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The startup approaches are upgrading the efficiency and transparency of the logistics business through the application of new tools and technologies to complement incumbents' legacy capabilities.
FREMONT, CA: While some industries are already reaping the benefits of the new digital future, some are struggling to find their way. The logistics and transportation industry, a trillion-dollar business, clearly belongs to the latter category. It wasn't until recently that the big industry players have started making changes to their business models, and by now, there are so many players out there. Even startups are getting the attention of the big incumbents as potential competitors and acquisition targets.
While funding is still not that big compared to business-to-consumer and sharing economy disruptors, logistics startups are attracting severe investor interest. A report says that it is more than $11 billion over the past decade. The top logistics startups have received around half of this funding. In line with increasing amounts of funding for logistics startups, a large percentage of new logistics startups are focused on online platforms and data-driven services. But rapid technological evolution means that all identified startup groups are seeing a steady stream of new entrants.
Startup investments could be a vital path to leapfrogging the challenges of digitalization for large logistics organizations. Startups can quickly identify which technology breakthroughs are worth pursuing and which are not because they have the flexibility to test and develop innovative solutions in an agile way. Invested incumbents can then rely upon surviving trends to optimize their own operations and enhance digital integration with their clients' supply chains and production processes.
Digital logistics startups offer scalability in large market segments, along with higher customer lifetime value than the initial acquisition cost. This is a great transformation for the conservative and risk-mitigating culture of logistics incumbents. Tackling uncertainty and risk while being flexible with regard to the business model is a virtue that must be shaped actively within conventional organizational structures. Established logistics providers have an open door right now to capitalize on the energy and agility of startups or risk meeting these new entrants head-to-head as competitors in the future.