Logistics company Freightos released its LogTech Report for the fourth quarter of 2021 today, and it shows that private investment in logistics technology has soared:
Through the third quarter of 2021, investment in logistics technology had already exceeded $24B, a 58% increase compared to the full-year total in 2020 and nearly twice the sum invested in 2019. And in Q4 the trend continued.
Part of that momentum came from major ocean carriers like Maersk and CMA CGM who are using record profits not only to expand to other parts of the supply chain, like forwarding and air cargo, but also invest in e-Commerce and other logistic technology companies.
Those numbers are remarkable compared with past levels of investment, as the report says, but they are also remarkable compared with what politicians want to take credit for. President Biden likes to tout the $17 billion for ports in the bipartisan infrastructure law as helping supply chains. But remember, spending numbers from that legislation are totals over ten years, and there’s an arduous grant process through the Department of Transportation to apply for and get the money. Private investors, with no central direction, spent $7 billion more in three quarters of one year than the federal government will spend over the next ten.
The money from private investors will almost certainly be better spent as well. It doesn’t come with strings attached by the federal government that make the money virtually useless. The Freightos report highlights investments in software, e-commerce, and last-mile solutions that aren’t touched by government spending at all.
Government spending also suffers from focusing on things that already exist instead of spurring new technologies. Private investors, on the other hand, are creating new unicorns, or start-ups with valuations over $1 billion, all across the supply-chain space. The Wall Street Journal lists a few:
Newly minted unicorns, or companies that exceed $1 billion valuations, in the logistics sector in 2021 include e-commerce fulfillment specialist ShipBob Inc., digital warehouse and distribution provider Stord Inc. and Flock Freight, a platform that matches shipper loads to trucks and is backed by a venture arm of Japan-based conglomerate SoftBank Group Corp.
The Freightos report points to retailers’ shoring up their supply chains by investing directly in logistics companies. IKEA, for example, invested $115 million in Bolt Logistics, a Canadian company using software to modernize the truck-delivery process. From The Globe and Mail:
Bolt has built its own software to manage the customer-facing part of its business – enabling retailers and consumers to track deliveries online – and run back-end operations to manage its business and plug into merchant e-commerce software. It handles deliveries in-house with 100 electric vehicles and has a goal to be carbon-negative by 2023. . . .
Bolt’s drivers . . . wear uniforms and are hygienic and friendly, delivering “a fully branded experience that you can rely on” with 98-per-cent-plus on-time delivery.
That helped win IKEA as a client for last-mile deliveries in big Canadian cities, and as an investor, said Krister Mattsson, managing director of IKEA parent Ingka Holding BV’s investment arm.
Private investment is also going to automation, which is explicitly prohibited by parts of the bipartisan infrastructure law. SVT Robotics raised $25 million for its work designing software that orchestrates robots in warehouses. From Venture Beat:
SVT offers prebuilt integrations and functionality programmed by its various automation partners. Customers select which technologies they want, and SVT designs a robotics solution using drag-and-drop tools. The solution can then be deployed on-premises or in the cloud, depending on the customers’ requirements. . . .
“With no ‘plug-and-play’ integration solution for industrial robotics, warehouses and manufacturers have been prevented from quickly deploying the automation they need to keep pace with the dramatic shifts in labor dynamics we’ve seen over the past year,” Tiger Global partner Griffin Schroeder said in a press release. “With its [platform], SVT is solving this crucial interoperability problem.”
Companies in the technologically moribund shipping industry are using their record profits to modernize as well. In addition to the aforementioned investments by Maersk and CMA CGM, Israeli carrier ZIM (which has North American headquarters in Norfolk, Va.) is creating a new digital platform for its customers. According to an article from Splash247, it “will target US and Canadian small and medium-sized businesses (SMBs) importing and exporting from China, Vietnam and Israel,” which perfectly demonstrates the integrated, international nature of supply chains. “The platform offering consists of both sea and air shipping services up to the final destination, including land and rail transport,” the article says.
Supply chains were not the center of attention before the pandemic, but now they are. With that attention comes motivation to innovate and improve.
But it’s not just news stories drawing attention to supply chains. Far more important is the profit motive. All this private money is flowing in because investors see profit opportunities in companies that can solve problems and satisfy unhappy shippers. Some of these companies will fail, but others will come up with the ideas that we need to get cargo flowing again. It’s through that trial-and-error process that industries advance, not central direction from Washington.