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Tech, Data Start-Ups Could Emerge In The Shipping Industry From The Hanjin Incident

Tech, Data Start-Ups Could Emerge In The Shipping Industry From The Hanjin Incident
The global shipping industry is slowly waking up to the redeeming potential of technology after being ravaged by collapsing revenues, defensive mergers and the failure of major player South Korea's Hanjin Shipping Co Ltd.
The start-ups making the biggest inroads are those that are engaged in streamlining the interaction between shippers, freight forwarders, and those actually transporting the goods while sensor-laden containers, smart ships and 3D printing have grabbed the headlines.
"This is way up there on the list of insanely complex systems with enormous impact on the global economy," says Trae Stephens of Founders Fund. A $65 million investment round in Flexport, a start-up focusing on providing logistics services and data, was led this week by Founders Fund.
"We believe doing this in a more efficient way can really move the needle on every part of the economy," said Stephens, who will join Flexport's board as part of the investment round.
McKinsey predicts shipping oversupply will stay above 20 percent this year and next and according to Seabury, compared to 10 percent in 2000-05, and 5 percent in 2005-10, container ocean trade is likely to grow no more than 3 percent over the next few years - at a compound annual growth rate.
The shipping industry is "manual, inefficient and opaque", said Zvi Schreiber, CEO of Freightos, a Hong Kong start-up that offers Expedia-like quotes for end-to-end freight shipping.
According to the Journal of Commerce, shippers each lose up to $150,000 a year when price volatility and staffing cuts force invoicing errors and KPMG found that a quotation for shipping freight typically involved 20 associated fees.
"This industry is broken, there's no question we have a serious issue. Without technology, this industry is not going to move much further," Jesper Kjaedegaard, partner at shipping and logistics firm Mercator International, told a recent shipping conference in Singapore.
To introduce greater transparency into rates charged, start-ups like Xeneta shipped giant Kuehne und Nagel, Kjaedegaard pointed out.
"Transparency is viewed by a lot of people in the industry as destructive in that it would negatively affect margins," said co-founder Thomas Sorbo.
Xeneta's solution has created a crowdsourced database of some 17 million contracted sea-freight rates around the world as it drew from the world of consumer start-ups that believe in encouraging all those in the industry to contribute rates.
By providing real-time data, shippers can see what they should be paying.
"Suddenly (they) can compare their contracts with others and find out if they're being ripped off," Sorbo said.
At least until last year, there has been a growth in venture capital interest in the broad supply chain and logistics industry. More than $1.7 billion of investment in start-ups, triple that in 2014, were counted in 2015 by consultancy CB Insights. An additional $500 million or so was invested in the first half of this year.
From Natilus, that plans a Boeing 777-size cargo drone which lands and takes off in water to those who trying to Uber-ise the industry are included in the list of start-ups. Now according to Seabury, ocean-bound shipping accounts for around 98 percent of global  container freight and CEO Aleksey Matyushev envisages a world where the cost of transporting goods by air could do away with a lot of the ocean-bound shipping.
But, for now, nibbling away at the industry's inefficiencies are start-ups like Xenetas which are making waves.

Christopher J. Mitchell

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