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Global Logistics Focus Sept.19, 2016

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8A THE JOURNAL OF COMMERCE www.joc.com SEPTEMBER 19.2016 SPECIAL REPORT THE JOURNAL OF COMMERCE GLOBAL LOGISTICS FOCUS 2016 of BlueGrace Logistics. His third-party logistics company recently received a $255 million infusion from Warburg Pincus. What Uber is doing for the rideshare business isn't that different from what freight brokers do, Satish Jindel, presi- dent of SJ Consulting Group, said in a recent Journal of Commerce column. "In simple terms, Uber and Lyft are nothing but fancy and technologically advanced brokers for transportation of passen- gers," he said. It's not a model, he said, easily applied to trucking. "To really disrupt, you have to add value," said Tommy Barnes, president of project44, which provides application program interfaces to shippers, brokers and carriers. "That's where I'm stuck on some of the guys entering the space now. They don't have a value proposition." Real value, said Barnes, a former Coyote Logistics and Con-way execu- tive, will come from enhancing existing processes. "The people who are going to disrupt the market are those who can enhance processes and eliminate waste in a systematic, scalable way," he said. " 'Uber for Trucking' is an over- simplification of a massive, complex, intertwined system," Zipline Logistics CEO Walter Lynch said. "The noise around technology is drowning out a lot of other important issues. One is the people side. The future of the supply chain is the people." The key for technology startups and companies hoping to emulate Uber's success in that the freight market may be matching people who have a deep understanding of supply chains, logistics and trucking with those who understand new technology and how to realize its potential. JOC Contact William B. Cassidy at bill.cassidy@ ihsmarkit.com and follow him on Twitter: @ wbcassidy _joc. THE LAST THING a shipper needs in his supply chain is disruption. In fact, all the effort from a shipper's logistics service provider is dedicated to ensuring consignments move efficiently through the transportation pipeline from factory gate to last mile. Yet disruptive influences can be found at every step of this process: Bigger ships are testing port effi- ciency, poor planning has left a huge capacity overhang, while industrial action and natural disasters regularly bring trade to a standstill. Although these are tangible disrupters, in economic theory the term means to radically change a business or a strategy to create a new mar- ket, eventually displacing the leading existing players. But the market is already clearly defined, and although improving the way containers are booked and the rates are secured could improve efficiency and cost, it's hardly a radical change in strategy. Whether the many logistics technol- ogy companies entering the market will displace existing operators remains to be seen, but two supply chain technology companies mak- ing progress shared their thoughts on the increasing number of online solutions-offering companies in the logistics sector. Harry Sangree, executive vice president of CargoSphere, a cloud-based global freight rate solution provider, said some technology start-ups, many backed by venture capital funding, are receiving a lot of press by positioning themselves as disrupters, "as if this were a good thing." "We think that disruption might be good for the person doing the disruption — because they can get a lot of publicity on the back of the disrupters like Uber, Airbnb and Houzz, which operate under different dynamics — but it is often not good for the highly skilled and important service providers that operate in the logistics space," he said. Also in this camp is Matt Tillman, CEO of Haven, a cloud-based com- pany that automates freight and logistics for commodity traders, food suppliers, and consumer goods companies. "Port strikes, rapid fluctua- tions in fuel costs and equipment availability are the most disruptive aspects of the supply chain," he said. "All are symptoms of poorly struc- tured communication. Technology is enabling the industry. The latest set of technology innovations not only improve upon existing models. They (also) enable us to trade in entirely new ways. Physical and digital inno- vation aren't disruptive to the supply chain. They are in fact necessary in order to feed, clothe, and power our growing population." The ocean transportation and freight forwarding industries aren't traditional innovators, but that has created an enormous opportunity for entrepreneurs and the numbers of technology start-ups backed by venture capital funding are growing all the time — apart from Haven and CargoSphere there are a host of other companies, including iContain- ers, Xeneta, Flexport and Freightos. Freightos in July launched an online marketplace covering U.S. imports from China by air and ocean. These online entities are develop- ing products that include sophisticated websites communicating with forward- ers and shippers, databases that offer market intelligence on prices and ship- ping terms, and multivendor solicitation. They are all pledging to replace the traditional way of creating a supply chain using fax and phone with one that is digitally based, faster, more transparent and, importantly, cheaper. The innovative technology for this is already available, but Sangree said the global logistics providers and forwarders need to accelerate its adoption into the supply chains they manage to get more connected and become more efficient. "We talk with ocean carriers, NVOs and forwarders in Europe, North America and Asia all the time, and what we hear is that the complexity of trade will continue to require established industry expertise at origin and destination into the far future," he said. "These parties know what they are doing and they know what they need. They are telling us they need software tools to eliminate unnecessary work and they need real-time, collaboration platforms that enable them to work together to efficiently move freight at the lowest possible cost." Not all the online rate management and freight marketplace compa- nies that have jumped into the container shipping industry will survive, but those that can easily demonstrate their value proposition to a market that is hesitant to change will have the best chance of sticking around. — Greg Knowler Curbing Ocean Shipping Disruption

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