Unpacking the Future: Strategic Insights from Investing in Supply Chain and Logistics Startups

I’ve had the unique opportunity to invest in various supply chain and logistics startups. Over the years, these experiences have given me invaluable insights into the key success factors and potential pitfalls in this dynamic sector. Here are some of my key takeaways

Freight Forwarding: Depth Over Breadth

In the freight forwarding sector, success is not about expanding trade lanes but instead increasing trade lane density. This ‘depth over breadth’ approach enables companies to maximize efficiency and profitability. Digital freight forwarders increasingly morph into software platforms, offering seamless integration and automation. Yet, the digitization wave threatens smaller, traditional forwarders as it disrupts established relationships. While carriers are keen to bypass forwarders and deal directly with Beneficial Cargo Owners (BCOs), BCOs are unwilling to put all their eggs in one basket.

Road Freight Challenges in Developing Markets

Contract logistic requirements in developing markets pose unique challenges. The need for more reliable, high-quality trucks with tracking capabilities makes road freight exchanges ineffective. Moreover, integrating embedded financial services into Digital Freight Exchanges (DFEs) is complicated due to the need for digitized channel partners. Though DFEs might seem like a cost-efficient solution, they often merely shift costs from one part of the supply chain to another, offering no real advantage over traditional 3PLs (thirdparty logistics).

Cross-Border E-Commerce: A Technological and Operational Challenge

Executing cross-border e-commerce economically as an end-to-end (e2e) solution requires direct integration with all 3PLs, especially air & ocean carriers and customs clearance. This is a significant challenge in regions where technologies and digital integrations may not yet be mature enough. Due to their limited operational capabilities, exception management is also a significant hurdle for asset-light digital Logistic Service Providers (LSPs).

Software Needs for Carriers & BCOs Complex road Electronic Proof of Delivery (ePOD) requirements are still a significant issue for many large carriers and BCOs. There is a growing need for highly configurable software to manage large BCO contracts, indicating that large carriers may eventually acquire these software vendors.

The Race for Ocean Container Visibility

While ocean container visibility is a valuable service offering, more is needed to create a competitive advantage. With ocean carriers moving towards smart containers, visibility platforms need to go further, offering valuable forecasts and actionable insights from private and public data sets, ultimately moving towards supply chain orchestration.

The Drayage/Haulage Dilemma

Successful drayage/haulage operations necessitate integration into the terminal/port operating system to extract profitable margins and create a competitive edge. Standalone first-mile DFEs that are not integrated offer no benefits over traditional 3PLs and lack scale or network effect benefits.

"The common threads are clear: digitization, software maturity, and seamless integrations are increasingly vital for success"

Road Freight Management Platform Challenges

Successfully executing Value-Added Services (VAS) on a road freight management platform is a complex task, even in developed markets. Single truck and small fleet operators tend to follow the trips, often without VAS, and their unit economics are generally unfavorable.

Last-Mile Logistics: Route Density is Key

Successful last-mile logistics hinges on high route density and continuous route optimization. However, large international express 3PLs, such as DHL in Latin America, often lack the software to enable same-day last-mile logistics economically. This market is heavily crowded, and the intense competition is expected to force many VC-funded operators out of business, leading to market consolidation. As the demand for sophisticated software solutions increases, we anticipate that large carriers offering contract logistics services will eventually acquire these SaaS vendors.

Conclusions and Future Perspectives

Each of these insights represents a snapshot of the supply chain and logistics industry’s shifting landscape. The common threads are clear: digitization, software maturity, and seamless integrations are increasingly vital for success. However, while technology is a powerful tool, it is not a panacea; implementation must be strategic, considerate of local market conditions, and above all, customer-centric.

Operators in this industry are encouraged to stay attuned to these trends and challenges, ready to support innovative startups that can turn these insights into actionable strategies and solutions. Only then can we continue to unlock new value and drive the industry forward.