Innovation Footprints

What if . . . ?

Supply Chain Management

#UserManual – Send Us All The Early-Stage Supply Chain Technology Startups

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Brian Laung Aoaeh and Lisa Morales-Hellebo, at #SCIT2019, June 19 – 20, Microsoft, Times Square, NYC. Photo Credit: Ray Neutron.

Author’s Note: This blog post is an updated version of User Manual: The Early Stage Startups I Want To Hear About Most in 2016 and 2017 and User Manual: The Early Stage Startups I Want To Hear About Most in 2017 and 2018. Certain portions of this version may be exactly the same as in the prior versions. However, there are significant differences between the prior versions and this one.

About REFASHIOND Ventures

REFASHIOND Ventures is a seed-stage venture fund that Lisa Morales-Hellebo and I are building to: invest in startups developing technology innovations to refashion global supply chains – across different industries. 

We are in the process of raising our first fund. Once we raise the fund, we will be based in New York City. 

While we are raising the fund, we are collaborating with a family office to make some early investments that fit our investment thesis, and the family office’s investment interests.

The three philosophical pillars of our investment thesis are;

  1. The world is a supply chain.TM
  2. Software is eating the world.
  3. Disruption creates opportunity.

Our working definition of a supply chain: “A network of connected and interdependent organisations mutually and cooperatively working together to control, manage and improve the flow of materials and information from suppliers to end users.”

– Martin Christopher, Logistics & Supply Chain Management: Creating Value-Adding Networks, 4th ed, Pearson Education Limited 2011, p4

We believe that a perfect storm of irreversible social, economic, technological, and environmental forces, has created an urgent and critical need to refashion global supply chains. This process presents the biggest investment opportunity of the next half-century. We are building a fund to invest in that opportunity.

We’ll invest in startups in the following areas; Supply Chain Management, Supply Chain Logistics, and Supply Chain Finance – across industries.

Our initial focus is on startups based in the United States, and Canada.

About The Worldwide Supply Chain Federation

The Worldwide Supply Chain Federation, which we founded in August 2017, is the collaborative, and mutually supportive coalition of grassroots communities focused on technology and innovation in the global supply chain industry. Each chapter is a community of practice that connects the builders of technology innovations for supply chain with the buyers of technology innovations for implementation in real world commercial supply chains. The New York Supply Chain Meetup is its founding chapter.

The Worldwide Supply Chain Federation is the world’s first, largest, fastest growing, and most active network of grassroots driven communities focused on supply chain, innovation, and technology. You can learn more here: The Worldwide Supply Chain Federation.

You can check out our Youtube Channel here. Join our community here. Follow @tnyscm on Twitter.

Characteristics We Look for in Teams, and Founders

We look for – we will not learn this until we actually interact with you. But this is what we will be looking for;

  • Teams in which the founders have known one another for a considerable amount of time prior to launching their startup; We look for teams in which the level of trust and respect between the co-founders is high. This reflects our belief that at the earliest stages of a startup’s life, team risk is the greatest risk we must worry about.
  • Teams that will not have difficulty attracting other great people to join the startup; We look for founders who inspire confidence and loyalty from others because they are good at what they do, the kind of people we could picture myself working for. We look for people that others outside the startup can come to look up to as thought leaders in their chosen area of expertise.
  • Founders for whom solving the problem that their startup is solving has become their life’s mission and they will work to solve that problem with or without help from outside investors; We look for founders who have an unconventional opinion about the market opportunity they are pursuing, and can explain their position is with evidence that investors can analyze independently. We look for founders who are focused squarely on solving their customers problems.
  • Teams that can focus on building a simple product that their initial customers love, and who can focus on a niche within which to launch that product. We look for teams that are judicious and frugal in how they deploy the startup’s resources.
  • Founders who value teamwork, and who can become great leaders if they desire to do so; We value transparency, honesty, and openness. We value self-awareness. We like people who are determined and tenacious, who do not give up just because the going gets uncomfortable and things seem bleak.
  • Founders who have a hard time doing something simply because it is what someone else expects them to do; We do not like obedience. We detest arrogance. We admire confidence. We look for founders who are not afraid to be different. We look for founders who have prior demonstrable experience of good decision-making when things are uncertain and information is incomplete. We are not looking for perfection.

Characteristics We Look For in Markets

We look for;

  • Large markets that could ultimately be served by the startup’s product, even though the initial target might be a small portion of the whole. We look for customers capable of and willing to pay for the product, and who are looking for and eager to find a solution to their problem.
  • Markets in which the pain is acute because the problem suppresses customers’ profits significantly, or because the problem makes users far less effective and efficient than they could be.

If currently the addressable market is between $1B and $10B, we want to see evidence that it is growing quickly enough to support the startup’s future goals, and the competition that we assume will quickly follow if the team is successful.

Characteristics We Look For in Business Models

We look for products and business models that:

  • Will benefit from network effects as time progresses,
  • Can scale efficiently and quickly once product-market-fit has been established, and
  • Can eventually benefit from an economic moat as the startup matures into a company, and the business model becomes established.

The Themes We Are Focused On

Notes:

  • These themes cut across different industries and sectors. That is a deliberate choice in the way we are designing REFASHIOND Ventures.
  • The technology sector evolves constantly. Accordingly, our team’s interests might adjust in response. The themes we have described below should serve as a rough guide to how we think about the universe of startups in which REFASHIOND Ventures will invest. It is not comprehensively exhaustive, nor is it mutually exclusive of themes we have not described. If the innovation you are working on fits our definition of supply chain and the descriptions above, please reach out to us.
  • We anticipate that REFASHIOND Ventures first fund will be a pre-seed and seed-stage fund. Our current collaboration will primarily focus on startups raising an institutional seed round, or raising a round between a previous institutional seed round and a series A round.

Our current investment themes;

  • Next Generation Logistics: Platforms or applications that significantly improve how logistics and transportation networks are operated and managed.
  • Advanced Materials: Platforms or products that make it possible to research, invent, and create new types of materials at scale. We are especially interested in the conversion of large quantities of waste of different types into new materials. 
  • Advanced Manufacturing: Platforms or applications that make it possible to integrate advances in software engineering into manufacturing processes. 
  • Data & Analytics: Platforms or applications that help people or other machines to manage, analyze, interpret, make decisions, and take actions based on vast and growing amounts of centralized or decentralized data from disparate sources. Such platforms or products enable large numbers of different types of connected devices, machines, apps, and websites to communicate with one another seamlessly, and with the people managing or using them, within a secure environment. 

Connecting With Us

If you know someone who knows us, an introduction would help. If you do not, never hesitate to communicate with us directly. We are both very easy to reach on the major social networking platforms. 

The best time to start communicating with us is before you are raising a round because we believe it is important to build trust and understanding before entering into the kind of working relationship that exists between startup founders and their early stage investors.

That also gives us sufficient time to understand the problem you are solving, so that if REFASHIOND Ventures invests, we are doing so with conviction. Time enables us to become a more effective advocate on your startup’s behalf when we have discussions about you with other investors we know, and who we feel would be a good match for the round you are raising.

Communicating With Us

If we are not meeting through an introduction, we will respond quickest to founders who get straight to the point, and explain why we should speak with them in 250 – 400 words in their first email to us. We try our best to respond to founders who initiate communication with us. However, depending on what else we have going on, we may not respond if we feel the startup is outside REFASHIOND Ventures’ areas of interest. 

Follow up with us once or twice if you believe we have made a mistake by not responding.

Things We Believe Are Red Flags

  1. Exploding rounds: An exploding round comes with a caveat like “Seed round in ground-breaking tech startup closing in 1 week!” We need time to do our own homework.
  2. Meetings led by an advisor: We prefer our first few interactions with a startup to be with the team of co-founders, not with an advisor or an investment banker. It is okay for an introduction to come from an advisor if that advisor is someone we already know. We do not like to have advisors or mentors micro-manage our interactions with startup founders. That does not inspire confidence.
  3. Lack of control over core technologies: We try to avoid situations in which the startup has a product that has launched to the public, but the startup’s team has no primary responsibility for actually building the core product. If there’s IP we’ll spend some time trying to understand who owns the IP.
  4. Founders who are mainly focused on invention: Some founders are born inventors. In and of itself, that is not a bad thing. However, as investors we have made a choice to invest in founders who want to build potentially big businesses. 

Our Commitment To Startup Founders

Based on Gil Dibner’s VC Code of Conduct;

  • We will be transparent.
  • We will respect your time.
  • We will not ask you for material we do not need.
  • We will not string you along.
  • We will let you know about any competitors in our portfolio.
  • We will be transparent about conflicts of interest.
  • We will not share any of your material without your permission.
  • We will not speak with your customers without your permission.
  • We will educate before we negotiate.
  • We will be honest about what standard terms are.
  • We will not issue a term sheet unless we have made a firm decision to invest.
  • We will reflect the term sheet in the final legal documents.
  • We will not seek an unreasonable equity stake.
  • We will avoid surprises.
  • We will always act in the best interests of the startup.

Without doubt, there will be times when we fail to live up to these ideals. When that happens we hope founders will let us know. That is the only way we can get better.

Can Collaboration and Community Serve as Catalysts For Innovation in Supply Chain?

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Note: A version of this article was first published on July 31, 2019 at Port Technology.

The innovations required to reinvent global supply chains will not happen without collaboration. This article describes our experience facilitating such collaborations, starting in late 2017.

In late 2016 and early 2017, I spent a lot of time studying trucking and shipping, with a view to understanding the industry dynamics at play, and to see what opportunities might exist for software startups. What I learned about the trucking industry piqued my interest in logistics overall, and ultimately led me to a decision to focus on early stage technology investing in supply chain by building REFASHIOND Ventures to invest in early stage technology startups reinventing supply chains.

Through that work it became painfully clear to me that there is a need for closer collaboration between software startups and established, mature companies. 

This article will explain why there’s a need for such collaboration. I will also discuss the approach our community, The Worldwide Supply Chain Federation, has taken to enable such collaboration. Although it is still early, we will end with a discussion of some early indicators of the results we might expect in general.

Note on prior and recent work: Disruption, supply chain management, supply chain finance, and supply chain logistics are topics I have been studying for some time – from the perspective of an early stage venture capitalist specializing in supply chain; Notes on Strategy; Where Does Disruption Come From? (2015), Industry Study: Freight Trucking (#Startups) (2016), Updates – Industry Study: Freight Trucking (#Startups) (2016), Industry Study: Ocean Freight Shipping (#Startups) (2017), Updates – Industry Study: Ocean Freight Shipping (#Startups) (2017), Where Will Technological Disruption in The Fashion Supply Chain Come From? (2018), Is disruption finally underway in the freight brokerage industry? (2019), and Why digital freight brokers might fail to disrupt the freight brokerage industry (2019).

Identifying The Chasm

A consequence that arose from my decision to publish my articles on trucking and shipping is that it prompted several executives at established companies to reach out to me to talk about my findings. The same happened with startup founders – though, they mostly wanted to meet an early-stage venture capitalist who cared about supply chain logistics.

Those conversations made it painfully clear that: On the one hand, executives at established companies know the business problems in supply chain operations for which they desperately need new innovations. However, they typically do not have sufficient time to meet their daily responsibilities at work and scour the globe seeking out such new innovations. Moreover, their companies might not be plugged into the right communities to find such innovations through tradition RFP processes. Moreover, such executives also tend not to have a very good sense of how much certain emerging technologies have matured, and if such technologies might be applicable to the problems they need to solve. I call such executives BUYERS: these are people and organizations who want to buy new technology innovations for supply chain operations. This is particularly true in a nascent area like cryptocurrencies and blockchain.

On the other hand, founders of software startups that are creating new innovations for supply chain tend to understand the technology well, but they lack a deep and nuanced understanding of the business problems that potential customers face. They lack a sufficiently mature understanding of the value proposition they must offer to the BUYERS if they are to win market adoption. I call such startup founders BUILDERS: these are people and organizations who are building new technological innovations for supply chain operations.

For this conversation to make sense, it is critical that we share a common understanding of what I mean by supply chain. 

The definition I have adopted is from the 4th edition of Martin Christopher’s Logistics & Supply Chain Management: Creating Value-Adding Networks. A supply chain is: “A network of connected and interdependent organisations mutually and cooperatively working together to control, manage and improve the flow of materials and information from suppliers to end users.”

Crossing The Chasm

In order to bridge this chasm between BUYERS & BUILDERSTM, Lisa Morales-Hellebo and I founded The New York Supply Chain Meetup in August 2017. We started with a very simple premise: Once a month, for about 9 out of the 12 months each year, we would bring these two groups of people together to:

  • Network, 
  • Talk to one another about the problems they were trying to solve and the products that they were building, and
  • Participate in curated programming that is based on relevant and topical themes related to supply chain. 

Each event would last about 3 hours. The format of a meetup appealed to us because it is inherently grass-roots driven, and emerges spontaneously based on a shared enthusiasm among a group of like-minded people for a particular topic. 

We ultimately settled on a mission for The New York Supply Chain Meetup: To nurture and grow the world’s foremost open, global, multidisciplinary community of people devoted to building the supply chain networks of the future – starting in NYC.

Even before we held our launch event on November 16, 2017 people in other parts of the United States, and in other countries asked us if we would be live-streaming the event. We took this as a promising sign. As we approach 24 months since we initially started working on this, our tentative first efforts have grown into an initiative to build The Worldwide Supply Chain Federation; A collaborative, and mutually supportive coalition of grassroots communities focused on technology and innovation in the global supply chain industry. The New York Supply Chain Meetup is its founding chapter. 

The initiative is entirely grass-roots driven. Our community includes:

  • Startups,
  • Mature Companies – across all industries,
  • Academics from research institutions,
  • Early-stage technology venture capitalists, and other late-stage investors, and
  • Journalists, regulators, professional services providers, and any other groups of people with interests and skills relevant to innovation in supply chain.

We have 1900+ members in The New York Supply Chain Meetup – the founding chapter, 2700+ members around the world, an active chapter in Charleston, South Carolina, and chapters in the process of being formed in several other cities around the world. 

The Worldwide Supply Chain Federation held its inaugural global summit, #SCIT2019, on June 19 and June 20 in NYC. 

  • We had 1000 people sign up for the event before we closed registration. 
  • During the event we had about 400 people attend on each day of the summit. Attendees came from 15 countries. 
  • We had 31 speakers: With 11 startup showcases, and a presentation by the Singapore Economic Development Board on June 20. Video of the event is available on our YouTube channel. 

Also:

In An Age of Platform Competition, Open Collaboration, Open Communities, and Open Ecosystems Matter A Lot

Why are companies like Amazon, Apple, AirBnB, Microsoft, Alibaba, Google, JD.com, Uber and others, posing a threat to companies in traditional industries? Why are startups that many people have never heard of beginning to attack and threaten companies in mature, established industries that one may have considered immune from such threats as recently as even just half a decade ago?

It is because the companies I have listed, and others I have not, understand the importance of business models that are built on open ecosystems rather than proprietary and linear value chains owned by a single company. 

Using the internet and other maturing software-enabled technologies as the foundation, these companies are launching demand-side and supply-side attacks on industries that have become accustomed to relatively sanguine competition among well established companies. 

That raises the question: What is an ecosystem? A business ecosystem has three main characteristics;

  • First: It is a network of networks.
  • Second: The focus of the ecosystem orchestrator must be on enabling and facilitating the creation and exchange of value, between all participants of the ecosystem.
  • Third: The creation and exchange of value must occur in a way that increases the aggregate well-being of the entire network over time.

When executed well, platforms and ecosystems give rise to powerful network effects. Network effects matter because, in the most extreme cases they can lead to winner-take-all outcomes. At best, they lead to winner-take-most situations. 

What’s are network effects? 

As I explained in my September 2014 article on the topic Revisiting What I Know About Network Effects & Startups: “A network effect occurs when the value of a good or service increases for both new and existing users as more customers use that good or service. The network effect is a virtuous cycle that allows strong companies to become even stronger. Network effects are also known as direct-benefit effects.”

The Results Are Early, But The Signs Look Promising 

As I have pointed out already, our effort is entirely grass-roots driven. We are yet to attract significant outside support to accelerate our efforts. Nevertheless we are showing promising early results in the 24 months during which we have been working on this. Here are just a few highlights.

  • A startup in our community is working with a very large shipping company that is seeking software technologies that enhance its ability to make decisions under uncertainty. Such software can be applied in various aspects of the shipping company’s global operations. The software could also be introduced to the shipping company’s customers who also need to optimize their own supply chain operations. The shipping company gains new technology, while the startup wins a channel partner to aid its go-to-market efforts.
  • A handful of startups in our community are building software to enable established freight forwarders modernize their business operations without bearing the expense of developing software from scratch. Many such efforts are led by people with significant experience in the freight forwarding business who have teamed up with technologists to build the technology. For such startups, a community like ours provides a great, low-pressure opportunity for them to connect with potential customers as well as potential investors.
  • Another startup in our community is building a derivatives exchange for the freight markets, creating a new suite of tools that shippers and carriers can use to manage risk.
  • One startup in our community is building a communication platform to enable communication around the transactions that take place between shipping companies and beneficial cargo owners, freight forwarders, and other parties involved in the shipping of cargo. Currently that communication happens over email, and relies on manual, paper-based processes. The team already has significant experience building software for the maritime shipping industry. The need for the product it is building is confirmed by the explosive rate of growth in adoption by very large shipping companies around the world. Where our community can help is with advice about the startup’s interactions with potential venture capital investors, and providing opportunities for the startup to tell its story to a wider audience. In one instance, after presenting at one of our events, a real estate broker told the startup’s founder that the same problem exists in the real estate industry. He also met an executive from a large shipping company who offered to introduce him to the shipping company’s corporate venture capital arm.   

Collaboration Is Especially Critical in Blockchain + Supply Chain

Like everyone who is enthusiastic about supply chain and technology, we are exploring how blockchain and other distributed ledger technologies will affect the supply chain. Here are some of the things I have learned;

In relation to blockchain, one of the lessons I learned while studying the shipping industry in early 2017 was this: 

“One product that it appears the industry would gravitate towards is a system of record that connects all participants in the supply chain, from end-to-end. This would be a platform into which various shipping industry data could be input, and other data can be obtained as outputs. Probably most input data would come from other platforms and data repositories, while output data would be fed to different counterparties based on their access rights and information requirements.” 

In that blog post, which I published in June 2017, I went on to say that this product seemed to be one ideally suited to be built on a blockchain. The platform would need to allow several independent parties to collaborate with one another while providing each of them with anonymity for certain aspects of their interactions. 

For example: Customs agencies around the world might demand special access rights to enable them monitor international trade transactions happening under various national regulatory jurisdictions. Such agencies could desire anonymity under certain scenarios.

About a week after I published the blog, I discovered that IBM and Maersk were beginning to release more details about their plans for TradeLens to the public.

During our meetup in January 2018, we hosted a discussion featuring speakers from UPS, SAP, Sweetbridge, Blockcience, and MState. The keynote speaker at that event was Dr. Michael Zargham, CEO and Founder of Blockscience, and at the time, also a technical advisor to Sweetbridge. The overarching conclusion I reached by the end of the event was this:

 “Successful implementations of cryptocurrencies and blockchains in supply chain will require more collaboration than the traditional industry is accustomed to.” — Why? The technology combines: digital systems; physical systems; social and political organization; economic structures and incentives; finance; and capital markets. No single organization is expert enough in all those fields to go it alone.

At our meetup in April 2018, we had speakers from: Algorand, Maersk, IBM, TigerTrade, EY, MState, Celsius Networks, and Sweetbridge. Professor Silvio Micali of MIT’s Computer Science and Artificial Intelligence Laboratory was the keynote speaker at that event. He described the key ideas behind Algorand, a blockchain he invented expressly to satisfy the demands of businesses. The other speakers discussed what it would take to bring blockchains out of the lab and into the real world of supply chain. Based on the discussions that day, I reached the conclusion that: 

Blockchain applications for supply chain must be interoperable with other blockchain platforms, and they also must be interoperable with the older technologies that businesses have relied on up till now.

TigerTrade started a conversation with IBM as a result of initial informal interactions at our in April 2018. Ultimately, this led them to partner and collaborate on the creation of TRADEFLO, a blockchain-powered platform for global trade facilitation and financing. Tanjila Islam, CEO and founder of both TigerTrade and TRADEFLO presented TRADEFLO at The Worldwide Supply Chain Federation’s inaugural global summit in New York City on June 20, 2019. Tanjila’s experience building TigerTrade directly informed her understanding of the need for a platform with TRADEFLO’s attributes. 

Conclusion

Platforms and ecosystems work well because they allow each participant of the platform to play to its unique strengths, while relying on its ecosystem partners for capabilities that it does not have in-house. This is not an issue that has mattered for shipping companies in the past. But, it is becoming more of an issue now, and it will continue to become a more acute problem in the future as beneficial cargo owners demand more sophisticated services from their supply chain partners. 

Collaboration is difficult because it requires a change in culture. It requires an openness that is not customary in many organizations. Collaboration for the purpose of discovering and nurturing innovative new ideas, products, services, and business models is even more difficult because it requires a commitment from senior leadership. Given how often individuals are shuffled around in organizations, it can be difficult to get anyone to focus appropriately on the long and difficult work that is required to build collaborative partnerships.

However, those companies that do not partner with others to meet their customers’ demands stand the risk of losing those customers to companies that come to grips with platform-and-ecosystem-driven competition more quickly. 

Key Supply Chain Innovation Issues to Consider as the World Becomes More Volatile, Uncertain, Complex, and Ambiguous

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Note: A version of this story was first published on June 11, 2019, at FreightWaves.

For a couple of years now, I wake up each morning thinking to myself; “I wonder what insane thing happened while I was asleep.” Initially, it was an enervating experience. Now, I have become accustomed to it, and I do not feel the same sense of dread when I wake up, or of being drained of energy even before my workday has begun.

In the same way that I have adapted to a less serene world, people who buy, build, or operate new technology and innovations for supply chains must adapt and adjust to a world that is characterised by instability and chaos.

This article will briefly touch on 3 approaches for doing so. It is based on observations I made during The National Retail Federation’s Big Show 2019, when my co-founder, Lisa Morales-Hellebo, and I led 9 different groups of visiting executives on tours of the expo hall to learn about innovations in supply chain that they might buy for their respective companies. Being a tour guide gave me a great opportunity to listen to them describe their problems in their own words.

What are the origins of the acronym VUCA, and what are its implications?

The term VUCA first appeared in the US Army War College’s curriculum in 1987. Subsequent attempts to trace its origins in the curriculum suggest that it may have resulted from a synthesis of ideas in the book “Leaders: The Strategies for Taking Charge” by Warren G. Bennis and Burt Nanus.

VUCA is an abbreviated description of a world that is simultaneously

  • Volatile — change happens more often than usual and the accompanying swings become more extreme with the passage of time,
  • Uncertain — our ability to make predictions of any meaningful nature deteriorates dramatically,
  • Complex — the number of variables we have to track, analyze, and interpret increases beyond our ability to synthesize the accompanying deluge of data and information for decision-making, and
  • Ambiguous — even when we can synthesise data and information, it can appear to lead us towards meaningless and even contradictory conclusions.

It is debatable if the world in general is more VUCA now than it has been at any time in the past. What is not open to debate, however, is that due to the evolution of information technologies, we now become more quickly aware of events around the world. The speed with which news of unexpected and destabilizing events travels contributes to our sense that the world we live in now is more unstable than it was in the past.

Observation #1: Supply chains are becoming less centralized, more distributed, and more integrated.

The days of centralised distribution appear to be well behind us. The trend now is towards more decentralized and localized distribution, and less reliance on centralized and massive distribution centers. This is happening because companies want to increase their responsiveness to changes and disruptions within their supply chain. To accomplish this companies seek to more tightly integrate local stores with one another, as well as to more tightly integrate existing centralized distribution centers with local stores. To accomplish this companies are looking for;

  • Increased automation — freeing human experts to focus on complex cases and issues that arise in the supply chain,
  • More sophisticated forecasting and network optimization capabilities, and
  • The potential to eliminate central distribution centers altogether, so that suppliers ship product directly to local stores.

Observation #2: Supply chain visibility is becoming a more pressing concern.

Supply chain visibility enables customers, producers, and other participants in the supply chain, to track and trace goods as the goods travel through the supply chain from a producer to a customer. Supply chain visibility is a problem of information creation, storage, transmission, retrieval, and delivery. Supply chain visibility is also an issue of information security. It depends on data standardization between organizations. This is something that has been rather difficult to accomplish in the past. However, the push for supply chain visibility will only increase as former arch-rivals and competitors move towards integrating certain aspects of their supply chain operations in order to collaborate more closely with one another.

Observation #3: Simplicity is a virtue to the users of supply chain software.

This thought occurred to me as I listened to the executives ask questions at each of the stops on the tour; The consumerization of enterprise software is now affecting people’s expectations of how supply chain technology should function.

What does this mean?

  • First, people now expect supply chain software to be as intuitive to use as the software they rely on at home. They expect unnecessary complexity to be abstracted away.
  • Second, people expect supply chain software to be always available, and ubiquitous. That is, it must be seamlessly available across computing platforms, with no degradation in experience or efficacy.
  • Third, customization and personalization are key. In this context, customization means that the software is easily configured to match an organization’s unique business operations and structure. Personalization means that within that customized organizational configuration, each user has an experience that is further configured to that individual user’s role and responsibilities within the company, in a way that maximizes the individual users on-the-job effectiveness.
  • Fourth, more so now than in the past, buyers of supply chain software expect speed, responsiveness, and redundancy.

It is clear the trends I have described create an opportunity for early-stage startups building new software-enabled innovations to help businesses simplify and streamline supply chain operations. What remains unclear is the degree to which switching costs will hinder the adoption of new software products from young startups in a world in which VUCA is the norm.

Disputes Will Disrupt Global Trade and Supply Chains

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Note: A version of this story was first published on June 04, 2019, at FreightWaves.

The United States is now in the midst of well publicised trade disputes with China, and Mexico, two of its biggest trading partners. There are also simmering trade tensions between the European Union and the United States. Supply chains are networks of interdependent organizations that cooperate and collaborate with one another to move goods and information between producers and consumers. Global trade has become more complex as supply chains have become increasingly more global. The current tendency towards raising barriers to trade will be disruptive to supply chains, global trade, and economic well-being.

My upbringing, having grown up in Ghana and Nigeria, and then attending college, graduate school, and pursuing professional credentials after that in the United States, coupled with my professional experience since college, and my past decade pursuing a career in early-stage investing, hopefully gives me a unique perspective on this topic.

Today, the most accurate way to think of supply chains is in three ways;

  • First, information and data supply chains are non-physical and typically traverse national borders.
  • Second, conventional supply chains used to move physical goods can’t function effectively or efficiently without tightly integrated information and data supply chain infrastructure.
  • The production of the most valuable physical goods that people consume today relies on complex supply chains that source raw materials in certain parts of the world. Then manufacturing into finished goods, or parts, occurs in other parts of the world. Finally, the goods are shipped to consumers for final consumption in yet other parts of the world.

In sum; Modern supply chains are complex systems which are susceptible to cascading unintended consequences. These consequences may arise due to policies pursued by national governments that do not take a holistic view of global trade and supply chains, and which are not guided by or based on a common understanding of the basic principles of economics.

Barriers to trade affect consumers directly and indirectly. The direct impacts arise when businesses that have pricing power pass 100% of the financial burden that barriers to trade create onto their customers. The indirect impacts arise when businesses that do not have pricing power absorb some or all of the increase in operating expenses, forcing them to make some employees redundant as these businesses attempt to maintain their profit margins. In both cases, it is not difficult to understand how the broader economy starts to buckle; Lower consumer consumption leads to reduced business sales. Lower business sales and increased operating costs lead to reduced production. These interact to create a reflexive spiral of negative business and consumer sentiment about the state of the economy.

Here are some highlights from Tracking the Economic Impact of U.S. Tariffs and Retaliatory Actions by Erika York, Kyle Pomerleau, and Robert Bellafiore of the Tax Foundation, based on the Tax Foundation’s Taxes and Growth Model, as of April 2018. If all the tariffs announced by the Trump Administration as well as other national governments as of April 2018 were fully implemented;

  • United States GDP would fall by 0.79%, a reduction of $196.77 billion, over the long run.
  • Wages would fall by 0.51%.
  • Employment would fall by the equivalent of 609,644 full-time jobs.

Given this administration’s tendency towards belligerent and ad-hoc decision-making on these issues, one may safely assume that April 2018 represented the optimistic scenario.

Concurrently, according to data on Global Government Bonds as of May 31, 2019 at the Wall Street Journal’s Market Data Center, yield rates and spreads over U.S. Treasurys of 2-year, 5-year, and 10-year maturities are respectively below their levels over the previous month, and the previous year. This is the case for government bonds in Australia, Belgium, France, Germany, Japan, the Netherlands, Portugal, Spain, Sweden, and the U.K.

Furthermore, according to data on International Stock Indexes as of May 31, 2019 at the Wall Street Journal’s Market Data Center; The Global Dow, The Global Dow Euro, the DJ Global Index, and the DJ Global ex U.S. each closed the session an average of 3.8% below their level 52 weeks ago.

If that is not persuasive enough, the June 3rd 2019 J.P. Morgan Global Manufacturing PMITM produced by J.P. Morgan and IHS Markit in association with ISM and IFPSM says; “Global PMI surveys signalled that manufacturing downshifted into contraction during May. Business conditions deteriorated to the greatest extent in over six-and-a-half years, as production volumes stagnated and new orders declined at the fastest pace since October 2012. The trend in international trade continued to weigh on the sector, with new export business contracting for the ninth month running. Business optimism fell for the second month in a row and to its lowest level since future activity data were first collected in July 2012.”

While this data is interesting, and relevant, the real issues of concern are those that aren’t adequately captured in data, the information about hardening attitudes and perceptions towards economic-cooperation and free-trade amongst countries. In what I consider an unexpected and unusual move, the Government of China has published a white paper: China’s Position on the China-U.S. Economic and Trade Consultations. Readers of the white paper can agree on one thing; We are entering uncharted waters as far as global trade is concerned. How will current disputes affect how countries interact with one another as it relates to global trade? Will the progress of the past few decades be eroded due to political sentiments around the world which have led us to these specific trade disputes between the United States and its most important trading partners?

Coupled with the trade disputes between Mexico and the United States, prior disagreements between Canada and Mexico on one-hand, and the United States on the other, about NAFTA, this dispute between China and the United States, as well as other trade related disagreements that appear to be simmering just beneath the surface, one can only conclude that the global economy is in for bumpy 18–36 months.

There’s extreme turbulence ahead. Buckle-in your seatbelts.

The Democratization of Data for Supply Chain Logistics

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Note: A version of this story was first published on May 29, 2019, at FreightWaves.

Almost every day, there are reports warning of severe weather events, across the United States and in other parts of the world. About two weeks ago, while listening to one of those reports I thought to myself “I wonder how easy it is for someone responsible for supply chain operations at any company to proactively get a sense of where there may be severe weather events worth worrying about?” I couldn’t think of any.

Since that day, whenever I have some slack in my day, I go to Google to see if I could find something that provides a simple to use, and holistic source of data and information to enable all types of businesses make preemptive decisions related to their supply chain operations.

The closest I have found is FreightWaves’ Sonar — specifically, for the particular issue I am thinking about, the Critical Events view.

According to Zurich Insurance Group, an extreme weather event is an unexpected weather incident that is at the extremes of historical ranges for a specific location. The record amounts of precipitation that led to flooding in the midwestern United States in March, and the flooding earlier this month, again in the midwestern United States, are both extreme weather events. As bad as the problem is now, it has been getting worse, and will continue to get worse.

In “Economic Losses, Poverty & Disasters: 1998–2017”, the United Nations Office For Disaster and Risk Reduction (UNDRR) and the Centre for Research on the Epidemiology of Disasters (CRED) state:

“The report finds that between 1998 and 2017, climate-related and geophysical disasters killed 1.3 million people and left a further 4.4 billion injured, homeless, displaced or in need of emergency assistance. While the majority of fatalities were due to geophysical events, mostly earthquakes and tsunamis, 91% of all disasters were caused by floods, storms, droughts, heatwaves and other extreme weather events.

In 1998–2017, disaster-hit countries experienced direct economic losses valued at US$ 2,908 billion, of which climate-related disasters caused US$ 2,245 billion or 77% of the total. This is up from 68% (US$ 895 billion) of losses (US$ 1,313 billion) reported between 1978 and 1997. Overall, reported losses from extreme weather events rose by 151% between these two 20-year periods.”

The ability to know where critical weather events may be developing so that a business can adapt it’s plans for moving goods around is quite important. Severe weather events simultaneously increase costs and decrease revenues.

As I write this article, Sonar is showing me;

  • 591 Severe Weather Watches and Warnings around the world,
  • 5 Severe Thunderstorm Outlooks
  • 2 Tropical Cyclones
  • 40 Earthquakes, and
  • 2 Wildfires.

Sonar also allows me to drill down further, to get local data wherever there’s an asset providing data to the system. I drilled down to see more detail from data assets and sources in Kaduna, Port Harcourt, and Warri — cities in Nigeria. It’s the beginning of the rainy season in West Africa so I may come back periodically to see what the data says.


In addition, I can zoom in on parts of the United States, and identify the specific cities that are most likely to be hit by the storms that are mentioned daily in the news. For example, I as I write this article, can see that there are 160 different assets collectively warning of wind gusts, severe weather, hail, flooding, and tornados across the midwestern United States. If I were expecting a shipment of goods from that region, I could make contingency plans to account for these developments.

FreightWaves isn’t the only company building a platform of this sort. In January 2016, IBM announced that it had acquired The Weather Company. Presumably with the data that it has gained from that acquisition its Watson Supply Chain platform is better placed to help IBM’s enterprise clients take proactive measures to prevent disruptions to their business operations.

The power of systems like the ones I have described will be realized when they are as ubiquitous for businesses as Google Maps and Waze are for consumers. The technology keeps getting better, and the need keeps becoming more acute. The days when such information is only available to big companies that can afford to pay significant sums each year for such data and information are now behind us.

Logistics Network Optimization — Why This Time Is Different

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Note: A version of this article was first published on April 23, 2019 at FreightWaves.

Amazon has changed the retail business. It has changed the cloud computing business. It has also changed the supply chain business, but perhaps not in the way that you think.

On April 9, 2015, Amazon published a blog post on the AWS Blog; Introducing Amazon Machine Learning. In the time since then sophisticated artificial intelligence capabilities and tools that make it easy for non-experts to deploy powerful models to solve business problems that have been intractable until now have become part of Microsoft Azure, Google Cloud, and other public cloud computing services. According to a 2018 report by Stratistics MRC, the market for Machine Learning as a Service (MLaaS) is expected to grow at a compound annual growth rate of 41.2%, growing from $679.32 million to $7,620.18 million between 2016 and 2023.

Why does this matter?

For the first time, technology startups building innovations that rely on supply chain data can utilise and deploy sophisticated Deep Learning, Natural Language Processing, Speech Recognition, Computational Learning, and Real-time Simulation at a fraction of the cost it used to require just to get started.

Concurrently, advances in microprocessor technology have led to a scenario in which data can be collected, analysed, and used to make critical decisions at the point of use — even in situations where poor internet connectivity makes communication between edge devices and public cloud services impossible, at relatively minimal cost. The graph below shows the growth in the number of connected devices globally, from 15 billion in 2015 to 75 billion in 2025.

Before 2015 logistics network optimization was only possible for the largest, most sophisticated companies. Since 2015, that has changed. Supply chain logistics networks can now be optimised in real-time, based on proprietary and non-proprietary data, and used to render a decision in a fraction of the time, and at a fraction of the cost it would previously have taken.

This development has led to the beginning of a new era in supply chain management. We are moving out of the age of transactional supply chain management and into the age of cognitive supply chain management. Transactional supply chains are characterized by; A narrow focus on discrete tasks that optimizes processes rather than end-to-end outcomes, static and siloed data that is refreshed at relatively long intervals, local optimization that does not account for global conditions throughout the supply chain network, reactive decision-making that is also relatively slow. In contrast, cognitive supply chains are characterized by; A focus on optimizing end-to-end outcomes within the supply chain network, data that is dynamic, refreshed in real-time and collaborative, global optimization, adaptive decision-making that accounts for the cadence at which business operations occur.

Why is this significant?

Manufacturing added $2.38 trillion to the U.S. economy in the fourth quarter of 2018. Durable goods manufacturing contributed $1.33 trillion while non-durable goods contributed $1.05 trillion. Transportation and warehousing added $664.4 billion to the U.S. economy in the fourth quarter of 2018. U.S. GDP was $20.87 trillion in the fourth quarter of 2018. Manufacturing, transportation and warehousing represent approximately 15% of U.S. economic output. (Source: Bureau of Economic Analysis)

Of the 251,774 manufacturing firms in the U.S. as of 2015, all but 3,813, 98.5% have fewer than 500 employees and are considered small. (Source: National Association of Manufacturers. Author’s calculations.) This is the opportunity; The portion of that population that is big enough to purchase supply chain network optimization software, but too small to build its own.

According to a BCG Report: How Online Marketplaces Can Power Employment in Africa; “The cost of getting a product from the factory to an end user within Europe adds around 90% to that product’s manufacturing cost. In Africa, logistics add an average of 320% to a manufactured good’s cost.” Consider the implications of supply chain network optimization — in all regions of the world.

The opportunity is even more exciting when one realizes that manufacturing is only one of the sectors in which this transformation is taking place. Every aspect of economic production and consumption will be affected by this shift from transactional to cognitive supply chains.

This is why startups building new supply chain logistics software have captured the imagination of venture capitalists recently, leading to the 25x growth in the amount of capital venture capitalists are deploying in freight tech startups. Some of them are building proprietary products that they use to run their own captive businesses. Others are building platforms that enable their customers businesses. That distinction is less exciting than the possibilities this ongoing transition offers investors and entrepreneurs.