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Sea change: global freight sails out of the digital dark ages

Berita 24 English -  If suppliers in China fail to pick up freight containers required to fulfil an order for MediaShop, Marcel Schneider re...

Berita 24 English - 
If suppliers in China fail to pick up freight containers required to fulfil an order for MediaShop, Marcel Schneider receives an alert via a digital freight system, allowing the retailer to quickly contact the supplier and resolve the issue.

Before July 2020, MediaShop's deputy supply chain director says he discovered supply chain issues only when containers failed to arrive in Hamburg on time.

"It was similar to being in a tunnel with a limited view of what was going on," Schneider explained.

For MediaShop, which sells consumer goods ranging from kitchen knives to fitness equipment, lost containers equate to lost sales. A missing load could result in the company having to compensate wholesale customers for late shipments.

Global supply chain bottlenecks, ranging from a shortage of freight containers in China to a blockade of the Suez Canal, have complicated the recovery from the COVID-19 pandemic. Additionally, they hastened the freight industry's transition out of the digital dark ages. This benefits a rapidly expanding cluster of startup companies that had previously struggled to sell their software-based freight tracking technology.

According to a Reuters analysis of digital freight startups, there are nearly 250 worldwide, including Uber's logistics subsidiary Uber Freight and several Chinese operators seeking to go public, such as Full Truck Alliance.

"In fact, the pandemic provided us with an opportunity to shine, with capacity being taken offline and demand surging in unpredictable ways," says Ryan Petersen, CEO of Flexport, a freight forwarder based in San Francisco that nearly doubled its revenue to $1.27 billion last year and raised $1.3 billion from investors. MediaShop is one of our clients.

The freight industry has been digitizing for years, but the high cost of grafting digital tracking systems onto legacy databases has deterred many businesses.

Several startups founded by former employees of technology companies such as Facebook, Amazon, and Uber have developed platforms that integrate with customers' transportation management systems, making them simple to use from home.

"We've seen a massive acceleration in the adoption of products that would normally take three, four, or five years to mature," said Sune Stilling, former head of growth at Maersk's venture capital arm, which has invested in several of these startups.

Traditional freight giants with deep pockets are also beefing up their own systems to compete. However, smaller businesses may struggle to fund the digital transition, resulting in consolidation, particularly in the freight forwarding industry.


Before founding Berlin-based digital freight forwarder Forto five years ago, Michael Wax visited a traditional company in Hamburg and was astounded by the antiquated operations.

"We observed a group of white males there juggling a slew of coloured Post-It notes around their computer screens and running around with scraps of paper," Wax explained.

Forte has secured $53 million in funding from a variety of investors, including Maersk Growth. As with Flexport, Forto developed a software platform to manage shipments from factory to warehouse online, including time-consuming customs declarations, and to enable customers to track containers as they are scanned at various points along the way.

"We will manage your entire supply chain on your behalf," Wax stated. "This is the logistics industry's future."

Forto's system integrates with transportation management systems developed by major customers such as Oracle and SAP, making them easier to use.

Additionally, it sells supply chain software to shippers as a stand-alone tool. By 2020, the company's revenue will have tripled.

Integration with transportation management systems was also critical for Loadsmart, a digital truck brokerage based in the United States, and Offload, its Australian counterpart.

When customers in the United States place an order through their own transportation management systems, rather than contacting a truck broker, they receive an instant guaranteed quote from Loadsmart.

Loadsmart has raised $150 million in funding and anticipates a 208 per cent increase in revenue in the fourth quarter of 2020.

"Whereas the switch to digital was once viewed as a vitamin, it is now viewed as a painkiller," Loadsmart CEO Ricardo Salgado explains. "If you do not take action, your competitors will run you over."

Offload launched in Australia in March 2020, just as the pandemic hit hard, and now boasts a combined fleet of around 15,000 trucks. Maersk Australia, a shareholder, uses it to manage all of its freight, not just those booked through Offload.

According to CEO Geoffroy Henry, Australia's trucking industry is highly fragmented, with approximately one in every three trucks "running empty at all times, and we intend to directly address those empty miles."

And Freightos, a Hong Kong-based digital freight startup, saw a twentyfold increase in bookings between freight companies and airlines via its WebCargo platform between March 2020 and March 2021, as the air cargo industry went online during the pandemic.


The global supply chain's large traditional operators are also not standing still.

For example, XPO Logistics in the United States reported that its own digital platform drove an 83 per cent year-over-year increase in truck brokerage revenue in the first quarter.

Increased digitization also coincides with a consolidation wave in the sector, particularly in China, fueled by the e-commerce boom during the COVID-19 pandemic.

Kuehne & Nagel, a Swiss logistics company, announced Monday that it would acquire Apex International Corp from private equity firm MBK Partners, transforming it into the world's largest air freight forwarder.

And DSV Panalpina announced last month that it would acquire the logistics division of Kuwait's Agility Public Warehousing Co in an all-share deal valued at $4.1 billion, creating the world's third-largest freight forwarder.

Credit Suisse analysts wrote in a client note last month that the rise of digital forwarders indicates that more deals are likely.

"Incumbent freight forwarders' continued reliance on legacy systems and processes suggests market share opportunities for new digital operators," the analysts wrote. "It may also present opportunities for consolidation in the top tier."

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