Justin Young is one of the most recent additions to Orange Silicon Valley’s expansive team of business and technology analysts. Young came to OSV in February with a background in supply chain and logistics, having worked with third-party logistics (3PL), freight-forwarding fourth-party logistics (4PL), and managing organizations’ supply chains.
Together with the communications, blockchain, and retail specialists at OSV, Young looks at emerging trends and technologies that are forcing players at various levels to change how they move goods from one place to another. In a short interview for the blog, he offered an overview of what interests him in this arena, as well as what he sees driving investment and innovation. This is what he had to say.
Orange Silicon Valley: What do you see driving innovation and investment in the supply chain and logistics space right now?
Justin Young: What is evident is the proliferation of e-commerce. Organizations are trying to be more competitive in their online business due to this “Amazon effect.” Everyone is a contributor to and a player in the Amazon world. The last year or so — especially in Q3 and Q4 of 2017 — was a significant time in the logistics space. GDP grew. Consumers are purchasing more; they’re purchasing more online. The ecommerce demand added a lot more congestion throughout supply chains.
The industry has not yet digitized which adds a lot of latency and inefficiencies . Supply chains are using archaic, manual processes to handle these innovative and demanding supply chains that companies like Walmart and Amazon have put forth.
Disruptive innovation is occuring because of a few things: One, the economy is booming. Two, consumer preferences are changing. And three, the proliferation of ecommerce resulting in the necessary improvement in technology to handle the inherent complexities.
OSV: You mentioned Amazon specifically. What companies can be seen leading these efforts and setting the standards that others are trying to keep up with right now?
JY: Historically, logistics service providers have been the leaders of innovation within supply chains. If you look at the 3PL space, they’re non-asset-owning. So the way you differentiate yourself is by offering innovative technology. In logistics, there is limited capacity in the marketplace. When logistics demand exceeds supply, prices increase and operations can slow which ultimately compress margins and affect an organization’s bottom line.
There are many startups in ecommerce fulfillment/warehousing, last-mile logistics, and supply chain analytics. The large incumbent logistics providers, DHL, UPS, C.H. Robinson as well as retailers like Amazon are investing in these startups that can improve supply chain processes.
OSV: How are competitors — whether those are established players or new new startups — reacting to these demands?
JY: The reaction is that this space is ready for disruption. As mentioned, the industry is moving towards digitalization. Silicon valley and the like are penetrating parts of the industry that has not changed in the last 30 years. Flexport is a prime example. A silicon valley unicorn that brought freight forwarding into the digital age.
There are two schools of thought among established players. One is taking an asset-heavy approach by controlling almost every aspect of your supply chain — this obviously takes a lot of capex that most organizations do not have. The other is an asset-light approach where investment are made in software that improve communication and collaboration between manufacturers, sellers, and logistics providers.
OSV: Among these new technologies, where do communications technologies play a role? And what’s the state of innovation there?
JY: Supply chain visibility is a major topic. That means improving the entire workflow including planning, in-transit and post delivery document management. Communication technology, specifically IoT, has a major role in automating visibility. We can connect all offline assets moving downstream into various management systems to better predict and make decisions empowered by real time data.
Another area of interest is connecting siloed systems such as Transportation Management Systems (TMS) and Warehouse Management Systems (WMS) into a cloud based digital control towers. The industry is moving away from the old electronic data interchange (EDI) to more advanced and less costly Application Programing Interface (API).
OSV: When you say “all assets,” what does that encompass?
JY: Assets can include trucks, trailers, containers, the shipment itself or even a truck driver. Amongst telcos, fleet telematics has a lot of potential. Carriers are connecting their fleets to optimize asset and workforce utilization. In the U.S. i think there’s a lot of potential to leverage Electronic Logging Devices recently mandated by the Federal Motor Carrier Safety Administration (FMCSA). The recent mandate requires truck drivers to log their hours of service via a mobile connected phone, tablet, or piece of hardware. Now every carrier on the road can theoretically provide real-time tracking data. If the data is available to partners in the supply chain, I see it being used to accurately predict shipment arrival times.
OSV: Are there any other big trends that you’re watching right now in supply chain and logistics?
JY: As the industry undergoes digitalization, organizations will naturally be at a greater risk in terms of cyber security. Cyber security is going to be a big topic. Organizations will need to implement strategies to proactively address cyber security throughout the value chain. What interests me is how brick-and- mortar retailers will rewrite their supply chain strategy to complete in the ecommerce space. Omnichannel supply chains is a hot topic right now. On-demand warehousing, fulfillment and last-mile services and even 3-D printing are picking up speed and retailers competing with the Amazon’s of the world are buying in. As we expand our global procurement practices our flow of communication needs to be quicker and secure. I am looking at how blockchain can play a role in terms of secondary markets, document management, and financing. The industry is obsessively looking at ways to implement blockchain technology. There are a lot of great ideas but it’s uncertain what the right use case will be.