Category Archives: Logistics

FreightTech investment: With the cheap money gone, what happens now?

How do innovations get to logistics and supply chain firms? Here is the current state of the situation.

We went through a period of high venture capitalist (VC) interest in Supply Chain and Logistics startups. but now with some contraction and with high interest rates, the money is drying up. How will firms get money to develop innovations?

As so often in tech, the big question is, hardware or software? Years ago in Silicon Valley that was the intro line used at parties!

Hardware products require more involvement with the actual situation where they will be made or used– a use test bed. They need to be developed near users’ sites. Software products, like scheduling software or logistics management software, can be built anywhere and tested via the internet. They require much less physical user involvement.

And hardware products require immediate feedback from the users as they are being developed. They need to fit, to match the required form factors, and to be able to handle the situations encountered in the location of use. So customers are consulted as you go along, and serviceability is built in as the design progresses. In fact, often the design is the service that is actually being sold. Serviceability is built into the first viable product.

With software, on the other hand, customer service capability is pushed off down the road. It doesn’t become a burden on the firm creating and offering it till there’s a large customer base. And that’s the moment of truth for software-based firms– when they have a large customer base, and the engineers can no longer handle the problems themselves. Normally this occurs more than five years after the first viable product is produced.

This distinction between hardware and software in serviceability makes a substantial difference to VC investors. They normally want to see their investment returns within 5 years, via a public offering or a SPAC or acquisition. With software, they are more likely to be able to cash out before the difficulty occurs. With hardware, the whole development and service framework must be devised before the innovation firm can cash out.

So VCs strongly prefer software investments.

Hardware investments, on the other hand, are often developed as partnerships with user firms, and they have continued oversight as they go along, along with investments. The concerns are going to include how the product is maintained and what service needs it has. And the investments are more likely to come from logistics or material handling firms that have the ability to provide testing sites and engineering oversight for the project. So the investments are more likely to not come from VCs, but from potential clients or users of the hardware.

It’s just the way of the world. The graph here shows all the red software investment dominates in most years since 2017. The data is the market valuation of unicorns, firms with over a billion-dollar market valuation, identified by Crunchbase, a firm that tracks startups and innovators and the investors that choose them. Market valuation will give a good idea of the money that can be returned to investors.

Source: Graph by author from Crunchbase Unicorns data.

Notice also the industries favored (the red bars). Supply Chain investments, and Auto and Transportation, are way down the list. The large valuations are in soft industries like Fintech, Internet software, Cybersecurity, and Artificial Intelligence.

VCs know where they can get the returns. Don’t expect them to jump up and support your new electric forklift or container mover.

Grace Sharkey Friday, June 17, 2022

FreightTech investment: With the cheap money gone, what happens now? – FreightWaves

Amazon’s workforce turnover is so high that it could run out of people to hire by 2024

In many markets, Amazon’s desire for warehouse workers seems to be exceeding what’s available. this is according to an internal report obtained by Vox.

Warehouses everywhere churn through workers. Many workers see warehouse work as a stop on the way to something bigger. Most see it as repetitive and offering little chance to grow; a way to pay the bills but not a final destination. That makes it already hard to keep workers— there’s no allegiance to exploit.

And since every warehousing operator needs workers, it’s easy to just jump across the street, probably for more money, or at least a signing bonus.

Many US warehouses today operate with a temp workforce, turning over the recruiting and hiring to a firm that specializes in providing warehouse workers. The workers work for the temp firm, and are placed on 90-day contracts with the warehouse operator. It simplifies recruitment, but makes the job of safety and training more complex. Of course we can ask how much knowledge is needed for a warehouse job. but equipment operation and machine operating skills, and even picking and placement practices take knowledge specific to the individual warehouse, and must be trained for.

Increasing wages would probably help retention some. A portion of workers are motivated by that. Work rules and quality of management are also very important and can aid worker loyalty. But bosses are often not skilled in making workers toe the line, but also feel wanted.

It’s a nasty problem for Amazon. The leak of the report is worthwhile reading for logistics and warehouse professionals.

By Jason Del Rey Jun 17, 2022, 7:00am EDT

Amazon’s workforce turnover is so high that it could run out of people to hire by 2024 – Vox

Used truck auction prices plunge as freight market cools

All of a sudden, it seems, used trucks are losing value. It could be because some truckers are finding the trucking business hard to make a living in right now. Spot rates for cargo have fallen recently. Sometimes they are even below contract rates for recently negotiated contracts.

I think the recession is starting to hit trucking. Inventories of many firms are fully stocked, and if business sales slows these firms won’t need to replenish so fast. Hence less trucking needed.

Some of the hot spots for truckers, like the West Coast ports, are starting to slow down also, so less drayage or off-port hauling is needed. There are just fewer loads available.

It’s a good sign for supply chain congestion, but not so good for those who recently entered the business.

So truckers are selling their rigs more frequently.

It’s not an easy business to make a buck in.

Alan Adler Thursday, June 16, 2022

Used truck auction prices plunge as freight market cools – FreightWaves