Enterprise Technology Freight Train Finally Reaches Logistics Sector
About $19 trillion worth of goods are exported globally annually. But despite the scope of global trade, logistics was, until recently, not on the tech radar. An analysis of top technology media sites since 2007 found over 2,000 mentions of a popular social media tool, while “freight” and “cargo” were referenced less than 600 times.
Slow technology progress in logistics makes sense. Huge industries push back against change, and it’s difficult for entrepreneurs to balance deep industry familiarity with the drive required to take on industry status quos. Finally, typical B2B challenges, like long sales cycles, incumbent legacy software, and memories of the dramatic B2B crash in 2000, loom.
But enterprise tech is in the crosshairs. Aaron Levie, CEO of Box, believes that more than one trillion dollars will be spent annually on enterprise software, up from $330 million. And this freight train of enterprise tech is finally reaching logistics. As a matter of fact, venture capital funds have invested over one billion dollars in the sector since January 2014, double the total invested in the sector over the previous five years.
The tech industry is waking up to this too. In the first half of 2015 alone, there were 134 articles about freight, equal to nearly all related articles published from 2007 to 2012. More logistics startups are launching, drawing attention to the once-neglected field that drives the global economy.
Why now? Four logistics startup founders shared their thoughts on the drivers of the logistics startup renaissance.
Investment and Experience
Brett Parker had a background in logistics before co-founding Cargomatic, which reduces empty truck space by connecting truckers and customers. Parker credits the rise in logistics startups to funding: “There has been a lack of investment in the space. That’s changing, bringing great people and great ideas to the field.”
Citing trucker adoption of CB radios in the ’70s, Parker argues that logistics is forward-thinking. However, lack of recent tech focus and the industry experience barrier created a deadlock. “You need insider knowledge to create solutions and you need the old guard to give the stamp of approval.” But the old guard is finally taking a more active role in pushing for innovation.
Ripe Technology and Industry Processes
Big data technology and changing industry conceptions are driving change too. “The barrier to online freight,” says Freightos founder Zvi Schreiber, “was insufficient technology and a culture of hoarding data, which made aggregating hundreds of thousands of different contracts for routing and pricing a pipedream.”
According to Schreiber, explosive logistics tech growth stems from big-data technology and changing mindsets. “Despite the refrain of ‘it’s always been done this way,’” Schreiber says, “industry executives know that technology differentiates between great logistics companies…and dead logistics companies.”
B2C-B2B Crossover
B2C-B2B crossover is also fueling the rise of logistics innovation. Nimber, a crowd-sharing platform for package delivery, is one example.
CEO Ari Kestin says that it’s natural for smaller entities to be visionaries. “The industry might not be completely ready, but an entrepreneur can take an idea and just say, “Let’s do it! This spirit is increasingly pushing startups towards logistics.”
The Battle of the Bulk
But obstacles still loom. About 25 percent of all shipping containers are moved empty, inspiring George Kochanowski to invent the upright foldable Staxxon container. But big change is difficult.
According to Kochanowski, slow tech adoption makes sense. “Logistics companies are prudent. Given the scale of operations, past failures, and low margins, they need to be careful.” For a CEO like Kochanowski, this means that “startup companies must bear the entire weight until hitting that critical point of success.”
What This Means for Logistics
More funding, better technology, bigger ideas, and changing mindsets bode well for the future of the industry that powers the world. As more enterprise technology gathers momentum, the freight train of innovation is already speeding down the tracks.