be competition and who might provide a lever toward success. If anything startups might be overly paranoid about seeing a company as a competitor - the key in the fragmented world of logistics is getting your product in front of users.
Now, on to part two.
There’s no shortage of coverage on the absolutely bonkers ocean freight market these days. One interesting wrinkle I noted on Twitter the other day:
But let me look at two aspects of this situation that have largely not been discussed, one shipper-related and one container line-related.
First, it’s dawned on me after talking with a number of importers and exporters the past few weeks that this is a really unhealthy environment for international logistics managers. I say this because they have been placed in a situation where they are working harder for deteriorating outcomes. Generally, putting in long hours and figuring out complex problems yields job satisfaction. A project completed. A new market successfully entered. A new technology implemented. Steady progress followed by closure.
This feels like being asked to carry a boulder up a mountain, only the boulder gets heavier and the mountain gets taller with each step. It’s weighing on these people. You can see it in their eyes, in the sighs and long pauses before they speak. For a group that’s accustomed to figuring things out, to be confident about the way they can effect their organization, there’s a demotivating helplessness that’s set in. I write about technology for a living, but honestly, I’ve often felt like the string quartet on the Titanic as the passengers were scrambling for lifeboats. Not to say technology couldn’t have helped manage this situation better, but the rates and lead times and delays and randomness is too much at one time to be offset by technology alone.
Now, for the container line side of things. There’s understandably been acrimony about the amount of profits carriers have reeled in this year while their customers suffer, but I’m not going to indulge in the blame game. As my colleagues report every day on JOC.com, the situation is way too complicated to say one party alone is culpable.
But if I can leave you with one takeaway, think about this: the liner carrier industry has, in a few quarters, completely reshaped their entire financial environment for years to come. This isn’t about “having a great year” or “making investors happy right now.” This is about a fundamental 180 in their financial outlook. Long-term debts that were being paid back slowly through hard-won, low-margin volume gains can be wiped away. Small lines previously in intense financial peril due to a lack of scale in a market that rewards scale have found unthinkable success in focusing on niche markets or services. Carriers undergoing a steady business transformation now have the capital firepower to accelerate those plans.
I’ve flippantly likened this to someone inheriting a fortune from a rich aunt or uncle they barely knew they had. It’s not so much the success in the here and now as much as it is what that short-term success can yield. Just as losses mount and create desperation, so do profits and the ability to build from a position of strength.
My question: how much of this strength will be invested by carriers into technology and how much on physical assets? It’s not a simple question to answer. Too much invested in technology, and container lines’ true moat (control of crucial, scarce, physical assets) erodes. Too much in assets and, well, we saw how that played out a decade ago.
Here’s a roundup of pieces on JOC.com the past week from my colleagues and myself (note: there is a paywall):
I wrote about a new digital ocean freight consolidator initially focused on giving importers in India a direct platform to book, track and manage trade compliance associated with LCL shipments. LCL is growing due to e-commerce growth (B2B and B2C) and because full container capacity is…well, see above.
DAT Freight & Analytics is obviously most well known as a load board, but it’s been steadily building a network of partnerships (there’s that word again) to extend the value of its data. Some in the industry like to malign DAT but it’s the biggest load board in North America and thus sits on a massive trove of information, so it’s hard to say it doesn’t have a massive impact on the market. In this piece, I explored its partnerships with a trio of small carrier technology providers that aggregate capacity from small fleets.
Portchain this week announced its berth planning software has been implemented at a new container terminal in Tanger-Med, the Moroccan transshipment terminal. That gives Portchain a footprint in Southeast Asia, the Baltic, Northern Europe, the Mediterranean, North America, and Africa.
And here are some recent discussions, reports, and analysis I found interesting:
This was a fun read from Ruben Huber, founder of the forwarding consortium OceanX Network.
Interesting live Q&A with Cargobase answering queries from logistics providers about its spot procurement platform.
Good blog piece here from Alana Semuels at Time magazine about her story tracking the journey of a toy stuffed giraffe from Asia to the US.
You’re going to want to read my colleague Bill Cassidy’s latest Substack newsletter, this one on the future direction of the LTL market.
Finally, it was instructive to go through Kevin Higgins’ refresh on this piece he wrote in 2018 about whether Amazon was a retailer or logistics company. I think we know the answer now, but it wasn’t so clear to everyone back then.
Some upcoming events I’ll be involved in:
The next episode of LogTech Live is right around the corner, at 10 am EST Sept. 3. I’ll announce the guest next week!
I’ll be speaking at the Container xChange Digital Container Summit, held virtually, at 8:30 am EST/14:30 CET Sept. 15. I have the honor (or challenge) of being wedged between Lars Jensen and Patrik Berglund on the agenda, so good luck to me! Use this code to get 30 percent off the registration fee.
I’m leading a session (in-person!) at CSCMP Edge at 2 pm EST Sept. 20 in Atlanta. The panel, How Leading Retailers use Technology to Effect Supply Chain Transformation, includes Sarah Galica, VP of transportation at The Home Depot, and Ben Pivar, CIO at Carter’s. Please stop by if you’re at the event – I have 18 months of in-person catching up to do! Details on the session can be found on the agenda page.
Disclaimer: This newsletter is in no way affiliated with The Journal of Commerce or IHS Markit, and any opinions are mine only.