What is the Future of Logistics Platforms?
Welcome to the 69th 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 discussed whether we can trust public proclamations of revenue and customer numbers from private technology companies? This week, I’m going to explore the future of the logistics industry through the idea of platforms.
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.
What exactly is a platform? It’s probably the most misunderstood term in logistics. I’m partly at fault. I throw it around in various JOC articles, often wrongly conflating it with “product” for the sake of variety. But a platform has a meaning, and it’s important to understand what a platform means to the logistics industry in the years ahead. It’s a topic we’ve tried to address in The LogTech Letter before.
I had an epiphany this week while putting together this piece on Convoy’s relatively new product for fellow brokers. Here’s my thought: the logistics industry is headed toward a future that will be defined by two sets of platforms. One will be a set of truly neutral platforms, a marketplace of apps and capacity aggregated by a provider that is not an intermediary. The other set will be operated by companies that are intermediaries that figure out how to pull in relevant ecosystems of customers, partners, and even complementary competitors.
I’ll admit this is hardly a groundbreaking realization. All we need to do is look to the world of retail e-commerce to see this having already taken place. Amazon started as a neutral marketplace and has evolved into what is essentially the retail version of an intermediary (and I’m not even talking about its actual logistics ambitions). That is to say, it started off a pure seller of third party items but now sells those items alongside its own.
In the meantime, other retail marketplaces that compete with Amazon continue to actually be neutral. They don’t sell their own goods alongside those of third party sellers. Both are platforms in that they provide a place for parties on multiple sides of a commercial transaction to meet.
Now let’s put this back into a logistics context. A truly neutral marketplace (of freight rates and/or adjacent services) will not even have the ability to be an intermediary. It will have neither a broker license nor an ocean transportation intermediary (OTI) license. It will be a technology provider that brings parties in a logistics commercial transaction together. It will serve as a public square in which those parties can also add other services. That’s one set of platforms.
A non-neutral marketplace will be one convened by a broker or forwarder that has the technology, the leverage, and the relationships to pull in the parties a neutral platform connects (ie cargo owners and capacity providers) but it can also provide the service itself. This is not exactly a new idea. Managed transportation providers or 4PL service providers have done this for decades. The trick to those arrangements has been convincing customers you can act as a neutral provider and as a first party operator in different situations, but always to the benefit of the customer.
How these intermediary-operated approaches evolve from managed transportation or 4PL into a true intermediary-operated “platform” is when they can pull in complementary competitors using a common technology. In the case of the recent Convoy piece, I called this a demand ecosystem. Brokers have been avid partners of TMS providers for years, a trend that went into overdrive during the advent of the “digital broker.” Those are naturally symbiotic relationships where benefits align very clearly. TMSs have shipper customers and Convoy (and other brokers) want direct access to those shippers’ loads. That’s one element of the demand ecosystem.
It’s not as easy to see how a 3PL that competes with Convoy can also create a symbiotic relationship, at least through the lens of traditional logistics thinking. But strip out of the idea that Convoy is directly competitive with every broker in North America, and you can view these relationships as widening the demand ecosystem for Convoy and widening the aperture of available capacity for competitive brokers. If Convoy is successful, and they are far from alone in pursuing this idea (I noted Shipwell and Emerge and others as having similar goals), then we are moving closer to that set of intermediary-operated platforms.
Money helps. Much of the early VC cash into the logistics technology landscape went to digital intermediaries (in the case of Convoy, a lot of cash), and that funding can go toward building and marketing the tools needed to create a demand ecosystem that incorporates willing competitors. This won’t happen overnight. It hasn’t happened overnight. It’s not just about the technology platform itself, it’s about building credibility with the market that the model is right.
Here’s a roundup of recent pieces on JOC.com from my colleagues and myself (note: there is a paywall):
There has been a mad rush of VC funding announcements before the holidays, including drayage marketplace provider Dray Alliance getting a $40 million pop this week. As I’ve been writing for weeks, the amount going toward this long-overlooked segment of global logistics is overdue and required.
Another big round went to KlearNow, a company focused on automating customs entries and other trade compliance documentation, but one that is also adding a drayage management component.
Two smaller, but still substantial rounds went into Mexico-focused startups Nuvocargo and Solvento over the past week. Cross-border broker Nuvocargo I’ve covered a few times before but Solvento, which provides working capital solutions to domestic truckers in Mexico, was new on my radar. Also of note, Nowports landed a massive $60 million round Friday to build its Latam-focused digital forwarding business (will have something up on JOC on that later Friday).
In non-funding news, I wrote about Singapore Airlines Cargo working with WiseTech Global on direct rate/booking integration for forwarders using CargoWise. This is another step in a progression that has been happening for a couple years now, led by Webcargo and cargo.one.
And here are some recent discussions, reports, and analysis I found interesting:
Great look at the evolution of APIs in freight from my friends at CarrierDirect.
Xeneta with a blockbuster examination of where it sees ocean freight rates heading in ‘22. Make sure to read my colleague Greg Knowler’s analysis on this as well.
Speaking of Convoy, CEO Dan Lewis with an interesting thread on what he sees as the future (and future implications) of self-driving trucks.
From a couple weeks back, a really great self-reflective post from Forager CEO Matt Silver on the lonely path of a founder.
Come for some terrific insight from a forwarder and former carrier exec on what ails container shipping and stay for my blow-by-blow recap of how email constrains the industry in the latest episode of Freightos’ Ship Happens podcast series.
TPMTech Session in Focus:
From now until TPMTech in late February, I’ll be spotlighting a different session at our upcoming event, to be held Feb 24-25 in Long Beach, Calif. This week I’m shining a light on a favorite topic of mine: the plumbing underneath the logistics industry. It’s a topic I’ve tackled in this newsletter before and one I’ll continually cover at JOC.com. It will also be a key session at TPMTech, and I’ve got three great speakers to dive into this. One is a systems integration specialist, another is a CTO at a freight broker that has morphed into providing its own standalone integration platform, and the third is a colleague of mine at IHS Markit that focuses on data management. This is the type of nerdy session that separates TPMTech from other events. Don’t miss it!
Some upcoming events I’ll be involved in:
The next episode of LogTech Live is Jan. 7. Subscribe here to get alerts and to catch an archive of previous episodes, including my most recent one with project44 CEO Jett McCandless.
The third and final webcast in our Logistic Technology series is Jan. 13, where DCSA CEO Thomas Bagge will join me to discuss how to drive standardization in the global logistics industry. Registration is free.
Disclaimer: This newsletter is in no way affiliated with The Journal of Commerce or IHS Markit, and any opinions are mine only.