DECEMBER - 20208 logisticstechoutlook.comIn My OPINIONLogistics software has become a major area of focus for start-ups and investors. According to a recent McKinsey report on start-up funding in logistics, total funding in logistics start-ups has been growing at a staggering 76 percent CAGR from 2014. In 2018 alone, $10 billion was invested into logistics start-ups. This newfound interest is of no surprise; it's a large, structurally attractive market with many fast-growing niche sectors. There have also been a number of trends that accelerated the growth of this industry: the ELD mandate driving more software in and around commercial vehicles, the Amazonification of consumer expectations with e-commerce logistics, and, of course, COVID-19 emphasizing our reliance on logistics. Given the sluggish inadaptability of today's supply chains in the face of shocks to the system, as well as the fragmented nature of the market, logistics is a natural contender for the next industry to be eaten by software.The software in logistics today revolves around the transportation management system (TMS). The TMS is a fantastic tool for logistics players to optimize all aspects of their supply chain. It has a proven ROI, and, as per Tim Fawkes of the 3T group, it's market is expected to almost triple by 2025. This growth is largely fueled by the movement of the TMS from on-premise to the cloud, making it more accessible to the logistics long-tail. However, building a 10X better TMS is incredibly difficult. First, most shippers, carriers, 3PLs, and others have significant commitment biases that cause a lot of resistance when transitioning from existing software tools to new ones. However, an even more significant hurdle is that the TMS is often more about customer service than it is technology. TMS is the core digital layer of most logistics providers, and as such, requires significant enterprise or customer experience services. Ultimately, this is where start-ups struggle to compete with incumbents.Nonetheless, the industry is starting to understand that one tool can't solve all logistics problems, and that niche tools developed for the unique problems of unique supply chains are the best ways to stretch profits in an industry of razor-thin margins. This opens up two key software opportunities for start-ups: Hyper-functional, specialized modules and the By Puneeth Meruva, Associate, Trucks Venture CapitalSPECIALIZED MODULES AND INTEGRATION INFRASTRUCTURE FOR TMS: THE NEW OPPORTUNITY FOR LOGISTICS SOFTWARE START-UPS Puneeth Meruva
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