Digital Disruption in Logistics1.4.17
Agility CEO Tarek Sultan shares his view of innovation in the logistics industry and explains how embracing disruption is enabling Agility to stay ahead of the game.
Digital disruption in the logistics industry is happening in ways big and small. For a mature company in a mature industry like ours, this can be either terrifying or exhilarating. Personally, I am excited about the potential to close known gaps with our customers, drive efficiencies, deepen access to services, and open entirely new markets with new ways of doing business. Our approach at Agility is two-fold. First, disrupt ourselves from within, and simultaneously, invest in the disrupters.
The Certainty of Disruption
Change in our industry is inevitable. Here’s a quick example. Even if you only spend $10 on an e-commerce platform like Amazon, you get a digital experience that works simply, easily and well. You can buy your product, track its progress enroute, and manage returns or concerns, all on a single platform. However, when it comes to freight forwarding, shippers can spend anywhere from hundreds of thousands to millions of dollars on freight and still have to write emails, make calls, fill out paperwork, and very often, still not know with precision where their goods are at any point in time. It doesn’t add up.
It’s neither coincidental nor surprising that venture capitalists have quadrupled investments in freight forwarding start-ups in the last couple of years, according to the Wall Street Journal. Venture capital funding for freight forwarding companies exceeded $1 billion in 2015, more than double the amount invested in the five prior years. Put simply: the industry is ripe for change.
While a number of logistics start-ups are trying to reshape how freight is booked and managed, they face the challenge of not having the logistics infrastructure to execute consistently across different markets. That’s where a company like Agility has an inherent advantage. We’re betting that we will gain a unique lead in the marketplace if we can develop an intuitive, online customer experience supported by a proven ability to deliver across the globe.
We are paying particular attention to the massive spike in smart phone penetration and growing comfort with ecommerce in emerging markets. We believe that our customers, especially in the small and medium enterprize segment, will increasingly demand self-service capability and increased functionality online. For bigger customers with more complex shipments, the ability to manage supply chains more effectively online is already a key competitive advantage.
Agility has invested in a development center in India to build platforms and tools that are cutting edge in our industry. Agility Connects is one example: a powerful customer platform that allows customers to book shipments, manage orders, documents, exceptions, inventory, vendors online, and to customize reports that improve shipping efficiency. Our commitment to developing a global operating platform that drastically simplifies and standardizes our business is another.
Partnering with the Disrupters
Digital disruption is not just about improving the business we have today. It’s also about anticipating new ways of doing business. On this front, Agility has created a new technology venture to invest in disruptive technology related to logistics.
The idea is to look outside our company at new business models that we feel that we can either adopt internally or promote through our business. For example, we have invested in CargoX, a platform that is looking to revolutionize how road freight is booked in complex markets like Brazil. We are eager to see CargoX at work in Brazil. Undoubtedly, there will be interest among customers, shippers, transport suppliers, regulators and other parties in other countries.
We have looked at investment opportunities brought to us by venture capital firms. One of the technologies that is intriguing is a hybrid technology for the trucking industry that reduces fuel consumption and corresponding emissions by a staggering 30 percent. These savings are achieved by recycling otherwise wasted kinetic energy and doing it through a simple, 30-minute trailer retrofit. The technology has the potential to disrupt multiple industries, from supply to oil-and-gas and beyond. Imagine for a moment the impact of a near-term 30 percent reduction in diesel consumption for trucks.
While we believe that this technology will succeed in its own right, we also believe that we can accelerate value creation by using the technology in our own fleets and promoting the technology with customers around the world. This philosophy of finding multiple points of leverage is at the heart of our tech strategy.
Disruption without Distraction
The challenge of being a big company is not distracting the core business, even as we invest in the technologies that may change it forever. There are many cautionary tales of logistics titans in our industry that spent hundreds of millions of dollars on transforming their technology platforms and ultimately failed. Internally, our approach has been measured change: engage widely, pilot at every step, and roll out in phases, fixing problems early and continuously. From our technology venture perspective, we ring-fence our investments from the business until it makes sense timing-wise, geography-wise or service-wise to link them together. In this way, we hope to reap the benefits of revolution with the relative ease of evolution.
Capturing Energy From Braking
Hyliion set out to bring the advantages of hybrid energy to tractor-trailers. Its add-on system hybridizes the tractor-trailer by installing an intelligent electric drive axle on the trailer. The system uses regenerative braking to capture and save power when the driver is braking, then to reuse that energy to provide power when the truck is driving up hills.
30% fuel reduction*
$1,300 monthly fuel saving*
30-60min installation time
* average depends on topography, fuel economy of trailer.
CargoX: Connecting Truckers and Shippers
CargoX, a Brazilian startup, has been described as “Uber for trucks.” The analogy might have been inevitable, since Uber co-founder Oscar Salazar is one of CargoX’s investors. He sees the fragmentation in the Brazilian trucking market as a major opportunity.
“They don’t have the tools to talk to each other,” Salazar says. “There’s a huge information asymmetry playing an important role there. If you show me a market with information asymmetry, I’m going to show you a $1 billion opportunity.”
CargoX works to connect businesses that need to ship freight with truckers who have excess capacity. Brazil reportedly has an excess of between 300,000 and 350,000 vehicles, with trucks running empty 40 percent of the time. So the goal is to reduce the number of empty trucks on the highway, increasing revenue for truckers and reducing costs for freight owners.
The startup has now raised a total of $14 million. The funding was led by Goldman Sachs, with participation from investors including Valor Capital Group, Agility Logistics, Lumia Capital, former DHL Express US CEO Hans Hickler and Salazar – who said that ultimately, the CargoX model could work in other countries. He also suggests that the company will remain valuable if trucking moves to a more autonomous/self-driving model.
From an article by Anthony Ha in Techcrunch.com