The current COVID problem has highlighted the importance of logistics in today's world. Borders can close quickly, demand and supply can abruptly fluctuate with little notice, and bricks-and-mortar shops can suddenly become inaccessible. As we further embrace eCommerce, startups with the right technology or innovation can disrupt our way of working and bring much-needed change. For investors, this can be the golden opportunity for tremendous returns while pushing our boundaries in logistics.
The case for logistics technology
For the past few years, automation, apps and big data have helped us expand the possibilities in logistics in many ways. The cornerstone for such achievements is the ever-advancing development of technology. In 2016, the founder of the World Economic Forum, Klaus Schwab, identified robotics, artificial intelligence, nanotech and the Internet of Things as elements of the fourth industrial revolution. As time goes by, some of these technologies are already making an impact on how we expect from 'logistics'.
Since then, despite many companies still using outdated technologies, things are starting to change. Flexibility and efficiency are crucial for future logistics development, and demand for eCommerce will continue to grow in the foreseeable future. Investors focusing on technology that can withstand the changing market conditions in logistics and eCommerce could tap into considerable returns in years to come.
Southeast Asia as the main stage
This trend of innovation is more than prevalent in Southeast Asia. The region has already attracted investments in logistics and eCommerce worth approximately USD9.8 billion since 2015. With the proliferation of internet shopping, right infrastructure and abundance of market opportunities, investing in the right logistics technology can significantly change the logistics landscape. Also, companies need to be familiar with the differences in geography, languages and income between countries to be successful. This inherent challenge thus gives rise to logistics technologies in the region. A combination of innovative disruption, entrepreneurship and local expertise can not only hugely benefit the region's logistics, but also a remarkable investment opportunity for venture capitalists.
The ability to leverage intelligent automation by logistics technology in Southeast Asia may be the answer that the global manufacturing community is seeking. Breakthroughs such as artificial intelligence can help interpret records and better understand risks and possibilities. Logistics companies and manufacturers can enhance their ability to customise services, plan for scenarios and increase real-time predictability while decreasing lead times for turnarounds and recovery.
As the current situation proves, quick, transparent and customisable deliveries are the key to success, and it takes the right tech to achieve that. Though there are a plethora of players in the field, successful technology will bring much spillover to different supply chain functions. Companies can make better decisions, communicate and collaborate with stakeholders, automatic logistics and trace deliveries for better customer service. The extra flexibility will allow eCommerce players to adapt to situations and customise their services further.
Given the diversity of Southeast Asia, such accumulation of small breakthroughs is especially essential. Without adequate automation and customisation, the overhead cost of entering each country could be vast. Each country has different cultures, regulations, peak seasons and geographics. With that in mind, moving shipments across borders could be less of a daunting task with the right people and the right mind. For example, automation can help optimise warehouses, truckloads and inventory while tracing cargos in every step. In contrast, market-specific automation and systems can help simplify logistics processes and minimise the chances of encountering custom issues. The extra visibility can help business owners make better decisions, increase flexibility and stay in touch with one another, whether managing a crisis or launching a holiday sale.
Startups: the unlikely winners
Big wins don't necessarily come from big players. It is often the startups that can bring something new to the ecosystem - especially those that are lean and agile. Figures have shown that small players can be formidable. A McKinsey report from May 2020 reveals that investors see opportunities in unconventional methods in last-mile delivery services that could serve customers in different scenarios. In 2017, startups that focused on unconventional deliveries like crowdsourced delivery, drones or autonomous vehicles had raised USD9.9 billion. By focusing on customer satisfaction with their unique offerings, these small and agile players have broken through in realms where incumbents haven't entered yet.
The prevailing situation in 2020 has forced companies to seek new ways to stay flexible while managing their supply chains. This reality has given more chances for startups to shine with their technological flair - which certainly caught the attention of investors. Since 2015, 93% of logistics startups have landed their investment in 2015 with a 76% compound annual growth rate between 2014 and 2019. The numbers suggest that startups' ability to innovatively disrupt the supply chain ecosystem as well as their vast potential of driving logistics forward.
Now, why invest in logistics tech startups?
A good startup can define a problem and fix it, whether an urgent or a common issue. Its innovation, specialisation and flexibility allow it to address different holes in our current supply chain system that we may not have thought possible. For example, automation, contactless delivery, tracking systems and paperless deliveries have significantly aided many communities during the current COVID19 outbreak. These breakthroughs are a combination of small contributions from different startups, which, when added up, has changed the overall landscape of logistics and have certainly changed the way we ship items.
The right investment can make innovation known to the market. No matter whether it's the startup's niche disruption or enthusiasm in simplifying our practices, its unique contribution can potentially change our landscape. The odds of the logistics industry benefiting from such innovation disruption thus depend on finding the right investor as much as the techies' wits and grits.
For investors, startups that can demonstrate their innovative disruption and potential are the prize. Understandably, venture capitalists will be curious about their returns. An article from eft.com states that the critical factor is whether market players have already adopted the startup's tech solution. Hence, an indication of market interest does not only highlight the solution's long-term competitiveness and scalability but also serves as the best example of the system's implementation and potential disruption.
Vietnamese eCommerce venture Tiki has raised USD130 million during the current pandemic, according to Nikkei. It achieved its feat by leveraging customer's acute needs for face marks and other COVID19 necessities, together with its nationwide network of order fulfilment centres and two-hour deliveries of their parcels to customers. One can expect Tiki to continue its trajectory of success as the venture serves its community with its innovative disruption - while bringing enormous returns for its investors.
Technology will continue to drive logistics forward. With its plethora of customer demands and innovative disruption, this sector will have something for everyone. Identifying the right startup or technological disruption will open a pathway to future developments and returns. Choose one with potential and go on a rewarding journey.