Business

Supply chain problems are intensifying, but family groups are backing innovative solutions

These days, commercial success tends to depend on your position in the supply chain rather than your skills on the shop floor. And the stakes are rising. 

Post-pandemic disruption is set to lead to stagflation, as users are forced to stump up to buy scarce components and resources, says economist Nouriel Roubini aka Dr Doom.

Supply chains represent more than 10% of global GDP but are still managed and executed using manual processes and siloed solutions

Political negotiations can help sort out the problem. But a lot of money also needs to be invested in more efficient supply chains following recent neglect. 

AI, automation and the Internet of Things (IoT) can offer solutions. Family enterprises led by Bessemer Venture Partners and Koch Disruptive Technologies are backing them. 

So are specialist venture capital firms such as Dynamo Ventures and Trucks, backed by the Schox family.

According to Dynamo: “Supply chains represent more than 10% of global GDP but are still managed and executed using manual processes and siloed solutions.”

Asia has lately been more effective than the West investing its trading surplus at regional supply chains to the benefit of China’s import and export trade. The region’s buying power has gone on to drive up a range of goods including micro-chips, shipping containers,  timber and natural gas following the pandemic, restocking and factory closures.

The trading situation is also complicated by the way US residents have diverted pandemic savings to home improvements rather than services. The container industry has nearly fallen apart under the strain. This year’s Suez  Canal blockage made things even worse.

Supply shortages can often be traced back to problems at a single supplier. This means, for example, that cars need to compete for chips with computers, smartphones, televisions and exercise equipment. 

“Not fully understanding who they were competing with at the supplier level got vehicle makers into trouble,” says Willy Shih of Harvard Business School.

McKinsey points to problems in getting suppliers to track, manage and communicate data relating to issues like carbon emissions and labour practices: “The vision of a truly integrated supply chain has proved difficult to realise.” 

It points to gross inefficiency in supply chains which have been rationalised to keep prices down. Crucial investment in the future has not materialised. 

Half of the world’s largest importers use a simple spreadsheet to handle complex supply chains. Goods get passed between an average of ten different organisations before reaching recipients. Shippers need to interact with 25 intermediaries, ranging from customs to shipping lines. Global political tensions, typified by Brexit, are undermining trade treaties, painstakingly negotiated over years.

Prior to the pandemic, logistics benefited from venture capital investment but this tended to favour transport and last-mile services, covering domestic trips from warehouse to the end-user. 

Big logistics companies, often based in China, also benefited from the venture capital spree, until it went into reverse in 2019. China’s Full Truck Alliance, also known as Manbang, pulled off a $16.7 billion IPO this year. 

Trucking companies are jostling for market share in the West as drones hover in the background. Cargo’s US digital freight network has been popular with investors including Al Gore’s Generation Investment Management, Marc Benioff of Salesforce, Bill Gates’ Cascade Investment and U2 musicians Bono and the Edge.

In the wake of the pandemic, supply chain experts are developing other solutions.  One leading application sees Tosca Services, owned by Apax Partners, an early backer to Apple, using IoT devices in reusable packaging and pallets to signal the status of cargo for tracking and tracing.

Wiliot has secured $200 million from SoftBank and several corporate venture funds for another IoT supply line strategy which it calls Sensing as a Service.

Vector.ai has raised $14.9 million from Bessemer Venture, plus Dynamo Ventures and Episode 1, to use data processing to client documents in freight forwarding.

Supply chain finance also needs to attract funds, now banks have limited their global involvement. Taulia has been backed by JP Morgan, UBS and Ping An of China, although the demise of Greensill Capital shows the risks which result from misjudging opportunities.

Sennder of Europe is a digital freight forwarding unicorn company that has found backing from several investors. Baillie Gifford invested $80 million this year. Another backer is H14, representing the Berlusconi family office.

Flexport is tackling freight forwarding on a global stage, after raising $1 billion from investors led by SoftBank and Founders Fund in 2019.  It plans to use machine learning to put more items in half-full containers, but concedes there is no early fix to the current crisis. 

Bessemer has also contributed to a $18.4 million fundraising by Optimal Dynamics, an innovative firm led by Warren Powell and his son Daniel, which uses AI to optimise shipping routes likely to be profitable – and prompt.

Gatik raised $85 million in August from investors led by Koch Distributive Technologies. Gatik has pioneered a new generation self-driving truck which has landed a delivery contract with Walmart and Canada’s Loblaw. Amazon is pursuing a range of global delivery solutions.

A relatively small innovator, Backbone AI, is making a bit of a stir. It aims to improve performance by automating operational data supplied by different companies. The company says it can offer transparency to supply chains via data sharing between logistics firms and clients.

Dynamo’s newest fund has invested in a range of opportunities, including Backbone AI, after raising $43.2 million. The firm says it is starting to attract more support from institutional investors.

A VC manager called Trucks, as the name suggests, offers direct access to transport ventures. Veteran transport investor Reilly Brennan is its general partner alongside Jeff Schox – a top patent attorney for startups such as Coinbase and Cruise – and Kathryn Schox, who studies team dynamics. They are currently gathering capital for Trucks Growth, a late-stage investor.  And it’s fair to say supply chains need all the capital they can get. 

Subscribe

You will need a Premium Plus Subscription to access this database.

Exclusive news, analysis and research on global family enterprise and private investment offices.

Access to the most comprehensive fully interactive database on global family offices, principal investment offices, and family enterprises.

Check Deal Data, Senior Staff, and New Analysis on more than 500 family/principal investment and holding groups

Already have an account? Login

Subscribe

You need at least a Premium Subscription to read this article.

The most comprehensive information service on the global family enterprise world, featuring exclusive news, analysis, research and data on global family enterprises, family offices, and private investment offices.

Premium

£299

per year

  • Exclusive reports, analysis and commentary
  • Exclusive access to family/private investment office deal information
  • Exclusive interviews with principals and senior management of family/investment offices
SUBSCRIBE NOW

Premium+

£399

per year

  • Access to All of Premium
  • Access to all of FamilyCapital Analytics, our interactive database with more than 500 detailed profiles of family investment groups

More Info

SUBSCRIBE NOW

Already have an account? Login

You've reached the end.

Continue reading free articles by registering as a Member.
Or choose a Premium Plan.

Membership

Free

  • Exclusive reports, analysis and commentary
REGISTER NOW

Premium

£299

per year

  • Exclusive reports, analysis and commentary
  • Exclusive access to family/private investment office deal information
  • Exclusive interviews with principals and senior management of family/investment offices
SUBSCRIBE NOW

Premium+

£399

per year

  • Access to All of Premium
  • Access to all of FamilyCapital Analytics, our interactive database with more than 500 detailed profiles of family investment groups

More Info

SUBSCRIBE NOW

Already have an account? Login

Leave a Reply