Чрезвычайно актуальная публикация посвящена тенденциям в сфере логистики. Публикация подготовлена по материалам 10-ой Китайско-американской логистической конференции президентом китайско-американского совета по логистике. Автор отмечает важность компаний, не имеющих материальной инфраструктуры, а также многофункциональных платформ, объединяющих все приложения, подобно мобильному телефону. Особенное внимание уделяется автором примерам инвестиций в создание и деятельность структур подобного характера.
[Ed Note: the following is the text of remarks given by Richard Gluck as President of the Sino-American Logistics Council LLC on the occasion of the Tenth Sino-American Logistics Conference, Jinan, Shandong, China, on 16 June 2019]
I am an attorney and businessman, based in Washington, with forty years experience in the transportation and logistics industry. I am on the board of directors and chairman of the Advisory Body Legal Matters of the International Federation of Freight Forwarders Associations, and I am the general counsel to the U.S. Transportation Intermediaries Association. I have represented the industry at the United Nations on the ocean cargo liability convention (the “Rotterdam Rules”) and on a working group to develop a model law for electronic bills of lading. A few years ago I negotiated an MOU between the U.S. and Chinese national forwarders associations that has given rise to the SALC’s efforts to foster business collaboration and learning between the US and Chinese logistics industries. My perspective is that of an industry observer and advisor who has participated in many of the changes we will discuss today.
Your program summary anticipates one of my key conclusions: that non-asset based logistics companies (without trucks, ships, planes or warehouses) have become technology companies in their efforts to make the transportation industry more efficient. To use names you may know, companies like CH Robinson Worldwide, one of the largest logistics companies by market cap in the U.S., owns no trucks. Expeditors International, the largest international freight forwarder in the U.S., owns no planes, ships or trucks. Amazon is joining their ranks, both as an asset and non-asset based company, delivering to consumers and handling larger volumes into and out of warehouses for retailers using the Amazon platform.
To track a “trend” we need to know a little about how we got to this point before we can map where we might be going. Let me tell you the U.S. story in just a few words, then link it to China’s state of development.
Decades ago in the U.S. there were only a few non-asset based companies that arranged transportation for domestic freight, most of which moved by truck over the highways. These freight “brokers” could be found at truckstops where drivers would come to refuel their vehicles, rest and eat. The brokers would help the drivers find loads, mostly for their return trips, and take a percentage of the freight, often between 10 and 15 percent.
It was considered a great innovation when the brokers were able to post available loads on a TV screen at the truckstops, instead of talking to each driver, face-to-face. This service took the name “Dial-A-Truck” (DAT) because the drivers would use a land line telephone with a rotary dial at phone booths in the truckstops to confirm the loads. Today, DAT has evolved into a multi-billion dollar company, an on-line marketplace for truckload freight matching, with its systems fully integrated into computer systems of thousands of brokers in the US. Most of those brokers work from sleek offices in major cities, not at the truckstops anymore, and they have formal contracts with thousands of motor carriers. The founder of DAT, now retired as a very wealthy man, recently funded an industry academy to train future industry leaders.
Ocean and air shipments followed a similar pattern. Ocean freight forwarders used to earn brokerage from the shipping lines to find freight for their ships, much like travel agents earned commissions for finding passengers. Air freight forwarders were commissioned sales agents for the airlines. Truck brokers, ocean freight forwarders and air freight forwarders all had to get licenses from the federal government and operate according to certain government rules.
1978 to 1988 was a period of deregulation in the U.S. All modes of transportation were freed from government restrictions on entry. Government regulation of carrier rates and conditions of service was lifted. These changes in government policy led to a surge in new entrants, both asset and non-asset based, and the start of major private sector capital investment in the logistics industry. (More on this at the panel discussion later today)
I entered the industry and lived through this transition: I filed the last domestic air route application at the old Civil Aeronautics Board, which no longer exists, and the last 50 state application for freight forwarder authority at the old Interstate Commerce Commission, which is also gone now. For a while, I wondered if I would have to change my legal specialty.
Next came the “Dot.com” revolution (some call it a “bubble”) of 2000. Students in dormitory rooms came up with “apps” that got millions of dollars in funding, based mainly on a creative but unproven idea. Many tried to make transportation, viewed as a technologically lagging industry, more efficient. I gave a paper like this at an industry conference then, where I predicted that 90% of them would fail because they lacked “domain expertise”–deep knowledge of the freight transportation and logistics industry. I was right, although I may have underestimated the failure rate.
Despite my own advice, I invested in one of these companies and helped with its marketing. We “burned” through more than $6 million in private equity funding (some of it mine!) in less than two years. I learned a lot about how not to market a start-up company, and how to create demand for its product. Our concept was to offer a common platform on which all participants in the supply chain could share data about shipment status. Does this sound familiar to some of you? It took another fifteen years before integration between different programs run by different players in the supply chain became achievable, and blockchain came on the scene as well.
Soon after the Dotcom bubble came the 9/11 terrorist attacks. Security became the highest priority. I worked with several private groups under government grants to integrate security measures into container shipping. Government was supposed to publish uniform standards based on the results of these grants, but it never did. However, that initiative stimulated thinking in the private sector about application of technology to the entire supply chain as a single process. (For example, I participated in a short-lived venture called Freightrac that tracked intermodal rail-truck-ocean containers from origin to destination with a combination of RFID and GPS. It was another idea ahead of its time.)
China entered the WTO at this time, with a commitment to move toward a more market based economy. There were no non-asset based logistics companies here, nor were there load boards like Dial A Truck or systems to interchange data up and down the supply chain.
All those forces were set in motion then, so now where has that taken us, and what can China learn from this experience?
First, non-asset based companies are no longer sales agents for the shipping lines, trucking companies, railroads and airlines. Instead, they contract with the underlying carriers for space, and sell an integrated service to their customers. They act as intermediaries between shippers, carriers and consignees to arrange the movement of goods. CH Robinson, with $15 billion USD in annual revenue, spends hundreds of millions on technology to optimize loading and routing, manage its contracted carriers, track and manage shipments, and integrate with its customers’ supply chains. It does not spend anything on truck acquisition or maintenance.
Second, the technology used is increasingly supported by multi-function platforms that bring together all the applications needed in one place–much like your cellphone, but with smooth connections between all the applications. The “dorm room app” has no real place in the logistics sector standing alone. The domain experts have taken over from the amateurs. They design systems using deep knowledge and experience in the industry which they can integrate into the platform. According to one consulting group, deal flow for the U.S. trucking tech industry alone hit $3.6 billion in 2018, up from $118 million in 2014.
Here are some examples:
Internet Truckstop (now just Truckstop) an Idaho based company, started as an internet based subscription service in 1995, similar to DAT in listing loads and trucks available for matching. On April 3rd of this year it was announced that the San Francisco private equity firm ICONIQ is buying out the founders at a valuation believed to be around $1 billion USD. The investors include Mark Zuckerberg and Dustin Moskovitz, the founders of Facebook; Reid Hoffman, the founder of LinkedIn; and Jack Dorsey, the founder of Twitter and Square. According to a press report in FreightWaves, “it’s probably more correct to think of ICONIQ’s Truckstop.com deal as making a ‘platform-as-a-service’ play, rather than the simple acquisition of an individual software product. . . . Today, Truckstop.com’s offerings include payments, transaction insurance, freight tracking and visibility, load matching, factoring [buying accounts receivable for cash at a discount], and a transportation management system (TMS), offering a nearly complete workflow business for trucking transportation.” DAT, mentioned earlier, is on a similar path to be an all services platform.
Convoy, a digital load matching service allows drivers to book loads with shippers directly, without going through brokers, and provides support services such as “drop-and-hook”, a trailer pool that allows drivers to pick up pre-loaded trailers and drop them off without waiting for loading and unloading. Founded by two ex-Amazon employees, it is valued at $1 billion USD. Major investors include Jeff Bezos (founder of Amazon) and Bill Gates. It raised $185 million last year from Alphabet’s (Google) growth equity fund.
, a full service digital international freight forwarder with a virtual network of 10,000 experts around the world, that also operates its own plane and several warehouses, recently raised $1 billion on a valuation of $3.2 billion from SoftBank, with participation from China’s SF Express and others. In 2018 its revenue rose 95% to $441 million.
Freightfriend, a Chicago based startup founded by one of the principals who started Coyote, a digital broker later sold to UPS for $1.8 billion, creates networks of shippers and their trusted motor carriers to bid on freight and collaborate on repeat shipments to optimize efficiency. There has been some investor interest in this company by a large Chinese trucking company.
Uber Freight, whose name explains its business concept–an Uber for shippers needing to move freight via truck.
Intermodal Marketing Companies (IMCs). This is a category, rather than a single company. These companies buy space from railroads and then resell it to motor carriers or shippers. They arrange the through intermodal transportation by putting containers or trailers on rail flatcars, and bring together shippers and consignees with origin and destination trucking companies for pickup and delivery. Some, such as Hub Transportation, operate their own fleets of containers and chassis. They use sophisticated technology that tracks equipment availability, rail rates, best routings and other factors that allow them to optimize the services offered. We led a tour of Hub’s Chicago headquarters for a Chinese delegation of investors and their portfolio companies that included a briefing by Hub’s president. The key question asked was how they could convince China Rail to work with them to provide a similar service in China.
On May 28th of this year, IBM and Maersk announced that the second and fourth largest shipping lines (Maersk is No. 1) had joined their TradeLens blockchain platform that allows the secure sharing of data among trusted participants in the supply chain. According to IBM, shipping lines controlling about half of the world’s container volume will now be using the platform, along with more than 100 freight forwarders, cargo owners, port authorities and others. At a presentation by IBM that I attended last year, they also offered to facilitate participation by small and medium size non-asset based companies that do not have the technology to do so on their own.
What does this mean for China?
You can learn from our mistakes: what works and what does not. There is no need to go through a dotcom bubble. You can build on the knowledge already gained.
The best logistics technologies today are increasingly supported by platforms that assemble multiple applications in one place and connect them.
The growth of a strong non-asset based logistics sector is critical to making efficient use of physical assets and infrastructure by deploying these technologies. Empty backhaul trucks are bad for the environment and use too much fuel. China has gotten a late start on developing this sector. Thanks in large part to the efforts of Madame Wang of the DRC who spoke earlier, the MOT began a project two years ago to license “Non-Truck-Operating Carriers” (NTOCs). They will organize truck transportation by contracting with safe, trustworthy carriers. The NTOC will be responsible for the safe transportation of cargo from origin to destination. To be eligible for the program, a company must show that it is using web-based technologies to manage the arranging of transportation and related services, and has a business plan for selecting responsible carriers with which to contract. The design of this program borrowed from similar government and private sector practices in the U.S., but has been adapted to the local situation in China.
Trust is an important part of any business relationship. I am familiar with the Chinese concept of “guanxi”. This must be imported into the digital world as well. For example, the U.S. load boards offer services to check the registration, insurance and accident records of carriers before booking a load. Known “bad actors” are blocked from using the service. Larger carriers have created their own private networks of trusted third parties who can handle loads that they cannot. These developments could be adapted for use in China to make the use of these public platforms less risky than it may be today. Blockchain may offer another long term solution to this problem.
There are two sectors in China that could benefit from the application of technologies already in existence in the U.S. and elsewhere:
Cold Chain. As a prime agricultural region, application of cold chain temperature control technologies for transportation and storage of agricultural products is extremely important to Shandong to prevent waste and protect public health. As you may have heard yesterday, a recent MOT-Asian Development Bank study estimated that one third of China’s agricultural commodities spoil in transit between farm and consumer due to inadequate Chinese cold storage facilities. Further investment is needed to maintain temperature control, not just at the warehouse, but throughout the supply chain. Because of the many separate players involved in the suppy chain, designing such a system is a complex problem with no single solution.
Intermodal. Long distance rail service is greatly underutilized for trailers and containers moving within China. There are many reasons for this, but one of the biggest is the absence of intermediaries capable of pulling together the necessary parties–rail, truck, river barge and ocean carriers, shippers and consignees. At a previous conference some speakers pointed out that there are internal problems engaging with China Rail as well on such issues as pricing and service. For international rail shipments, such as China’s new container rail service to Europe, we have learned that there is no single document that can be used both for rail transport and for trade financing, such as a negotiable bill of lading.
It is hoped that the NTOC initiative may lead to further work applying technology to increase the use of intermodal transportation, and to expansion of adequate temperature control up and down the supply chain.
I hope these remarks have given you some ideas about where future investment might do the most good to improve the state of logistics in China.
The Sino-American Logistics Council wants to be helpful in bringing together experienced U.S. companies and professionals with Chinese companies and experts, to find innovative solutions in these areas (and others) that support sustainable development of China’s logistics industry.
 Chinese investors and private equity funds in this industry generally invest outside China in companies that can help improve operations of their portfolio companies in China in trade between China and other countries. They use the investment either to learn successful U.S. management models or to deploy comparable technology and business practices, or both. SALC has hosted a number of Chinese investors and their owned companies looking for such investments or business collaborations in the U.S.
 The answer: do an independent study that shows how profitable this business could be for the railroad. That is what Hub did when it was starting out.
Автор: Richard Gluck