Startups seem to adopt new systems to assess the various parameters in the industry in an attempt to shake-up the international freight market.
Fleet Logistics
Max Lock, the CEO of Fleet Logistics, said that his company does not offer an Uber-style marketplace, because Uber transactions occur quickly and show up very quickly. Fleet offers an online marketplace connecting shippers to freight forwarders, both ocean and air. The complexities of international shipping make that impossible. On the Fleet site, when a customer asks for quote, the first 5 freight forwarders who respond are presented to the prospect. This may take some time. The customer then chooses a forwarder to work with, partially by looking at the freight forwarder ratings and price. So rather than an Uber model, this is a rating and review platform more akin to TripAdvisor TRIP -0.23%.
Freightos
The CEO of Freightos, Zvi Schreiber, another marketplace connecting freight forwarders in air and ocean to shippers, agrees that a better analogy would be to Priceline, Orbitz, or Expedia. He syas that Uber is a sharing economy marketplace. They entice new drivers to enter the market. We are not enticing new freight forwarders to enter the market. He also agrees that in contrast with Uber, where a passenger can get an almost instant notification that a driver can pick them up within a few minutes, that is not currently possible for international freight. Freightos does provide quotes within 20 seconds to shippers. However, these are not binding quotes until the freight forwarder can determine that they can capture a slot on the ship or plane. The freight forwarder has one day to cancel the order. Over 90 percent of the time the quote is honored. And in the case of air, where a 3 or 4 day transit time is quoted, if the forwarder can’t get a slot on one carrier’s plane, they usually can on a different carrier. At Freightos, roughly half of the 50,000 quotes they provide in a quarter are for air.
Rid inefficient middlemen
The new technology-based marketplaces generate value by dis-intermediating inefficient middlemen. That is clearly not the case at Fleet or Freightos, where they are looking for freight forwarders.
CoLoadX, a startup
This is also true of CoLoadX, a startup focused on connecting ocean freight forwarders to shippers. One of the founders, Petere Miner, used to be the Director of Global Logistics Procurement at Hewlett-Packard HPQ -0.76%. He said that freight forwarders are necessary because shippers need service. The mistake many startups have made is looking at a freight forwarder like they are a travel agent. They are not. They add value. Shippers do not want to negotiate customs in Indonesia or a trucking delivery in Ukraine. Freight forwarders cannot be dis-intermediated!
Mr. Lock of Fleet
Mr. Lock of Fleet provided a different example of how freight forwarders provide value. The largest air freight forwarders actively work to consolidate less-than-container loads (LCLs) to full-container loads (FCLs). They do the consolidation themselves. These consolidation services save shippers money. In ocean, some of the biggest freight forwarders physically do this as well, but often they have VanGuard or ShipCo do the consolidation for them.
Caitlin Meaden, the Director of Marketing at Cargo Chief
Other startups, don’t look to provide more efficient connections between shippers and freight forwarders. They are freight forwarders! Caitlin Meaden, the Director of Marketing at Cargo Chief, also describes Cargo Chief as being a freight brokerage, but a technology first broker. He says that ‘We are a traditional broker, but we’ve made the decision to create sophisticated Silicon Valley technology to solve these problems.’
Today’s Top Supply Chain and Logistics
The summer is not providing U.S. domestic freight carriers much of a kick-start toward the fall. The closely-watched Cass Freight Index fell back 2.6% in July, the 17th straight month of year-over-year decline, WSJ Logistics Report’s Robbie Whelan writes, adding to tepid international numbers that have been coming in from seaports. Donald Broughton, an analyst at Avondale Partners and author of the report issued by Cass Information Systems Inc., says inventory retrenchment remains a drag on road and rail demand, a situation unlikely to turn around in the third quarter. Other measures don’t look much better: ACT Research says the supply of trucks in the U.S. jumped ahead of demand for loads in July. Retailers may be waiting for stronger signals from consumers that they’ll start buying goods at a faster pace as the end-of-year holidays approach. That’s likely to fuel more e-commerce business—and the parcel demand that goes along with it.
The burgeoning auto supply chains forming in Mexico may be getting more expensive. The rush by car makers to establish plants in the country, and the draw it has created for a growing field of auto-parts suppliers, has led to tougher competition for workers. Although the growing job vacancies and rising labor costs won’t shift the economic basis for the pushing factory work to Mexico, the WSJ’s Christina Rogers and Dudley Althaus report that they’re causing sticker shock among manufacturers. Companies including Toyota Motor Corp., BMW AG, Ford Motor Co. have committed to spending $15.8 billion to build or expand assembly plants. Those sites, along with those of parts makers, are increasingly hard-pressed to hire and retain skilled workers, particularly in the industrial strongholds in the north of Mexico. One expert says the region faces a “huge supply gap” of skilled workers and that rising wages may even push some factory work further south, extending supply chains still further in a bid for lower labor costs.
Target Corp. has a perishables distribution problem that is hitting its grocery aisles, and the retailer’s financial health. Usually the big traffic driver at grocery stores, perishables instead have been a drag on Target’s profits, reports the WSJ’s Khadeeja Safdar, leaving the company with a tough question of how much to invest in the capital-intensive supply chain. Groceries have become a critical category for big-box retailers, and Wal-Mart Stores Inc. gets more than half its U.S. revenue from grocery sales. Wal-Mart has invested heavily in the infrastructure to transport fresh foods on its own, however, while Target’s supply chain hasn’t been built to transport items with a short shelf life. Right now, perishables are funneled through one of the company’s four food distribution centers or through C&S Wholesale Grocers. The company is considering outsourcing more of its food transport as a strategy with high stakes.
That’s because retailers believe grocery sales will drive more store visits, boosting the foot traffic stores need for bigger sales across all aisles.
Significant consolidation appears to be gathering speed in the supply chain technology world. Honeywell International Inc.’s move toward an estimated $3 billion purchase of JDA Software Group Inc. marks the latest in a series of increasingly large acquisitions that are changing the map for logistics software services. The WSJ’s Ted Mann reports it also highlights a dramatic change underway at Honeywell, which only last month said it would pay $1.5 billion to buy Intelligrated, a maker of automation systems for warehouses and supply chains. Honeywell, like rival General Electric Co., is betting software layered atop heavy machinery will help lock in long-term service revenue from its customers.
JDA itself has helped consolidate the industry, buying up RedPrairie in 2012. Since then, deals such as Infor Inc.’s buy of GT Nexus and Predictix have added to the rush, and Descartes Systems Group Inc. said in May that it is raising money for acquisitions.
Did you subscribe for our daily newsletter?
It’s Free! Click here to Subscribe!
Source: Forbes
