3PLs prepare to see off digital start-ups


3PLs prepare to see off digital start-ups
  1. 3PLs prepare to see off digital start-ups
    lloydsloadinglist.com
    Growing tech capability of established logistics and forwarding companies limiting opportunities for disruptors, analyst…
    Industries

The major recent investments in innovation and technology by a number of large third-party logistics providers (3PLs) may limit the opportunities of digital start-ups in the sector, some of whom may decide their future lies in niche sectors or partnering with ‘bricks and mortar’ rivals rather than remaining independent.

That’s the view of leading industry analyst Evan Armstrong, president of 3PL market research company Armstrong & Associates, who told Lloyd's Loading List: “In third-party logistics, technology can disrupt and create competitive advantage until it is replicated and becomes commonplace across multiple 3PLs. This adaptation tends to take from six months to two years.

“Startups need to act fast to build on technological advantage before it is replicated. The other option is to sell to a 3PL.”

In his company’s Third-Party Logistics Market Results and Trends for 2017 report last month, Armstrong highlighted “the interesting competitive paradigm” that had developed in the marketplace, where large 3PLs were perceived as “not innovating”, while innovative start-ups were perceived as being unable to develop a network scale.

“The consensus is that large 3PLs will be acquiring, or leveraging, the technology developed by the most interesting innovators - such as the deal DB Schenker has done with uShip in Europe. Similarly, Amazon acquired Kiva Systems, which is now Amazon Robotics,” Armstrong noted.  

But innovation was now also being driven by 3PLs more than ever, as well as by IT companies. This could render the need for ‘tech’ acquisitions by some 3PLs superfluous.

“Most large 3PLs have more people in IT and financial resources than startups,” Armstrong noted. “The key is to build a culture of innovation. We feel that many large 3PLs such as DHL Supply Chain, C.H. Robinson, Transplace, and (UPS-owned) Coyote Logistics are also leaders in innovation.”

He noted the recent financial support from venture capitalists into US digital freight-booking startups Convoy and Transfix, which secured combined funding of more than $100 million, but added: “The approximate $300 million plus of venture capital investment in ‘digital freight matching’ companies, such as Convoy, is still relatively small considering trucking costs exceed $3 trillion globally and $742 billion in the US alone.”

Armstrong believes that the future of the so-called disruptors as ‘stand-alones’ lies in a tighter market foc…

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