Are Logistics Start Ups Focusing on the Right Areas to Disrupt?
If I were to build a logistics start-up, it would not be to disrupt the $10 trillion shipping industry (or whatever other unthinkably huge number some start-ups use to describe the size of the freight forwarding market). I don’t have the stomach for it.
Of course, the global logistics markets are massive but the solution many start-ups are bringing to market severely oversimplify the extremely complex process of international shipping.
Rate shopping for an ocean container rate is not like booking an Uber or a flight with Expedia. Any shipment moving between countries involves a lot of documentation and coordination that does not get taken care of with a few clicks on a website.
Real shippers with real shipping volume know the amount of work that goes into every international shipment. They know the deal.
Most new booking sites downplay how hard the process really is. Even less talk about, or understand, the deep problems in the industry either - like what’s happened at Hanjin, historic rate volatility and mess that is surcharges. These are real problems and a threat to ANY player in the market – big or small.
Then again, the biggest challenges may present the biggest opportunity.
The main reason for the perception the freight forwarding industry is so ripe for disruption is based on the fact there are a lot of small and medium sized providers still relying on manual processes to get stuff done. This may be true but there are plenty of big, established freight forwarders operating with technology and completely automated processes.
These are companies willing and able to protect their market share by investing however they need to. In other words, they will not go down without a fight.
Aside from forwarding being a market that is more competitive than many give it credit to be, it’s also not growing as quickly as others.
Ecommerce and online retail present a much more dynamic opportunity for many reasons.
New companies are going on-line every day and markets are opening up around the world. While at the same time all of them, even established retailers, are struggling with the challenges of multi-channel fulfillment, warehousing, returns, packaging, carrier selection... the list goes on.
Plus, faster and cheaper final mile delivery is the obsession of the entire industry. Because online retail is such a new phenomenon, there is none of the “old guard” mentality that exists in the freight shipping world (UPS, FedEx, and USPS notwithstanding).
It’s a time of great transition for the retail industry. The entire retail market is in flux trying to figure out ecommerce and everyone needs help. To me, this represents the most fertile ground for logistics technology disruption.