JOC Uncharted: Latam logistics ripe for technological innovation

JOC Uncharted: Latam logistics ripe for technological innovation

Logistics providers in South America have a huge addressable market but also contend with divergent customs regulations and customer expectations across the continent

Technology can help the Latin American market address logistics inefficiencies, but convincing shippers of this will be a gradual process, Janan Knust, CEO of Santiago, Chile-based KGroup Logistics told JOC Uncharted Wednesday.

“Latin America is like the United Nations without the government,” he said. “You have 20 different customs, 20 different countries, 20 different cultures, and 20 different regulations, so it's so difficult to put all of those things together. And the key issue here is standardization. The only way to make this standardization possible is through technology.”

That lack of market cohesion led Knust to focus on building KGroup as a digitally native forwarder, akin to Flexport in North America and Forto in Europe. Knust said putting technology at the center of what the company provides to shippers allows it to understand where shipper customers are on the technology-readiness spectrum.

“We think about this triangle which puts the clients on the top, the industry on one corner and what we are doing as a business [on the other corner],” he said. “Clients are very different from one another. If there is one person that is not incumbent in technology, then you cannot force him to be technological. He wants to use the [paper bills of lading] and pen and paper because he's done that for the past 50 years.”

Forwarders have two potential paths

Knust acknowledged forwarders in the Latam market have two possible paths to becoming digital, one that’s similar to the options available in other markets. They can invest, as KGroup did, in an in-house software development team, or use a variety of software-as-a-service (SaaS) tools to create a digital environment for their customers.

“We have 18 developers inside here that are developing according to our needs, but there are two ways,” he said. “There are a lot of different platforms out there that will be able to give you visibility, will be able to give you pricing, able to give you connectivity with your shippers and big data with an order management system. So all of those things you will be able to pick and hire from different platforms. But we think that if we want to be a real digital company, we need to build it from within.”

Knust said either path would enable existing forwarders to stay relevant, especially in markets such as Latin America, where local expertise is a crucial component of the value provided by a 3PL.

“I don't think that our industry will disappear whatsoever,” he said in reference to disruption caused by digitally oriented entrants in other industries such as ride-sharing. “I really think that the local heroes will continue being local heroes. This industry is completely fragmented.

“Think about Latam, where there are so many players, so many customers, and so many cultures. The shipper in Bangladesh does not speak Spanish and the consignee in Chile speaks very little English, so first we need to have an ecosystem — or a platform — that is very user friendly.”

Knust said KGroup’s approach has been to invest “100 percent of our profits” into technology and staff, but acknowledged innovation is a risk in itself.

“I don't know which one will be the right way,” he said. “It's a completely different approach in terms of saying we're going to change the industry from within. We’re not burning money, and not spending the dollars that we don't have.”

For more information on the weekly JOC Uncharted web series, airing Wednesdays at 11 a.m. EDT, including future speakers and discussion topics, please visit https://subscribe.joc.com/uncharted/.

Contact Eric Johnson at eric.johnson@ihsmarkit.com and follow him on Twitter: @LogTechEric.