Ship shake: Hanjin woes may help float tech, data start-ups
SINGAPORE: The global shipping industry, ravaged by collapsing revenues, defensive mergers and the failure of major player South Korea’s Hanjin Shipping Co Ltd , is slowly waking up to the redeeming potential of technology.
While sensor-laden containers, smart ships and 3D printing have grabbed the headlines, the startups making the biggest inroads are those working on something more basic – streamlining the interaction between shippers, freight forwarders, and those actually transporting the goods.
“This is way up there on the list of insanely complex systems with enormous impact on the global economy,” says Trae Stephens of Founders Fund, which this week led a US$ 65 million investment round in Flexport, a start-up focusing on providing logistics services and data.
“We believe doing this in a more efficient way can really move the needle on every part of the economy,” said Stephens, who will join Flexport’s board as part of the investment round.
Container ocean trade is likely to grow no more than 3 per cent over the next few years – at a compound annual growth rate – compared to 10 per cent in 200005, and 5 per cent in 2005-10, according to Seabury, a transporta- tion consultancy, and McKinsey predicts shipping oversupply will stay above 20 per cent this year and next.
Zvi Schreiber, CEO of Freightos, a Hong Kong start-up that offers Expedia-like quotes for end-to- end freight shipping, says the shipping industry is “manual, inefficient and opaque.”
KPMG found that a quotation for shipping freight typically involved 20 associated fees and, according to the Journal of Commerce, shippers each lose up to US$ 150,000 a year when price volatility and staffing cuts force invoicing errors.
“This industry is broken, there’s no question we have a serious issue,” Jesper Kjaedegaard, partner at shipping and logistics firm Mercator International, told a recent shipping conference in Singapore.
“Without technology, this industry is not going to move much further.”
Kjaedegaard pointed to startups like Xeneta, set up by two industry veterans after they failed to convince their employer, shipping giant Kuehne und Nagel, to introduce greater transparency into rates charged.
“Transparency is viewed by a lot of people in the industry as destructive in that it would negatively affect margins,” said co-founder Thomas Sorbo.
Xeneta’s solution was drawn from the world of consumer start-ups: encourage all those in the industry to contribute rates, creating a crowdsourced database of some 17 million contracted seafreight rates around the world.
By providing real-time data, shippers can see what they should be paying.
“Suddenly (they) can compare their contracts with others and find out if they’re being ripped off,” Sorbo said.
Venture capital interest in the broad supply chain and logistics industry has been growing, at least until last year.
In 2015, consultancy CB Insights counted more than US$ 1.7 billion of investment in start-ups, triple that in 2014. Another US$ 500 million or so was invested in the first half of this year. — Reuters