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Logistics Startups are Stealing Market Share as They Deliver on E-Commerce Demand

The growing demand for logistics to keep up with the increase in e-commerce has given rise to a slew of logistics startups that are chipping away at traditional players’ market share.

In its new “Eye for Transport” report, JDA Software Group said it’s seeing increased momentum in the logistics service provider (LSP) sector, as accelerated e-commerce growth, disruptive technologies and digitalization blend together to create opportunities that will change how LSPs do business.

“Manufacturers and retailers are transforming their businesses towards digitalization, which means the supply chain will be expected to run much faster, everything is becoming more intelligent and connected, more autonomous devices will be operationalized and much more data will be generated,” Danny Halim, vice president of distribution and logistics industry strategy at JDA Software, said in the report. “These trends are front and center of the CEO’s agenda in 2018 and beyond, presenting opportunities for LSPs to embrace the growing digital ecosystem and orchestrate a high-performance supply chain for their customers.”

The report noted that, tech-driven logistics startups armed and ready to disrupt the space, came on the scene with “significant fanfare.” While none have had the influence of Google or Apple in their sectors, JDA said there’s certainly been significant progress in the space.

Rather than top-down disruption driven by a single company, those startups are chipping away at market share and changing the expectations of what logistics services should look like—much the same as tech-focused retail startups have altered what the shopping experience should look like.

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Companies surveyed in JDA’s study said they’re more likely to build rather than to buy a freight technology platform. This may be because valuations for LSPs have grown so much that it’s more economically feasible to build a platform than make an acquisition.

Just 47 percent of logistics respondents are using software-as-a-service (SaaS) compared to traditional on-premise deployments for their newest software, the study noted. SaaS traditionally represents a cheaper option when it comes to “buy” and has made the build versus buy question much more difficult considering SaaS’s affordability and ease of roll-out, JDA said.

But it’s blockchain and AI that respondents feel are most important in logistics right now.

Nearly 30 percent of respondents said blockchain was the “game-changing technology” bringing them the most return on investment (ROI), although actual investments were relatively low. Roughly 24 percent said they were seeing ROI from robotics, and around 23 percent from AI.

Digital transformation was noted as the biggest present challenge for logistics by 21 percent of those surveyed, and 16 percent pointed to capacity as the biggest ill.

“Margins are already difficult to come by in an industry suffering from a commoditization problem. The need to digitalize is only going to put more stress on these margins,” the study noted. “There is, however, one possible bright spot that might be able to play a role: capacity. Capacity is one of the biggest challenges LSPs currently face, however, it also presents an opportunity to increase pricing.”

Some of the biggest opportunities for LSPs could come from what are currently the biggest challenges, JDA said. Taking lead-times, for one, which were one of the biggest challenges cited for B2B e-commerce retailers and customers, JDA said companies that can mitigate the impact of lead times with flexible capacity or warehousing, could have a significant impact in the market.

“Order regularity, customization and helping in the omnichannel experience are other B2B specializations that are highlighted…The push for B2B e-commerce in a manner similar to B2C e-commerce is very new,” according to the study. “Any logistics provider that can enable seamless omnichannel B2B puts itself in a great position for future growth.”

What will be critical, either way, is that logistics providers explore all of the technology options available to them.

“Building proprietary systems isn’t going to be sustainable in 2018 and beyond. In the future, LSPs aren’t going to be able to rely on a single Internet of Things (IoT) or data provider. It’s going to be an ecosystem of digital solutions,” JDA said. “LSPs need to proactively figure out how they can use innovation to perform better with the workforce conditions they have and deliver a high-performance workplace.”