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STATE OF THE LOGTECH SECTOR (MARCH 2023)

Over the years, the sector saw strong growth and progress in automation and advanced analytics. However, not everything went as expected. Now a range of innovative solutions targets further increases in logistics operations efficiency.

As we move towards launching our BETA product for testing in Q2 this year, this month we take a look at the LogTech (Logistics Technology) market. LogTech solutions build on the transition to software-as-a-service and aim to transform the way businesses manage their supply chain and logistics operations in the way FinTech has transformed and opened up banking and investment.
In this blog we explore the state of the LogTech sector. We’ll look at the key players and levels of investment, notable achievements and successes, challenges the industry faces and what the future holds for LogTech solutions.

Who are the key players and how much money has been invested?

LogTech has attracted many startups and established players, each claiming to offer innovative solutions to improve logistics and supply chain operations. Over the last five years, investment in LogTech has reached more than $400 billion. Here are some of the notable players in the LogTech space:

  • Flexport is one of the most widely known LogTech businesses, now led by a number of ex Amazon execs. It has developed a digital freight forwarding platform that simplifies the shipping process for businesses. To date, Flexport has raised over $1.3 billion in funding.
  • Convoy is a digital freight network that connects shippers with carriers. The company has raised over $668 million in funding.
  • ShipBob provides e-commerce fulfilment services for businesses and has raised over $130 million in funding.
  • Freightos is a marketplace for freight shipping, providing instant quotes and bookings for businesses. The company has raised over $94 million in funding.
  • Uber Freight is a logistics platform that connects shippers with carriers, raising over $500 million in funding.
  • ClearMetal provides AI-powered supply chain visibility, prediction, and orchestration. The company has raised over $65 million in funding.
  • Haven is a collaborative logistics platform for global trade. The company has raised over $27 million in funding.

Are they transforming the logistics services industry?

The LogTech industry has certainly seen some successes in recent years. Volumes increased during the Covid-19 pandemic and valuations soared. Businesses also claim to deliver:

  • Increased efficiency: LogTech has helped businesses streamline their supply chain operations, reducing the time and cost of shipping goods. Flexport's digital platform claims to have helped businesses reduce their shipping time by up to 50%.
  • Improved visibility: LogTech solutions provide businesses with real-time visibility into their shipments, allowing them to track their goods at every stage of the shipping process. Convoy's digital platform, for instance, aims to provide real-time tracking and analytics, enabling businesses to optimise their shipping operations.
  • Better customer experience: LogTech solutions, such as Amazon's Prime delivery service, have improved the customer experience by providing fast and reliable shipping.
  • Sustainability: LogTech solutions are helping businesses reduce their carbon footprint by optimising shipping routes and reducing the amount of waste generated during the shipping process. ShipBob's e-commerce fulfilment services, for example, use a network of fulfilment centres to reduce shipping distances and improve sustainability.

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Not everything went well, though.

While the LogTech industry has seen significant successes, there have also been failures. As with any technology change implementing LogTech solutions can be challenging, particularly for businesses with complex supply chain operations. Businesses may struggle to integrate novel solutions with their existing legacy systems or face resistance from employees who are used to traditional shipping methods. In addition to data and implementation challenges we discussed in earlier blogs, as LogTech solutions rely on web based technology, they are vulnerable to cybersecurity threats, which can compromise the security of shipments and customer data. For example, a cyberattack on Maersk, one of the world's largest shipping companies, disrupted its operations for weeks and cost the company hundreds of millions of dollars. Perhaps most critically, there has been limited adoption. Despite the benefits of LogTech solutions, many businesses have been slow to adopt them, either due to a lack of understanding or concerns about cost and organisational impact. Compounded with significant reductions in volume, share prices and valuations of most learning players have all plummeted. The industry has not been immune to the layoffs seen across the wider tech industry, with 10,000s of redundancies over the past few months in the arena.

What does the future look like?

We’re excited to see the next wave of LogTech companies and innovative solutions entering the market. As the industry matures, adoption becomes more widespread and financial pressure forces companies to consider significant supply chain transformation, there will be more winners than losers.

Some of the key trends and developments to watch for include:

  • Artificial intelligence and machine learning: AI and ML technologies are expected to play an increasingly important role in LogTech, helping businesses optimise shipping routes, anticipate problems, reduce waste, and improve efficiency.
  • Blockchain: the technology has the potential to revolutionise the shipping and logistics industry by providing a secure and transparent way to track shipments and verify transactions.
  • Collaboration: industry-vertical collaboration has a range of well-developed solutions. Horizontal (or inter-enterprise) collaboration segment however, offers significant economic and social benefits, but is not widely present, yet.
  • Autonomous vehicles: the development of AV’s, such as self-driving trucks, could transform the way goods are shipped, improving operational efficiency and reducing costs.
  • Sustainability: sustainability is expected to be a major focus for the LogTech industry in the coming years, with businesses looking for ways to reduce their carbon footprint and improve their environmental impact, whilst addressing social challenges such as driver shortages.

The LogTech industry is a rapidly evolving field that is transforming the way businesses manage their supply chain and logistics operations. With innovative solutions that increase efficiency, improve visibility, enhance the customer experience, and reduce the carbon footprint, breakthrough LogTech solutions have the potential to revolutionise the logistics industry and tap into the benefit potential restricted by the traditional ways of working.

The LogTech industry is a fast growing market, with massive potential for future growth. The number and range of solutions have vastly increased over the years, with significant amounts of venture capital being invested. The future of the sector looks promising, especially as businesses continue to recognise the importance of logistics and supply chain optimisation. According to a report by Grand View Research, the global LogTech market is expected to reach $309.9 billion p.a by 2027, driven by increasing demand for e-commerce and the need for efficient and sustainable logistics solutions. We expect to see a strong focus on sustainability and collaboration over the next few years, as companies look to reduce carbon emissions and tap into the potential benefits of horizontal collaboration. AI and ML technologies are also likely to play an increasingly important role, as they help businesses to optimise shipping routes as well as anticipate and prevent problems. However, if the industry is to realise its potential, there remains a need to increase adoption and address the data and implementation challenges which have held the industry back. The coming years will be an exciting time for the LogTech sector, with more breakthrough solutions, innovative collaborations and widespread adoption.