February 9, 2022

Global Logistics in Need of a Digital Transformation

The networks of global logistics are more intricate than ever before, especially after the rise of e-Commerce. As countries around the world are increasingly intertwined through trade, the global logistics industry has stealthily grown to a market valuation of $8.6T USD. Up until the global pandemic, this industry hadn’t received much attention, but after the effects of supply chain issues exacerbated by the pandemic surfaced in everyday life, people began to realize the importance of global logistics and how much it’s taken for granted. 

The logistics industry has always been seen as a very traditional industry, given its many areas of needed improvements. According to a McKinsey report, a single parcel traversing borders typically needs the cooperation of 25 different parties on an average shipment. In addition, while we live in the age of big data, the logistics industry remains stuck in the past; close to 50% of the US’s biggest importers still utilize Excel to manage their complex global supply chain. In an increasingly global market, the logistics industry is in dire need of a digital transformation. However, what’s interesting is that the increased pressure under the pandemic has made this traditional sector take bold steps toward finding more digital solutions. 

One thing that I often say is that the best opportunities for startup companies are in times of massive market transitions, and I believe that the digitization of the logistics industry is precisely one of these great opportunities. Case in point, Flexport is doing exactly that. As mentioned before, a single package on an international shipment requires the cooperation of many different parties along the way. However, the industry currently lacks a standardized platform for communication and information-sharing, which leads to countless inefficiencies as well as inaccuracy about shipment information. Flexport recognized this pain point early on and developed a one-stop platform for managing global logistics. Whether you’re an importer, exporter, freight forwarder, etc, Flexport’s platform is meant for anyone part of the global supply chain to facilitate communication and collaboration among all stakeholders. In addition, the platform makes the whole process of global logistics much more transparent; providing important metrics and even geolocation markers keeps everyone up to date with all necessary information. In short 8 years, Flexport has impressively been able to make headway in addressing this pain point and managed to achieve an $8B valuation. 

Several other startup companies in this space have also been receiving much attention and even capital interest. One example is Shipamax, a startup company that focuses on providing freight managing groups that have low technical integration with digital tools to help them in their transition. Most operators usually rely on manual input or OCR methods to fill out freight forms, which are very time-consuming and easy to make errors on. However, with Shipamax’s technology, these processes are completely automated, saving operators time and future headaches. Similarly, Taiwan-based GoFreight provides a one-stop SaaS service for freight managers by streamlining internal processes such as managing electronic bills, sea/air shipments, customs declaration, booking shipments, etc. 

Overviewing these companies, it’s surprising to see how much innovation is needed in the logistics industry in this age of big data. Because of the fragmented and distributed nature of this business, it certainly won’t be an easy task to digitize this space overnight. However, given the multifaceted nature of this business, there are numerous entry points into this industry with innovative solutions. Whether it be digitizing logistics-related documents, providing comprehensive management services, or developing data-driven software, opportunities are simply waiting to be taken up. 

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