TECH & DIGITALISATION EXPERTS

LogTech firms and digital forwarders may not be perfect, but they can help bring change and attract valuable industry talent that may not otherwise view freight as a sector worth joining, argues Ethan Buchman, CMO of Freightos Group

Let’s get contrarian. With so much schadenfreude around logistics tech layoffs lately, and particularly changes at digital forwarders, here’s an alternative view (or four of them).

But first, two disclaimers...

1 Tech companies aren’t perfect. The “we can do this better” approach that frequently comes with the territory is admittedly grating. Most companies move beyond this, especially those that depend on maintaining relationships with the very industry they are trying to improve.

2VC funding as a model is not the problem. Whether for whaling, semiconductors or SaaS, venture capital is an investment to build something enormous that – in the long-term – is viable. It’s risky, requires shooting for the stars, and frequently fails. It’s also frustrating for the existing ecosystem actors who are contending with unviable cost structures. That doesn’t mean it’s broken, just that it should be wielded with care.

Four positives about LogTech firms

So setting aside the literally billion dollar question of whether any one LogTech company is a winner or not, here’s four reasons to appreciate them:

2LogTech companies attract industry talent. Supply chain isn’t sexy. Sure, there are some people (ahem) who would do terrible things for a pair of blue and white Maersk shoes… but most won’t. Logistics tech companies – with outside funding – help. And those employees are then more likely to double down on logistics. LinkedIn shows 217 people who used to work at Amazon, mostly in logistics roles,…who now work at Maersk. That doesn’t just happen.

3LogTech companies shine a light on differentiators. Brand matters. Many logtech companies got their start with a vision and a powerful brand that procurement professionals wanted to be affiliated with. I can list at least a handful of midsize forwarders who have an incredible logistics tech stack but haven’t taken off because they walk the walk but don’t talk the talk.

4LogTech companies help drive change (maybe?). It may be too early for this, but tech is scattered with companies that started with one use case and pivoted to another. Slack, for example, started as an internal communication tool for a gaming development company. More companies working on logistics tech means more potential for "accidental" innovation in logistics or for taking valuable tech developed to use internally and turning it into software for other companies.

I believe that we will continue to see huge wins from some, but certainly not all, logtech companies. For example, at Freightos we saw a 2.5x growth in bookings during 2022, which continued into Q4 despite a slowing market. This is made more complex due to the current macro environment

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LogTech companies motivate. I would put down money that nearly every major logistics company has at least one LogTech company’s logo in their annual strategy meetings, marked as a potential threat. They may have pooh poohed the company while presenting the slide, but it also served as a source of motivation; writing off a competitor as being just about a good UX/UI likely encouraged companies to double down on UX/UI.

The price of money is rising, making VC-backed companies focus on shorter paths to profitability. And, of course, freight price volatility (in the last year, all in the downward direction) means that traditional logistics companies have also required a certain degree of reckoning.

Criticism is healthy. But it’s also healthy to give credit where credit's due.

LOGTECH UPDATE – OVERVIEW

Starting in mid-2022, with interest rates climbing, inflation high and the prospect of recession looming, many tech stocks and valuations started to come down from the heights of the previous year. As part of this shift, venture capital funding became harder to come by for startups across industries too.

Logistics technology was no exception. In addition to some highprofile downsizing, there has also been a significant decrease in VC logtech investments. Through Q3 of last year, logistics startups raised only about half of 2021’s record total of $59B.

But 2022’s VC investments in logistics tech will still be at least 5% higher than in 2019, suggesting that – like freight rates and ocean volumes – investment activity is normalizing back toward the pre-pandemic trend, as opposed to cratering.

With this normalization we’ll see – and are already seeing – more caution from investors, more focus among logtech companies (including some pull backs), but also continuity in terms of big developments and indications that major investors and players still see opportunities in logistics.

...whose WebCargo booking and payment solutions help thousands of forwarders and carriers make global trade smoother with better pricing, quoting and booking www.freightos.com www.webcargo.co