Europe tech firms tackle logistics challenges

Malcolm Ramsay, Europe Special Correspondent | Mar 24, 2016 2:09PM EDT

With an ever-increasing number of firms competing in the global logistics supply chain, investment in new connective logistics technologies has seen a sharp rise in recent years.

Matching shippers with free capacity in the nearby area and turning paper trails into data points are key targets for innovation, and in the U.S., spillover from Silicon Valley’s hyper-entrepreneurial tech culture has created a number of cargo-matching startups such as Cargomatic, Flexport and Keychain Logistics.

Now, a fresh wave of European companies are challenging these models with new technologies and approaches. One of these firms is Kontainers, a startup based in Newcastle in the north of England since 2014.

A product of Newcastle’s Ignite technology accelerator, the firm provides technology that aims to create a seamless one-stop-shop for shipping containers by utilizing unused capacity in existing freight carriers’ fleets.

The process is designed to remove the multiple stages and paper interactions typically required to arrange freight shipments and replace it with a single consumer portal using an extremely simplified interface.

“From what we have experienced, we found the infrastructure of the industry needs a lot of upgrading. With more investment capital going into e-logistics in 2015 than in the last 10 years, we see this change is happening now,” Kontainers Director Charles Lee told JOC.com

“On average, around 6 million containers go in and out of the U.K. From a rough 'beer mat' calculation, trucking prices range from 150 to 900 pounds ($212 to $1,2712) per 20-foot-equivalent unit (say 500 pounds is the average), so say connectivity takes 10 percent of that, this is somewhere around 300 million pounds in the U.K. alone,” Lee said.

Another data-driven startup seeking to cut costs and disrupt the staid workflows of container shipping is Norwegian firm Xeneta, which relies on a crowd-sourced platform to connect pricing data from beneficial cargo owners. This allows users to view aggregated data and make more informed decisions about costs.

“Two of the biggest problems we set out to tackle were a lack of transparency and high levels of volatility in the market, but we initially met resistance from carriers and freight-forwarders/non-vessel-operating common carriers. Our approach was to get some of the most important shippers, the customers, on board early on as we knew that once they got the idea they would take our concept to the deal table,” said Patrik Berglund, chief executive of Xeneta.

While much of the sharing economy technology and conceptual framework that underpins these and other new startups is similar, it is the real world implementation that all too often sets competitors apart. This is particularly true when operating in different geographies, as it is not just electronic systems that need to be aligned, but new ways of doing business and relationships that must be developed.

“One of the advantages of being based in Europe is our understanding and access to the leading players in the sector. We have deep roots with the shipping industry here in Norway,” Berglund said. “The world’s biggest shipping lines and seven out of the top 10 freight forwarders are European headquartered.”

Xeneta’s daily operations are split basically evenly between establishing the crucial industry relationships needed to gather data and find customers, and technology development, he said.  

With 61 languages spoken across Europe, numerous different regulatory systems and overlapping governing bodies, the process is inherently more complex than single markets like the U.S.

In many cases, requirements in one jurisdiction do not have a corresponding analog in another, making conversion and transfer of cargo a more complicated procedure.

“The main difference we have found, is that European shippers require a lot more face to face meetings than say in the U.S. We think the primary reason is that the individual countries are still relatively small compared to the U.S. and so doing business face to face is still the norm. Also tech adoption also seem a little slower,” Lee said.

Lee also emphasized the importance of personal relationships, saying those relationships are critical to their efforts to streamline the flow of information between shippers, suppliers, and customs officials.

Lee said that when these connections are developed in a particular country, it allows country-wide service to grow rapidly, but he remains hesitant about the implications of some wider regulatory moves such as the Safety of Life at Sea, or SOLAS, Verified Gross Mass mandate, which may further complicate cross-border delivery.

Efficiency gains due to smarter freight matching are likely to drive significant investment and growth in the sector, and at least some of these startups are set to turn into sizeable global players, however the exact market potential remains unclear.

“(Potential market size) is a very tough question to answer. One of the reasons is that freight prices are notoriously obscure, therefore it is very hard to get an accurate answer. However, this connectivity is what the industry needs. Every container requires a lot of information flow that is currently needlessly transferred from one human to another,” Lee said.

Worldwide, this transfer of knowledge from human interactions to electronic interfaces is still in its infancy and while everyone agrees this process is only set to grow, there still remains disagreement over the most profitable near-term approach.

“There is a growing number of startups out there that aim to offer an Expedia-like booking service but our biggest difference is that we are focused on the strategic rather than the operational level — everything that happens before the booking itself,” Berglund said.

For example, the shipping industry has numerous stakeholders, such as banks, consultancies, insurance companies, ports, tech companies, e-sourcing platforms, etc. that could also benefit from having greater access to data like pricing and transit times, and the need software that can do more than match loads to capacity, he said.

However the industry develops, the promise of further cost savings and efficiency improvements seem likely to drive growth for some time to come.

“Currently we don't have many competitors yet, but we will see this changing in the next 5 years. By then shipping your next container will be like booking your next holiday,” Lee said