Moving Atoms As Easily As Bits
Extensive musings on how logistics inter-operability will bring Star Trek's "Transporter" to life.
Over the past few years, start-ups in logistics technology have attracted an immense amount of attention, investment, and "thought-leadership" for an industry that's previously escaped the broadening hype cycles of the software ecosystem. In recent years, the enthusiasm has only heightened, as coronavirus induced supply shocks, increasing trade tensions, and mildly comical container ship mishaps have piqued immense interest for the industry amongst the global business community. As supply chain breakdowns send ripples through downstream industries, enhancing frustrations in the day-to-day lives of most workers in the western world, few can help but ogle at these various operational disasters like passerby's on a freeway, staring at a 10 car pile-up. As personal interest snowballed into insightful tweets, investment theses, and genuine, entrepreneurial innovation, a flurry of viral blog posts and podcasts exploring critical pitfalls in the logistics industry sprung to prominence seemingly overnight. The authors of this coverage often wave their hands in the general direction of the heart of these logistics problems, making undoubtedly correct but impractically broad statements about a need for "technological transformation" and "operational efficiency". A few commentators, typically long-time industry experts or investors with skin in the game, dive deeper into the systems thinking approach required to "fix" our deeply broken contemporary logistics infrastructure. Perhaps out of a desire to somehow self-actualize my existence by exacting my influence on a fascinating conversation, I'd wanted to try and give my own more depthful diagnosis of the main challenge impeding the scalability of logistical processes today, and the exact mechanism by which innovation in logistics technology can help the industry inch towards tackling this problem.
But first let's talk Star Trek. I promise, it'll be somewhat relevant.
Beam Me Up, Scotty
In the Star Trek series, the Transporter is an incredibly nifty device capable of instantaneously transporting an object from one location to another, as easily as a smartphone can send a text. As is the case with most good sci-fi, the mechanism of The Transporter is carefully detailed within the show's dialogue. Transporting an object, requires "dematerializing" it into bits of information representing it's entire physical presence, transferring these bits between Transporter devices, and then "rematerializing" the transferred bits in order to spawn the object in a receiving Transporter device. In the show, the Transporter is used in almost every episode, as its immense convenience makes it easy to let characters move seamlessly through worlds without lengthy set-up or exposition.
Of course, the physics of the transporter are entirely impossible, as Star Trek is just a TV show. "Dematerialization" is effectively magic as described, and transferring the number of bits estimated to represent every atom of a person, would require a duration of time longer than the age of the universe. However, The Transporter's promise is alluring for more reasons than its disobedience to the laws of our universe. Its mechanics are largely inspired by network protocols which enable humanity to transfer trillions of bits instantaneously, across the globe, rebuking contemporary conceptions of the ease with which we can move matter. There is typically a stark difference between the user interface of technology that allows one to transfer bits, such as email or apple pay, and that of technology built for use cases that require transferring atoms, such as coordinating a multimodal trip into a city, or shipping a D2C product from a factory in Shenzen to a customer's apartment in Brooklyn. This immense contrast between the technology suites enabling physical and digital transportation makes a machine that can immediately move goods and people even more enticing, as it unlocks the infinite potential achieved when one can move atoms just as easily as one can move bits.
Today, "bits" are so easy to move as a result of painstaking investment in layers of communication protocols, critical technical infrastructure connecting anything (and everything) with a chip to variety of systems capable of processing immensely complex data. Apple Pay is such an effortless transaction, only as a result of the immense effort poured into developing protocols for communicating between NFC chips and applications, between applications and cloud servers, as well as between cloud servers and on-premise servers hosted by banks. The secret sauce at the foundation of this innovation is inter-operability, the standardized communication between the dozens of parties required to settle a financial transaction from a physical device. The prominence of innovation accelerating inter-operability is hardly restricted to financial technology; similarly standardized communications empower builders within industries such as healthcare, commerce, and the capital markets. Traditionally, inter-operability of logistics and transportation technology, has left much for wanting, which was a significant obstacle preventing anyone from building anything even close to resembling a Transporter. However, there has been a flourish of developments within logistics technology infrastructure in the past few years, suggesting that moving atoms, as easily as one can move bits, might soon not entirely be science fiction.
Where We Are
Before venturing "where no man has gone before", it'd be quite useful to discuss what the state of logistics technology is today. Suppose I owned a clothing brand, and wanted to ship a product from a manufacturing plant in Shenzen to a customer's apartment in Brooklyn. I'll need to coordinate (or pay someone to coordinate) a truck to transport my goods from the plant to Shenzen's port, from the port's loading dock to a particular cargo ship, from that cargo ship to a port in LA, from LA to a distribution center in Newark and from Newark to the customer's home address. Each individual leg of this trip is completed by a carrier, or a company responsible for transporting goods from one place to another.
Carriers come in all shapes and sizes, and often specialize in a variety of transportation modes; truckload carriers transport volumes of goods over the road that are large enough to fill a 53’ trailer, and ocean carriers manage container ships that haul millions of pounds of cargo between continents. Some carriers are international enterprise behemoths like Maersk, the largest container ship carrier in the world, or FedEx, a massive business focused on shipping individual packages that arrive at a consumer's doorstep. Others, are small local operations, perhaps run by a husband and wife duo who own a single truck and maintain a handful of customers, or an exporter working specifically on shipments out of a particular port city in China into another in the United States. Shippers, companies that need wish to move goods between two points, will either contract directly with carriers to procure logistics services, or leverage intermediaries such as brokers and freight forwarders, which subcontract carriers for them. The market for many services in the logistics industry is immensely fragmented, and carriers are rarely capable of integrating with the hundreds of counter-parties they may work with in a given year. The immense fragmentation of actors in the logistics ecosystem begets similar fragmentation of the software solutions they rely on, and thus it is an understatement to remark that the technological infrastructure for moving goods is significantly less efficient than that of sending an email.
Let's dive deeper on the technological innovation that has revolutionized logistics in recent years. Contrary to dominant narratives about the industry, companies that operate at each leg of this journey have made deep investments in technology for managing their complex operational workflows. Truck drivers are mandated to use electronic logging devices (ELDs) to track their location and hours spent driving throughout the day. Supply chain departments within retail organizations have long used transportation management systems (TMSs) responsible for procuring and coordinating ocean, air, road, and rail carriers to move their goods to a desired destination. Established titans, like BlueYonder or JB Hunt provide an adequate solution for technological coordination, and the massive success of a variety of heavily-funded startups, most notably Convoy, Flexport, and Shipwell, has kicked the industry's technological transformation into gear. As VC investment has accelerated within logistics, software solutions have flourished to manage every one of its many niches. Examples of this are PortPro for drayage (transportation from container ship loading docks) or Lineage Logistics for cold chain management (the process of transporting food and medicine, which must be refrigerated throughout the entirety of their transit). The logistics industry is currently undergoing a technological renaissance, in which every other week a new cutting edge start-up spawns to digitize an arduous manual process.
Despite the significant efficiency gains incurred by this widespread technological transformation, we have quite a ways to go before atoms are as easy to move as bits. It is undeniable that, in recent years, the logistics industry has seen significant local optimizations resulting from automated workflows and software proliferation. Digital freight brokers like Coyote Logistics and Loadsmart, which primarily use software connect shippers with carriers, now offer platforms for which customers can easily request goods to be shipped at a specific rate with an online portal, rather than through over-the-phone negotiation. This phenomena has risen in parallel to an explosion of products providing live tracking and visibility for intermodal shipments, such as Project44 and FourKites. While these technologies have incurred productivity improvements for logistics operators, they fall short of completely abstracting away all manual components of key global logistics workflows. A shipment booking process over the internet is still a shipment booking process, requiring extensive communication between two humans. A visibility solution that provides an operator with the ability to make data-driven decisions, still requires significant input from a human operator.
Software-as-a-service solutions automating individual processes in supply chain management are often restricted in their power by a narrow scope of available API integrations. Without inter-operability, these software solutions remain siloed within the workflows of individual organizations so key logistics processes still require manual data transfers, human decision-making, and live communication for successful completion. The promise of logistics technology mass adoption: fully harmonized port operations that seamlessly organize the thousands of containers passing through every day, endless capacity of trucks, planes, and boats always ready to respond immediately to demand fluctuations, moving atoms as easily as we move bits, only becomes tenable once this hurdle of inter-operability is finally cleared.
Where We're Going
While the current iteration of logistics technology is primarily categorized by siloed solutions specific to individual workflows, the proliferation of software in the industry provides a crucial foundation for the lofty goal of moving atoms as easily as we move bits. Any physical process represented digitally with software can inter-operate with other software so increasingly, every transaction, communication, and hand off surrounding the movement of goods can be read universally with data integrations. End-to-end shipment visibility is currently used primarily in dashboards and reporting, but also enables complex software solutions to fully automate the actions previously taken by humans with carrier location tracking data. Recent offerings by freight brokers enable shippers to seamlessly book loads via an online form or even an API request, enabling freight forwarders, to fully automate carrier procurement at every leg of a shipment’s journey. Many recent VC-funded exploits in logistics technology focus primarily on enabling inter-operability: Kargo builds sensors into loading docks, enabling the automated visibility of shipment pick up and delivery at warehouses and distribution centers and Vector provides software enabling truck drivers to confirm shipment completion without requiring the transfer of the paper documents previously leveraged to complete such transactions.
The downstream impact of the mass investment in workflow digitization will entirely reinvent the procurement of logistics services in the coming decade. To start, initial improvements in inter-operability across the industry has vastly improved the dynamism of freight marketplaces in a variety of modes, particularly over-the-road trucking. While there’s still a long way to go, as evidenced by bottlenecks at ports in recent months, it is becoming significantly easier to hire carriers to haul any commodity that the heart desires. A decade ago, truck drivers and the companies that employed them relied primarily on phone calls to manage business with customers that wish to move goods. Today, every truck driver in America can broadcast their location to anyone who may need their services at the push of a button. If they’d like to be more proactive, they can use load boards to search the expanse of supply chain demand for a high paying job that matches their preferences. A large reason that atoms are so much harder to move than bits, is the immensely sparse communication network between the millions of operators which comprise global supply chains. For a long time, the industry’s endemic software fragmentation made procurement, or the process of contracting of freight services, nearly impossible to complete dynamically. Big-box distributors and e-commerce giants often lack the network to solicit truck drivers precisely when their services are needed the most, entrenching delays and shortages as a common response to unexpected supply shocks. In the coming decade, it will be easier for these drivers, their vehicles, and even their trailers, to communicate with shippers and their transportation management systems, so delays inhibited by shoddy communication will occur less and less frequently.
Some of the more exciting implications of continual interoperability improvements are those regarding improvements to logistics infrastructure over the coming decade. It’s no secret that humanity’s supply chain machine is far from well-oiled. The common culprit of fragmentation inhibits the ability of private organizations to think globally beyond their particular region or specialty. Despite often moving the same goods, and even using similar equipment, cold chain carriers rarely optimize their planning around rail networks, and ocean carriers almost never consider last-mile demand. The limited strategic scope of logisticians within large companies further increases supply chain slack. To repeat the refrain, for a long time, logistics has been interconnected but not inter-operable. As communication barriers fall between the thousands of counter parties which comprise the global logistics ecosystem, it becomes easier to integrate a variety of modular components that work in synchrony to increase productive capacity. Such integrations can serve as foundational infrastructure upon which actors in the logistics ecosystem can expand their scope.
An example of a company that has taken this newfound opportunity to invest in logistics infrastructure is Baton, which has built a network of drop-yards (large lots for parking trucks and trailers) outside of major cities, minimizing the transportation costs to complete deliveries in urban centers. Leveraging advancements in visibility and dynamic procurement, Baton completes shipments for its customers by contracting a single truckload carrier to complete a delivery from the shipment’s origin to one of its drop-yards, and then contracts another truckload carrier to complete the shipment’s journey into a warehouse in a destination city. Enabling shippers to leverage this disjointed transportation strategy minimizes the probability that a truck driver delivering their goods will need to wait hours on an urban freeway, as the second journey that Baton procures is completed when traffic is minimal. Baton coordinates this global optimization through API integrations with transportation management systems for both truckload carriers and companies looking to procure truckload freight. Baton, and similar infrastructure ventures in logistics technology, such as Outrider and Dray Alliance, provide a fascinating glimpse into the potential of interoperable logistics technology to revolutionize key components that are often taken for granted in contemporary logistics systems. If the industry is ever able to approach moving atoms as easily as we can move bits, it will be these massive improvements to fundamental logistics processes that get us there.
Technology trends in the logistics industry will mark the coming decade as a renaissance in the business of moving goods. In this piece, I tried to dig deeper into the potential of logistics technology than most mainstream industry coverage, but in all honesty I feel as though I've only scratched the surface. As technology solutions for aggregation accelerate inter-operability in logistics software, individual shipments, the atomic unit of the industry, can be used as building blocks for highly efficient product offerings. Inter-operability allows freight brokerages to batch shipments from separate carriers and minimize the miles driven by a truck driver without transporting goods in their trailer. It allows last mile delivery solutions to batch shipments going to different addresses in a sufficiently small radius. Perhaps most importantly, it will be crucial for effective and automatic communication between automated software for matching loads to truck drivers and automated software for hauling loads with a truck, even without a driver.
I have yet to even mention the implications of billions entering the global middle class within the coming years, and the titans of emerging markets: Jumia, Rappi, and Shopee that are laying the groundwork to satisfy the massive wave of expected demand. As more consumers demand more stuff, sooner, faster, better, and cheaper, the logistics industry will be forced to bend to their will. The previous century logistics advancement has been characterized by increasingly intricate process alterations aiming to siphon every last drop of unused capacity into productive input. The coming century should be more of the same, continual re-imaginations of contemporary processes, progressing at an exponentially faster rate.
I'd like to thank the day one's for helping turn my mad ramblings into something coherent, and maybe even halfway publishable. I also want to implore any of my lovely readers to reach out to me on twitter @aquariusacquah with any feedback and thoughts. If the prospect of working on moving atoms as easily as bits is something that excites you, I'd love to chat and dive deeper. Subscribe to my new Substack to read more meandering self-actualizations and pop-culture poisoned analyses of technology in various industries, I’ll be writing more on how companies can achieve interoperability in the logistics technology ecosystem, leverage autonomous vehicles, drone delivery, or platform aggregation. My next piece should be out at some point in the next decade, so stay tuned.