By Max Lock | Director, Koho an Expeditors Company
In recent years, visibility has proven to be a hot topic in the logistics and supply chain industry; a topic that has gotten even more attention after a turbulent pandemic year that forced shippers to reconcile the historic disturbances to carrier capacity, pricing and on-time service.
According to a recent study by Bain, 40% of supply chain leaders listed real-time supply chain visibility as a top priority and plan to increase their investment in this area next year. Given the demand, several companies have raised significant investment rounds this year in hopes of being able to tell you where your freight is at any time.
Though the objective is simple, the path to providing end-to-end visibility is anything but clear. In reality, providing full visibility is very complicated as you need to connect multiple parties and systems in an industry that is barely digitizing. In general, the asset-based players that are physically moving the freight have a weak technical foundation. This challenge is only exemplified by the seemingly never ending migration from EDI to API; a transition that will require an incredible amount of investment and maintenance to support these integrations. While the technical infrastructure makes it easier for these visibility platforms to integrate, in and of its self it doesn’t solve the visibility problem.
In the Less-than-truckload market for instance, only one of the top 25 carriers offer real-time, last mile visibility to the end shippers. The remainder are dependent on milestone data (when freight is picked up, when it arrives at the warehouse, when it's delivered etc).
Visibility providers are only as good as the data input, such as the milestone data, which leaves much to be desired. If the companies that are claiming to offer visibility don’t have control over the data inputs, the current value proposition is a race to offer as many integrations as possible to accommodate the various asset owners in a shipper’s supply chain. At best, today’s visibility platforms are able to aggregate data and feed it into one cohesive system - if the supply chain partners cooperate, that is. While this is certainly convenient, it doesn’t solve the elusive problem of knowing where one’s freight is at all times.
Visibility platforms are quick to claim that the aggregation of these milestone data points will allow for predictive modeling. However, this value proposition is again based on the assumption that they will receive high quality data from supply chain partners. Bad data inputs create bad data models.
How can we fix this? First, we need to evaluate if the investments in the visibility space are misguided. The well-funded visibility startups are approaching the visibility problem from the shipper side when, in fact, the real opportunity lies with attacking this issue from the asset owner’s perspective.
To run their businesses today, asset owners are dependent on legacy software companies that are providing the ERP/management systems to handle everything from accounting to dispatching. Without owning the interaction for how the asset owners run their business, it will be very difficult to offer better visibility data.
However, this presents some challenges. Firstly, the legacy software providers are so ingrained within the carrier’s operations that it would be too difficult to migrate to another system. Also, the legacy software companies have little incentive to expand their offerings because their customer is the carrier and not the end shipper who wants the visibility.
There is no silver bullet for visibility but we’re seeing significant progress in the domestic full-truckload market as a result of the Electronic Logging Device(ELD) mandate and arming truckers with apps. A few digital truck brokers have started providing end-to-end visibility as a result. Note that this change came from the asset owner and broker, not a third party visibility platform. Domestic trucking was the easiest to solve since you’re only dealing with one asset from origin to destination. International visibility is likely to take much longer because of the multiple parties involved and lack of logging mandates for other modes and countries.
The companies that are disguising data aggregation as visibility will find it difficult to create a true value proposition. I predict that the“visibility” companies are likely to, over time, pivot their value proposition to become transportation management systems (TMS) or an easy API gateway to connect to multiple carriers. I don’t see how the “visibility” companies will solve the underlying visibility problem if they can’t control the quality of the data input.
The only option for shippers to have full end-to-end visibility today is to place a tracking device on their freight. This solution is far from perfect as they’re often sold separately from the transportation services and you have to deal with the logistical challenges of getting the tracker on the freight pre-departure.
If one of the large ERP/management systems fixed the quality of the data at the asset owner level they’ll unlock the holy grail of visibility, eclipsing the startups entering the space.