Visibility in Supply Chains--What are the Emerging Solutions?

One of our long-term investing themes at Supply Chain Ventures has been shipment visibility in the supply chain.

Why have we not been big fans recently of the traditional supply chain visibility space?

Here are a few reasons:

1. It's a crowded space--we have probably looked at 25+ startups doing what other providers are already doing very well over the past few years 
2. Business case/value proposition--beyond hi-value products, there is not a great demand for real-time shipment tracking--close enough is OK for most shipments
3. Visibility is not a standalone solution--its value lies in being integrated with a suite of supply chain software and used to make supply chain decisions.
4. Innovation--there are new players emerging that will upend current visibility providers.

We do think visibility is a key part of supply chain management. The visibility space is fast evolving and new technologies are creating more valuable shipment-specific data than just answering the 'where's my stuff' question. We like to stay well ahead of current technology in our investing, preferring 'what's next' rather than 'what's hot today' investing themes.

Let's look at examples of the current state of technology in supply chain visibility:

Old School Visibility--We started investing in visibility startups over 20 years ago. LeanLogistics, the first native SAAS Transportation Management System (TMS) founded by my now partner, Dan Dershem, and currently part of BluJay, was the first investment in our Fund I. Early on, we found that customer service teams at clients were constantly pinging the TMS data for shipment status reports to answer customer questions on when orders would arrive. In most cases, shipment update data was provided by the carriers who were delivering a load. Many carriers rely on telematics data from numerous providers (Verizon, among others) who track vehicles using GPS technology and provide updates to carriers on vehicle location, among other information. We also discovered that many owner-operators had no way to update carriers who were using them to deliver a load (except a barrage of phone calls). That led us to invest in Macropoint, which provided owner-operators with an app on their phone tied to GPS that would provide a constant update via the Macropoint platform to both carriers and shippers. We sold Macropoint a few years ago to Descartes Systems.

Current Visibility Players--Project44 and Fourkites have done a superb job of bringing together many disparate visibility databases for all modes, not just trucks to create close to 'full move' visibility data. Black holes in visibility data still exist, such as inside many ocean ports and for drayage providers, although more info is becoming publically available. Other players include Clearmetal and Blume, each of which provides multi-modal shipment data, often including international shipments. The issue we have with the current players is that visibility is based on a melange of databases some compatible, some not. And these solutions lack other relevant information on a shipment, such as temperature, humidity, shock, etc.

Emerging Visibility Solutions--sensor-based shipment tracking is the source of visibility data, now and in the future. Although only a small percentage of current shipments are sensor tagged at the moment, this will grow rapidly over the next five years. Why? The sensor data provided is much richer than just TMS-based information, detailing temperature, shock, humidity, tamper alerts, etc. Although historically high values goods such as pharmaceuticals and electronics could afford to put expensive sensors on a shipment, the cost of a sensor has come down significantly in the past few years, making the technology cost-effective for almost all shipments. We have invested in a leading player in sensor-based supply chain visibility, Tive.

How will the future of visibility play out? It's already starting. Transporeon, one of our portfolio companies, has just announced partnerships with two sensor-based visibility solutions--Tive and Roambee. The partnerships will allow Transporeon to marry telematics data with sensor-visibility data, reflecting the growing need for shippers to manage condition-sensitive shipments amid a congested global environment. Sensors capture significantly more real-time data on shipment conditions than traditional GPS-dependent vehicle tracking data, ensuring for example that temperature-sensitive shipments can be monitored throughout the trip and corrective actions taken quickly, as opposed to upon delivery when it may be too late to save the products.

What do we look for in Emerging Visibility Companies? There are three key areas:

1. Software--does the company have the software to create meaningful information from the plethora of real-time data generated by the sensors? Current supply chain legacy tools, such as SAP APO, cannot easily integrate such information into decision tools
2. Use Cases--does the company have a number of interesting use cases across a variety of industry verticals as to how the real-time data can be used for other applications, beyond traditional shipment visibility. An example would be measuring if shock-sensitive chemical shipments were mishandled in transit, resulting in quality degradation.
3. Sensor agnostic--there will be a variety of special-purpose sensors developed going forward. No company should be dependent on a single sensor for all applications.

One final note--sensor-based applications will become increasingly important in the emerging Internet of Things (IoT) space, opening up a number of new market opportunities for emerging visibility companies. That's a topic for a future Blog post...