How The Trillion Dollar Logistics Industry is Being Disrupted by Startups
Annual logistics spend accounts for approximately 10 per cent of the global spend on all goods and services combined. That’s large!
Here are a few facts:
- USA spends over $1.1 trillion and India spends 13 per cent of its GDP on transport.
- China had over 20 million trucks in 2013 and 1 in 15 people in USA is employed in the trucking industry.
- There are 190,000 logistics businesses in UK alone.
- Over 9.5 billion tonnes of cargo is transported via ocean each year, accounting for over 80 per cent of every good globally.
- Trucks travel over 500 million miles only during holidays due to the rise in number of packages.
Transportation is primarily done through air, ocean, surface and rail.
How would startups change any of this?
For shippers, traditional shipping companies deliver from ‘X’ to ‘Y’ as quickly as possible. Startups would do the same. Yet, including that, startups are redefining the shipping experience using technology.
Let’s take an example:
You need to ship furniture from New York to Boston.
1. Contact a sales representative of a local transportation company
2. Email them the shipping documents and wait for a price (which takes a few hours).
3. Once through, co-ordinate with the operations representative and wait for pickup.
4. Post pickup, wait to get notified on email about the truck’s location or take the hassle of copying your shipments number and pasting it on the truckers’s website.
5. Post delivery, receive the invoice on mail which you create into your ERP.
6. Deal with another representative from finance for payment.
What if a startup could merge all the points into one with one platform? Startups in logistics are building tech platforms to make logistics companies compete for your business (price), track your shipment real time and automate the entire process, from inquiry till payment.
For a single shipment, the hassle makes little difference, but for a business with hundreds of shipments each day, startups are replacing the need to have in-house logistics teams. Also, the complexity grows when a shipment changes from surface to air or ocean. With international shipping, the customs department of each nation accepts documents in their own format, where a businesses add more middlemen to ensure smooth delivery.
Startups are integrating with all stakeholders like shipping lines, airlines, trucking companies and the customs departments to ensure shippers have the same streamlined process. Along with integration, startups are offering unmatched analytics to help shippers plan inventory better, book shipping contracts at cheap costs and have end-to-end visibility to reduce leakages.
There are hundreds of startups trying to change logistics globally and among them Cargomatic is organising the unorganised long-haul trucking space, Deliv is creating cheap local shipping through crowdsourcing deliveries, Flexport is a new age freight forwarder for ocean shipping, Freightos allows shippers to choose freight forwarders like air ticket booking, Pack link allows comparison of shipping prices between different couriers, and Vamaship automates processes for shipping through air, ocean and surface, at lowest costs.
Does this mean traditional companies won’t survive in the long run? I believe traditional companies will collaborate with startups to leverage their ready infrastructure and use technology to optimise it, creating a win-win. Startups which achieve scale can majorly affect traditional businesses which compete with them.
In a few years, we will also see drones replacing humans for delivering light shipments, which opens up endless opportunities and for allied industries.
Logistics is seeing a new wave and the next big thing in logistics could potentially become much larger than the Uber and its peers, combined.'