As explained by Boston Consulting Group, “Not surprisingly, venture capitalists find the sector highly attractive. They poured more than $3.3 billion into digital shipping and logistics startups from 2012 to 2017. A considerable portion of this funding went to freight forwarding.”
That amount has exponentially increased since then, with roughly $30B total now being invested in the US alone to innovate within the supply chain. The majority of that investment is from venture capitalists, looking to fuel innovation, disruption, and growth of those companies within the supply chain.
Let’s take a closer look at the state of the logistics startups space and what’s happening to fuel such interest from venture capitalists.
Advancements in Automation Are Stimulating More Interest in Forming Logistics Startups
Much of the interest surrounding logistics startups comes from the opportunities available through automation. Automated processes dramatically reduce inefficiencies and open the doors to new revenue streams when applied correctly.
One notable trend tied to this interest is dis-intermediation. According to Deloitte, “The freight forwarding industry is said to be a business model prone to dis-intermediation, with many players aspiring to realize its platformization potential in recent years.”
The market is getting tougher for these independent companies, but with the right expertise, a differentiated approach, and applying technology, it’s possible to not only survive but thrive, in today’s global state.
The Industry Remains Hyper-Fragmented
The state of the freight forwarding industry continues to further the need for logistics startups. Freight forwarding has not changed much.
Yes, modern shippers and carriers have advanced their systems. But as a whole, freight forwarders remain behind the curve and are often left using outdated systems that lack value. Or they have invested too much time and resources into a dated solution to justify any outside investment – a very dire position to be in.
For this reason, new startups, much like Cargologik, are continuing to reshape the market. In turn, the digital transformation of freight forwarding will overcome the problems with a hyper- fragmented market and allow companies to do more with less.
The purpose of technology is to make things better, cheaper, and faster for those who participate. While fragmentation has its difficulties, it’s often fertile grounds for new ideas and innovations to take hold in one aspect, and then subsequently expand into other areas as they gain traction.
Shippers Want More Customization and Robust Flexibility Within Logistics Startups’ Services
Both shippers and carriers want the ability to reduce clicks and streamline freight management.
However, attaining that digital transformation level has proven difficult and costly for companies that wish to build in-house platforms. When you have too many medium-sized companies with their own platform, it further creates instability in the market by forcing shippers to engage with yet another platform. That experience is broken and it’s one of the things that Cargologik takes on while also providing core benefits to the forwarder.
With the participants in the global supply chain so reliant on one another, this opens the door to risk. As reported by Business Insider, “Startups are the lynchpin of this transformation, pinpointing areas of need that can be tackled by cutting-edge digital solutions, including digital freight services, warehouse robotics, AI in the supply chain, delivery robotics, and autonomous driving software.”
Startups Are Working to Streamline the Order-to-Cash Cycle
Newer supply chain startups are also transforming the order-to-cash cycle. Instead of relying on an outdated, paper-based approach to freight settlement, modern freight management parties can leverage digital platforms to centralize the process.
Systems that produce and maintain a system of record, a “truth” if you will that all parties can clearly see as objective truth for much faster resolution and cost savings on both sides.
As a result, brokers, forwarders, carriers, and third-party logistics providers (3PLs) can get paid faster and are more likely to accept freight tenders in the future – while coming back to do more business.
Everyone Still Wants End-to-End Visibility and Easy Controls
All companies still expect end-to-end visibility and access to real-time information. Supply chain transparency and traceability are hot-button topics in logistics and companies like Amazon have created global customer behaviors and high standards for all logistics companies to live up to and strive for.
The inability to offer such functions has given rise to entirely new logistics startups, devoted to unlocking real end-to-end visibility and doing so for the businesses that need it most like independent forwarders/brokers who stand the most to lose.
Logistics Startups Need a Freight Forwarding Platform That Works Without Sacrificing Value as a SaaS-Based Resource
While the global state of logistics startups continues to reveal one trend, advancement, companies will be faced with a choice. Will forwarders, shippers, brokers, and carriers continue working within the status quo, or will they fully embrace digital transformation with a final and digital alternative?
Our bet is that it’s on the latter. That forward-thinking, customer experience focused logistics operations that think holistically about their business and stakeholders will succeed. We believe that their vision allows them to pick the right fun and easy systems that their customers and team will enjoy using. Sign up for Cargologik online to get started on your fun, new digital freight forwarding collaboration platform today.