At this point, it’s almost a cliché to say that there are problems with the supply chain. Everyday, we see it… chaotic container yards on the news, empty spots on the shelves, price increases… it’s a problem that has been thrust into the face of the average person over the last few years. So, what’s being done about it? Digitalization, and it’s long overdue.
The way freight is moved around… the way shippers and carriers operate in general, is fairly old-school. Traditionally, a disjointed network of freight brokers work to connect shippers and carriers with potential loads through manual processes using things like spread sheets, fax machines (yes, those are still a thing), and phone calls. In 2022, when we have so many fantastic technologies at our disposal for coordination and management, that process can be about as inefficient and labor intensive as it sounds.
Enter digital freight brokers. Digital freight brokers solve problems that traditional, manual processes can’t by cutting out middlemen and connecting shippers and carriers directly via an online marketplace. These online marketplaces are apps powered by artificial intelligence, machine learning, and data analysis which predict supply and demand fluctuations, and improve efficiency by centralizing these processes within an online ecosystem.
The Trade Route Of Things
The short answer is efficiency. Machine learning and automation allow the network to quickly and easily react to shifting demands in the freight space… like a prize boxer, nimble on his feet. These digitally based freight networks are not only agile and accurate, they benefit everyone because more freight carriers join the network, then more opportunities for automation and networking arise. These digital platforms and freight forwarding systems can provide end-to-end visibility for every load.
Automated, digital platforms connect shipments, vendors, and carriers using real-time data and applications. Machine learning allows the network to automatically evaluate billions of load combinations to consolidate and match shipments with carriers. This automation reduces labor costs and manual efforts normally required… all this leads to increased efficiency, which lowers prices for shippers and offers carriers the opportunity to earn more.
And we can expect a boom in this space, which translates to opportunity. The digital freight forwarder market is expected to reach $43.33 billion by 2031. Some key factors driving the market are growth in international trade volumes, an increase in global trade agreements, a robust e-commerce market, and healthy ancillary services surrounding the space.
Deals To Watch Out For
One company that is absolutely winning in this space is Convoy. The Seattle-based company is the nation’s leading digital freight network and they recently hit a $3.8 billion valuation and indicated their intent to work toward an IPO. The company, which has been named to the 2022 CNBC Disruptor 50 list for the fourth consecutive year, is ranked 6th on the list of breakthrough companies and has secured funding from giants like JPMorgan Chase and Hercules Capital and is backed by major names like Bill Gates, Jeff Bezos, Mark Benioff, and Y Combinator. Convoy’s mobile app connects shippers and freight brokers to a network of 400,000 trucks in the United States and the company is planning to extend its fleet by up to 40% by the end of this year.
Another is Full Truck Alliance which, as of last year, was the world’s largest digital freight platform by gross transaction value. The company previously listed in the U.S. in June of last year and is preparing for a second listing in Hong Kong. The company will be submitting a formal application, probably this month, and intends to raise $1 billion dollars through the IPO. The company has invited Morgan Stanley, Goldman Sachs, UBS, and Huatai International to take charge of the listing.
Two names you wouldn’t immediately put together in this space are Panasonic and Blue Yonder. However, Panasonic has a supply chain business and is looking at the possibility of making Blue Yoder the centerpiece of that business through an IPO. The company recently announced plans to spin off its supply chain management (SCM) business through an initial public offering. Last year, Panasonic purchased the U.S.-based company for more than $7 billion. Their ai-driven technology would be the centerpiece of an SCM business and Panasonic has visions of using it to push automation of the supply chain the edge.
It’s easy to see the benefits of the digitalization of the supply chain. Cutting out unnecessary steps, entities, and barriers to entry and engagement may be just what the doctor ordered to get our supply chain back into shape. The complexities of the world are growing daily, and if we’re going to keep things running, we have to be willing to evolve in this space. Keep coming back, keep an eye on my Buy List, and let’s see how things shake out as these new kinds of freight forwarders move into the market and make much needed changes.