The start-up approach upgrading the efficiency and transparency of the logistics business through the application of new tools and technologies complements 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 start-ups are getting the attention of the big incumbents as potential competitors and acquisition targets.
While funding is still not that big when compares to business-to-consumer and sharing economy disruptors, logistics start-ups are attracting serious investor interest. A report says that it is more than $11 billion over the past decade. The top logistics start-ups have received around half of this funding. In line with increasing amounts of funding for logistics start-ups, a large percentage of new logistics start-ups are focused on online platforms and data-driven services. But rapid technological evolution means that all identified start-up groups are seeing a steady stream of new entrants.
Start-up investments could be a vital path to leapfrogging the challenges of digitalization for large logistics organizations. Start-ups 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 start-ups 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 start-ups or risk meeting these new entrants head-to-head as competitors in the future.
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