Investor Relations

Ayla Jeiroudi

In any product lifecycle, sandwiched between factory production and doorstep delivery, is the wild west of fulfillment, freight, 3PLs and brokers. Supply chain is a significant cost for sellers. It is also an arena subject to coercive (e.g., government mandates) and normative (e.g., oil price) pressures. Squeezed margins challenge retailers to rethink their process efficiency by engaging with new tech.

Signaling an auspicious time for the category, in Q1 '23, startups optimizing supply chains secured $2.4B in venture funding at valuations impervious to today’s otherwise hostile market conditions.

Below are three supply chain trends worth attention.

1. Structural Shifts

Traditional warehousing and eComm distribution represent a glacial shift from the old brick and mortar world. In my past life as a retail consultant, I worked on an analytics project for a national jeweler optimizing warehouse operations and foot traffic against a map of distribution nodes and store footprints. After a months-long analysis of 140+ inputs, our final deliverable pushed for a leaner real estate presence with enlarged operations at key nodes. In today's need for speedy, low-cost delivery, that engagement would have produced an entirely antithetical outcome.

“Traditional warehousing and eComm distribution represent a glacial shift from the old brick and mortar world.”

Logistic operations are being granularized by Micro-Fulfillment Centers (MFCs), small, well-situated, automated supply nodes that hold healthy stocks of the most frequently ordered products. This model is important for Grocery, where unit-per-order math justifies the robotic costs. Shuttered high-street stores increase the incidence of flexible space in urban areas which can be reconfigured into MFCs. Served by automation (e.g. Fulfil) MFCs expedite delivery time and reduce the cost of transit to make fulfillment more efficient.

In Retail, Middle-Mile Logistics cover operations such as sorting and segregating. By shifting from industrial centers to market areas, these processes (which are traditionally done in remote areas) can invoke freight costs diminished by 40-50%, directly feeding profit. Fillogic operates in this sphere, converting non-selling space at local malls into tech-enabled, middle-mile hubs.

2.  Vendor Payments

One frustrating symptom of running a freight business: as topline expands, operators lose money to brokers' bad debt and late payments, causing bottom-line implications.

Freight billing is categorically complex. Dynamics between shippers, carriers, brokers and 3PLs make port and trucking infrastructure a shrouded space. As with the case in healthcare, invoices are plagued with additional charges and mislabeled fees, making audits and accounting another pain-point.

The journey of an Amazon order might look like this: A toaster is manufactured at an OEM in China, packaged and placed in a container. The shipper completes the necessary export documentation and arranges for the container to depart the port of Xiamen. A freight forwarder books cargo space on a ship handles insurance and arranges inland transportation. The toaster traverses the sea on a carrier vessel then awaits clearance and verification from customs authorities on the other side. The LA Port Authority manages crane unloading and storage within the port. A drayage provider gets the container from port to warehouse. The package is processed once more at the facility then sorted and stored before a last-mile logistics company takes it to its destination. All in, the toaster changes hands an average of 12 times, and those 12 vendors will each invoice the buyer a list of semi-itemized charges, usually offline and several weeks after the fact.

Loop uses AI and ML to capture documents (e.g., contracts, bills of lading, inspection tickets), validate invoices and automate payments. PayCargo aggregates vendors onto a convenient platform for shippers to streamline payments. BlueCargo empowers shippers with a per diem dispute tool against D&D fees and provides the supporting documentation to contest black box invoices.

3.  Supply Chain Transparency & AI

There is not yet an underlying architecture to support true supply chain visibility, but demand for better intelligence is on the agenda. Combined with new AI capabilities, visibility enables performance reviews and planning for bottlenecks, disasters and trade tensions.

Robotics and IoT sensors are the first level of connectivity to material handling. In transit, vehicular IoT (e.g., Faurecia) creates real-time transparency, action and response. RFID tags attached to perishable shipments make possible the monitoring of real-time temperature and freshness (e.g., Transparent Path, Sensitech). Internet-enabled cameras collect data on traffic, weather and road conditions, allowing for optimized transportation routes.

IoT feeds AI, giving rise to better inventory management and predictive maintenance. Hardware costs prohibit mass adoption, but regulation forces uptake. Across the pond, Germany passed mandates for supply chain due diligence with regard to human rights violations and environmental risks. A similar directive is under proposal for the broader EU. Such coercive pressure creates opportunity for new startups to flourish. Prewave touts itself as a “holistic” supply chain risk platform by identifying, analyzing, mitigating and reporting these risks. IntegrityNext and Sesamm help companies audit supply chains from an ESG context. There is a massive market to ameliorate data accessibility pain-points for anyone between accounting, operations, procurement and ESG-compliance teams.

In an era of shrinking discretionary spend, supply chain is a precious lever to rescue bottom-lines from collapse. It is also a significant line-item, sustainability wise. I anticipate logistics to become a significant concern as governments demand more accountability from corporations.

Author Bio:

In her role, Ayla is responsible for supporting investor relations, fund marketing and business development. Passionate about the commerce and consumer startup space, she previously worked in strategy consulting at Kurt Salmon, developing growth and digital strategies for Fortune 500 retail and consumer clients. Ayla started her career in the buy-side at a Fund of Funds, and holds a degree in Applied Math and Economics from Brown University.