This past week we reviewed the supply chain industry. We looked at 1025 supply chain startups and analyzed patterns across the top 400 companies. Investors that attended our breakfast include KDDI Ventures, Orange Digital Ventures, Cisco Infrastructure Fund, Prologis Ventures, Hardware Club, Global Founders Capital, City National Bank and more.
Content Of The Event
I categorized 1024 supply chain startups into 11 categories. I then broke each one apart by how they innovate by function, feature or use case to understand how each category is evolving. The purpose of sharing this content was to build a better understanding of the supply chain industry, to encourage investment and continuous innovation.
At a high level, startups within this ecosystem are racing to automate the entire end-to-end supply chain processes. Every category wants to automate operations, reduce costs, minimize risk and deliver goods almost instantly. To automate processes, startups need to acquire data as close to its source as possible. Supply chain data is created when a product is manufactured, an order is placed and the movement of an asset. You will see how startups in each category go after each segment. We will explain why this is true by sharing how each category is evolving in this summary.
Asset tracking startups are a critical component to automating the supply chain ecosystem. They started as a tool for visibility of products in transit. Now, they are the data source for fleet management, inventory, fulfillment and delivery to automate processes. Asset tracking startups are evolving to incorporate logic and programmable interfaces into their platform. This means they will replace back office work as they automate data collection and decision making. Eventually they will evolve to offer their own supply chain management software as they own the most important data. Asset tracking startups are going after manufacturing and movement data within the automation process.
Similarly, you will see supply chain analytic startups taking ownership of data but in a different way. Most analytics startups are doing everything they can to ingest data from every source possible. Their goal is to improve processes, lower risk, optimize pricing and more. They do this by collecting information about suppliers, transport prices, inventory location, and more. They then build market benchmarks and scorecards. Customers can use this data to understand how they compare to the market and their competitors. To gain access to these insights, customers give out their data to these startups. The most valuable data these startups collect is the pricing and contract information. Analytic startups will probably evolve to become delivery or supplier marketplaces, to broker the best deals among carriers and shippers. Analytics are going after order and movement data within the automation process.
Fulfillment and inventory startups follow suit in a similar way. They have a lot of overlap among each other and they also incorporate TMS, analytics and asset tracking tools as well. Inventory is a category that is facing the most disruption as data created is typically outside of their ecosystem and new tools are being used to track and move inventory. Fulfillment startups are responding to this by trying to own the order management process. Inventory startups are moving towards services, typically warehousing. However, both categories are at the mercy of ecommerce players and delivery marketplaces. To innovate these startups are moving in a lot of directions, offering more supply chain software, outsourced delivery and warehousing services, and asset tracking.
Transportation management startups are doing their best to own the entire process of supply chain management. The more data they collect and decisions their software controls, the more they have the ability to offer the services themselves, such as delivery, warehousing and more. We see that TMS is working towards automated multiple processes internally, like carrier matching, routing, sorting, inventory and more. They are providing the flexibility for you to set you your parameters to control the process or they will do it on your behalf. You should see that the process of shipping anything anywhere will be completely automated, products will be categorized, routed, stored and distributed all with no intervention. TMS startups compete with every category within the supply chain ecosystem. Today, they ingest most data but the future they will try to control order, movement and manufacturing data sources. Many TMS startups seem to be focused on order data, by creating their own delivery marketplaces. Some go as far as creating their own B2B procurement marketplace.
Fleet management category is taking a very unique turn. The rise of ride sharing services and connected vehicles has changed fleet management tremendously. Transportation is evolving to include a variety of vehicles, fleet-sharing, autonomous vehicles and new modes of transport. Fleet management tools are becoming integrators, that connect with any transportation system, application and management tool. This category is going after the movement data and ordering data. These startups are making it possible for marketplaces to offer more competitive on-demand products/services.
Robotics logistics are hardware robots that typically deal with warehouse management and last mile delivery. They are completely automating human labor out of the physical process of moving items. This makes delivery and storage much less expensive and more reliable. They control movement data but last mile delivery startups will go after order data. Last mile delivery is being disrupted by dramatic changes to the automotive industry. These startups will have an intense competitive advantage over any other delivery service. To learn more, we will have to watch the automotive industry.
Delivery marketplaces own the ordering and movement data. They are what facilitate payment for transport services. Marketplaces are competing for transactions. They start by building software features that make it simple to book and manage shipments. This means instant booking, simple invoice management, optimal pricing, carrier matching and real-time tracking. The next step is owning the order management and freight management tools. This way they can control the supply of carriers on their marketplace and guarantee capacity. They do this by providing order management tools for carriers or business management tools for small fleets or drivers. Marketplaces inevitably compete on price and to provide better rates some are completely cutting out broker fees. This means they are generating revenue through financing, fuel cards, insurance or other products they can up-sell. Marketplaces are facing a lot of competition from TMS category.
Delivery services are focused on owning the ordering and movement data. It’s important to note that delivery services and marketplaces are colliding. The demand from consumers to have limitless, cheap options with instant delivery are becoming a standard. Delivery services are becoming brands that are building networks of drivers leveraging fleet management tools, instead of owning fleets themselves. With a large scalable fleet at their disposal they are targeting marketplaces. Delivery services have the competitive advantage of owning the supply chain and the expertise to provide on-demand delivery. You’ll notice the food and beverage industry, on-demand marketplaces/services and subscription business are merging with delivery companies.
Drone logistics are a subset of robotic logistics. These startups are focused on disrupting last mile delivery. The standard among delivery services to have limitless, cheap options with instant delivery are what is changing modes of transportation. Aerial transport will become the autonomous vehicle that will become the most prominent first because they have fewer obstacles they have to manage. These startups will control movement data and inevitably ordering data just like delivery services.
Blockchain logistics startups are focused on manufacturing and movement data. Most of them are focused on compliance. They collect data using asset trackers or surveying methods used by supply chain analytic startups. What makes them unique is how they store the data they collected, which is on a blockchain. In order for these startups to be competitive they have to move beyond just unique methods of storing data.