The last thing a shipper needs in his supply chain is disruption, and in fact all the effort put in by his logistics service provider is dedicated to ensuring consignments move efficiently through the transportation pipeline from factory gate to last mile.
Yet disruptive influences can be found at every step of this process — bigger ships are testing port efficiency, poor planning has left a huge capacity overhang while industrial action and natural disasters regularly bring trade to a standstill.
Although these are tangible disrupters, in economic theory the term means to radically change a business or a strategy to create a new market, eventually displacing the leading existing players. But the market is already clearly defined, and although improving the way containers are booked and the rates are secured could improve efficiency and cost, it is hardly a radical change in strategy.
Whether the many logistics technology companies that are entering the market will displace existing operators remains to be seen, but two supply chain technology companies making progress in this area shared their thoughts on the increasing number of online solutions-offering companies in the logistics sector.
Harry Sangree, executive vice president of CargoSphere, a cloud-based global freight rate solution provider, said some technology start-ups, many backed by venture capital funding, were receiving a lot of press by positioning themselves as disrupters, “as if this were a good thing.”
“We think that disruption might be good for the person doing the disruption — because they can get a lot of publicity on the back of the disrupters like Uber, Airbnb and Houzz, which operate under different dynamics — but it is often not good for the highly skilled and important service providers that operate in the logistics space,” he said.
Also in this camp was Matt Tillman, CEO of Haven Inc., a cloud-based company that automates freight and logistics for commodity traders, food suppliers, and consumer goods companies.
“Port strikes, rapid fluctuations in fuel costs and equipment availability are the most disruptive aspects of the supply chain. All are symptoms of poorly structured communication,” he said.
“Technology is enabling the industry. The latest set of technology innovations not only improve upon existing models, they enable us to trade in entirely new ways. Physical and digital innovation aren't disruptive to the supply chain, they are in fact necessary in order to feed, clothe, and power our growing population.”
The ocean transport and freight forwarding industry are not traditional innovators, but that has created an enormous opportunity for entrepreneurs and the numbers of technology start-ups backed by venture capital funding are growing all the time — apart from Haven and CargoSphere there are a host of other companies, including iContainers, Xeneta, Flexport and Freightos. Freightos in July launched an online marketplace covering U.S. imports from China by air and ocean.
These online entities are developing products that include sophisticated websites communicating with freight forwarders and shippers, databases that offer market intelligence on prices and shipping terms, and multivendor solicitation. They are all pledging to replace the traditional way of creating a supply chain using fax and phone with one that is digitally based, faster, more transparent and, importantly, cheaper.
The innovative technology for this is already available, but Sangree said the global logistics and forwarding industry needed to accelerate its adoption into the supply chains they manage to get more connected and become more efficient.
“We talk with ocean carriers, NVOs and forwarders in Europe, North America and Asia all the time and what we hear is that the complexity of trade will continue to require established industry expertise at origin and destination into the far future,” he said.
“These parties know what they are doing and they know what they need. They are telling us they need software tools to eliminate unnecessary work and they need real-time, collaboration platforms that enable them to work together to efficiently move freight at the lowest possible cost.”
With freight rates on major trades scraping rock bottom, and unlikely to stage a sustained and significant recovery in the next year or two, the always narrow margins of service providers have shrunk even further. This is probably the best marketing tool the cloud-based platforms could ask for.
Not all the online rate management and freight marketplace companies that have jumped into the container transport industry will survive, but those that can easily demonstrate their value proposition to a market that is hesitant to change will have the best chance of sticking around.
Contact Greg Knowler at email@example.com and follow him on Twitter: @greg_knowler.