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What is logistics? What are the industry problems and what opportunities do they create for innovation?
Key Takeaways
- Logistics is a critical part of the economy - its the orchestration of the complex supply chains which make the modern economy work, and is the number one job provider in the US.
- The industry as a whole - and trucking in particular - remains very inefficient, relying on antiquated processes and wasting a lot of resources and time each year.
- High barriers to entry due to complexity, existing inefficiencies, and a fast pace of growth create a lot of opportunities for disruption (and profitable investment) in the logistics space.
- Several nascent companies are disrupting the trucking space today via local networks, automation and better data, to improve the lives of American workers and lower costs for consumers.
Transcript
Logistics and supply chain is really the fundamental orchestration of the world around us. It's how vaccines get to the arms of individuals to stop a pandemic. It's how food gets from a farmer onto your plate at a specific temperature so it doesn't spoil aimlessly.
I'm Wes Friedman on the investment team at 8VC. One of the reasons why investing and building in logistics and supply chain is so exciting to me and so exciting to so many is because it really is the backbone of the American economy. That's how many, many people in the United States and in the world survive. When you're investing in the way the supply chain operates and is orchestrated, you're investing in people and you're investing in people's livelihoods, and that creates opportunity across the world.
Why is there so much opportunity to invest in innovation, in freight logistics? So let's take it from a high level. This is a massive space. It is an industry that can really benefit. If you were to look at just trucking, it's close to an 800 billion dollar industry just in the United States, there are over 10 billion tons of freight moved just on trucks. That 10 billion tons will grow close to 50 percent over the next three decades as twenty five percent of the trailers that you see on the road are empty. So that's a ton of wasted time, a ton of mileage that you're paying for it. To create innovation in the trucking space, you have to have a deep understanding of both technology and logistics. Part of it is this fragmented nature of supply chain. There's so many different pieces in that and so many real world things that can go wrong throughout that entire chain, which is why it's very difficult to to bring technology to this, because you have to have very deep understanding of it. So there really is a lot of inefficiency that still exists in the market today, which from our point of view just means opportunity.
Baton is a logistics technology platform with real estate and local fleets, with the goal of eliminating waste of time and trucking instead of a driver driving clear across the country only to wait and congestion, they can stage a load at one of our drop zones in the city, and then we coordinate a network of local drivers to handle the final mile. There's a billion gallons of fuel lost per year for trucks idling. Everything around you was moved on a truck at some point. So you can increase the efficiency of the trucking industry. You're effectively reducing the cost of every single goods sold in the entire United States. Again, you know, truck driving is the number one job in the state. So if you invest, those jobs are really benefiting, you know, not just in general, but those individuals and their families.
If you think about owner operators who have only a handful of assets, insurance is prohibitively expensive. In fact, it actually ends up being one of the major, major costs that they have every single year. So what HDVI is doing is allowing these smaller carriers to stay in business by not pricing them out of the insurance market, and it's allowing them to operate more efficiently and save money when they're driving safely. There hasn't really been any innovation in the commercial auto insurance sector for decades. What we doing at HDVI is we are rebuilding commercial auto insurance companies from the ground up centric around the advanced technology and the advanced in the trucks. And we incorporate that data. Everything that we do able to bring a lot more value in the fleets and help them not just with their insurance, but become more efficient operators, become more compliant. That makes them better risk for us.
Vector is a really exciting company as well in the portfolio because they're fundamentally digitizing a workflow that every single carrier, every single warehouse has to deal with. The only way you can do that is by having incredible technology that allows this paperwork to be captured and stored and to have a data model that actually allows for you to run all of these different types of data analytics on top of that. So Vector has fundamentally become a key component of how carriers and shippers interact at the warehouse and how they keep people safe. Logistics is very much a team sport and requires a lot of collaboration and collaboration right now is all happening through physical handoffs, through word of mouth. So we're taking that to enabling truck drivers, shippers, receivers to execute on a digital platform.
It's exciting and frankly fun to dream about the way that the world could work and should work. And how can we build and invest in solutions enabling software and technology to help those come to fruition. It fundamentally is up to us to build the future that we want to pass on to the next generation. And that's what excites me as an American and as an entrepreneur.
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