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

Apex International Co

24/05/2021 06:00

By Nick Carey and Lisa Baertlein
    LONDON, May 24 (Reuters) - If suppliers in China fail to
pick up freight containers to fill an order for MediaShop,
Marcel Schneider gets an alert via a digital freight system,
allowing the retailer to reach out and fix the problem swiftly. 
    Before July 2020, Austria-based MediaShop's deputy supply
chain director says he would discover problems in his supply
chain only when containers failed to arrive in Hamburg as
scheduled. 
    "It was like being in a tunnel where you had only a limited
view of what was going on," Schneider said. 
    Lost containers means lost sales for MediaShop, which sells
consumer goods ranging from kitchen knives to fitness equipment.
A missing load can mean the company pays penalties to wholesale
customers for late shipments. 
    Global supply chain snarls, from shortages of freight
containers in China to a blockage in the Suez Canal, have thrown
a wrench into the recovery from the COVID-19 pandemic. They have
also accelerated the freight industry's shift out of the digital
dark ages. That's benefiting a fast-growing cluster of startup
companies that had struggled to sell their software-powered
freight tracking technology, until now.
     A Reuters analysis of digital freight startups shows there
are close to 250 companies globally, including Uber's  UBER.N 
logistics arm Uber Freight, and some Chinese operators looking
to go public like Full Truck Alliance.  urn:newsml:reuters.com:*:nL4N2GT1Q2 urn:newsml:reuters.com:*:nL8N2MY5N2 
    "Really, the pandemic gave us a chance to shine, with
capacity being taken offline and demand surging in unpredictable
ways," says Ryan Petersen, Chief Executive Officer of San
Francisco-based Flexport, a freight forwarder whose revenue
almost doubled to $1.27 billion last year and which has raised
$1.3 billion from investors. MediaShop is a client.
    Digitization in the freight industry has been under way for
years, but the expense of grafting digital tracking systems onto
legacy databases has discouraged many companies. 
    Now, a number of startups staffed by alumni of tech
companies like Facebook, Amazon and Uber have developed
platforms that integrate with customers' transportation
management systems, making them easy to use from home.
    "We have seen a massive acceleration in products that
normally wouldn't have been adopted for three, four or five
years from now because people have had to figure out how to
operate remotely," said Sune Stilling, former head of growth at
the venture capital arm of shipping giant Maersk  MAERSKb.CO ,
which has invested in several of these startups. 
    Deep-pocketed traditional freight giants are also beefing up
their own systems to compete. But smaller companies may find it
hard to fund the transition to digital, which should drive
consolidation, especially in the freight forwarding industry.
    
    'RUN YOU OVER'
    Before Michael Wax founded Berlin-based digital freight
forwarder Forto five years ago, he toured a traditional
company's offices in Hamburg and was shocked by the antiquated
operations.
    "We saw a bunch of white males there managing a lot of
colored Post-It notes stuck around their computer screens, and
running around with bits of paper," Wax said.
    Forto has raised $53 million from investors, including
Maersk Growth. Like Flexport, Forto built a software platform to
handle shipments from factory to warehouse - including
cumbersome customs declarations - online, with customers able to
track containers as they are scanned at various points along the
way. 
    "We will orchestrate your entire supply chain for you," Wax
said. "This is the future of logistics."
    Forto's system integrates with transportation management
systems developed by the likes of Oracle  ORCL.N  and SAP
 SAPG.DE  for major customers, making it easier for them to use.
    It also sells software to shippers as a standalone
supply-chain tool. The company tripled its business in 2020.
    Integration with transportation management systems has also
been key for Loadsmart, a U.S. digital truck brokerage and
Ofload, an Australian equivalent.
    When U.S. customers, which include Home Depot HD.N ,
Coca-Cola  KO.N  and Kraft Heinz  KHC.O , book an order on their
own transportation management systems, rather than having to
reach out to a truck broker, they get an instant guaranteed
quote from Loadsmart. 
    Loadsmart has raised $150 million from investors and saw its
revenue jump 208% in the fourth quarter of 2020.
    "The switch to digital used to be seen as a vitamin, now
it's a painkiller," says Loadsmart CEO Ricardo Salgado. "If you
don't do it, your competitors are going to run you over." 
    Ofload launched in Australia in March 2020 as the pandemic
hit hard and has companies with around 15,000 trucks combined
using its system. Maersk Australia - also an investor - uses it
to manage all of its freight, not just the loads booked using
Ofload. 
    CEO Geoffroy Henry says Australia's trucking sector is
highly fragmented so around one in three trucks "is running
empty at all times and we aim to tackle those empty miles
directly."
    And Hong Kong-based digital freight startup Freightos saw a
twentyfold increase in bookings between freight companies and
airlines on its WebCargo platform from March 2020 to March 2021
as the air cargo industry went online during the pandemic.
    
    'CONSOLIDATION OPPORTUNITIES'
    Big traditional operators in the global supply chain are
also not standing still.
    U.S. logistics provider XPO  XPO.N , for instance, said its
own digital platform powered an 83% year-over-year growth in
truck brokerage revenue in the first quarter.
    Increased digitization also comes amid a wave of
consolidation in the sector, especially in China, sparked by the
e-commerce boom during the COVID-19 pandemic.
    Swiss logistics firm Kuehne & Nagel  KNIN.S  said on Monday
it would buy Asian logistics provider Apex International Corp
from private equity firm MBK Partners, making it the world's
largest air-freight forwarder.  urn:newsml:reuters.com:*:nL1N2KS0AM
    And last month DSV Panalpina  DSV.CO  said it would acquire
the logistics division of Kuwait's Agility Public Warehousing Co
 AGLT.KW  in an all-share deal worth $4.1 billion, creating the
world's third largest freight forwarding company.  urn:newsml:reuters.com:*:nL1N2MK0AB
    After hosting a meeting with Forto's CEO Wax last month,
Credit Suisse analysts wrote in a client note that the rise of
digital forwarders means more deals are likely.
    "The continued use of legacy systems and processes by
incumbent freight forwarders suggests market share opportunities
for new digital operators," the analysts wrote. "It may also
provide consolidation opportunities for the top tier."

 (Reporting By Nick Carey, Editing by Nick Zieminski)
 ((nick.carey@thomsonreuters.com; +44 7385 414 954;))