The COVID-19 Pandemic has accelerated the pace at which companies of all sizes are adopting innovations and new technologies that even as recently as 2017 - 2019 would have been described as mere flights of fancy by traditionalists in legacy, digital immigrant industries - those industries whose existence long predates broad adoption of the internet and the world wide web.
One of the areas that has received significant attention is the issue of access to trucking capacity to move freight. For example: On November 9, 2021, the New York Times published The Biggest Kink in America’s Supply Chain: Not Enough Truckers; On December 5, 2021, Business Insider published Experts say reports of an American truck driver shortage are overblown; And, on January 2, 2022, Vox published Where have all the truck drivers gone?. Numerous others have weighed in on this topic, including CNN, the BBC, QZ, Time, the American Trucking Association, and many others.
The problem is so acute that the Department of Transportation has made recruiting truck drivers a priority, with Transportation Secretary, Pete Buttigieg pushing for truck drivers to be classified as essential workers, as reported by Freightwaves, on January 13, 2022 in Buttigieg prioritizing truck driver pay.
Whatever political ideology one embraces, there’s no debating the fact that optimizing the ability of transportation networks to meet the fluctuating and uncertain demands for freight transportation capacity across transportation modalities is a complex problem that defies simple or easy solutions.
It is worth spending some time to understand the problem in depth.
The Problem: Freight Transportation is a Classic Case of the Dynamic Assignment Problem
I described the Dynamic Assignment Problem as it relates to freight logistics in my November 23, 2016 article, Industry Study: Freight Trucking (#Startups). The Dynamic Assignment Problem is a subset of a class of problems known as Dynamic Resource Allocation Problems; These are problems that deal with the allocation of scarce resources in an optimal manner over space and time when conditions are uncertain and changing randomly in complex networks, in response to relatively unlimited demands for the resources being allocated.
It is a problem that is present in any industry or business setting where scarce resources must be deployed over a large and distributed network to satisfy demand in real time.
We have each experienced Dynamic Resource Allocation Problems play out before our eyes, in a very visceral way, during this COVID-19 Pandemic, though for many of us this is the first time we have experienced them in a way that is impossible to ignore; If you have been unable to find a product you wanted in a grocery store, you are experiencing the practical implications of a Dynamic Resource Allocation problem.
The management of freight transportation involves; Planning and optimization; The selection of transportation service providers; Real-time visibility and tracking while the freight is in transit; Financial management to control costs; Performance management of the selected carriers and other service providers; Contract negotiations; And other activities.
Complicating matters in the United States, these activities have to be coordinated across an impressive panoply of Federal, State, and Local regulatory frameworks.
Because Dynamic Resource Allocation Problems are most uniquely characterized by uncertainty over time and space, solving them requires:
Data, Information, and Decision Analytics at the strategic, operational, and tactical levels of each of the organizations seeking to solve these problems;
Data, Information, and Decision Analytics Infrastructure that forges and fuses various disparate enabling technologies with one another to fashion an easy to use and simple platform for transportation and logistics managers at large organizations, and that makes multi-party interoperability and coordination across organizational networks and platforms possible;
Visibility across an individual organization’s supply chain logistics network AND visibility across the networks, platforms, and ecosystems of other organizations that are willing to collaborate with one another in solving this problem to their mutual and collective benefit;
Coordination within and between participants in the supply chain, at scale.
This is where Leaf Logistics comes in.
Leaf Logistics: Arming Transportation Managers at Large Corporations With A Multi-Party Network and Platform View of What is Possible
Leaf Logistics is building a platform that brings together shippers, transportation providers, and other logistics partners to deliver resilient transportation planning and a forward view of the market to help navigate supply chain uncertainty.
Leaf Adapt offers shippers continuous network optimization to build more efficient routes and moves that increase driver utilization and decrease empty miles;
Leaf Flex committed contracting allows users to engage in the network in a forward-planning capacity - this is a problem I touched on generally in this November 2016 article.
Shippers on Leaf’s network benefit from efficiencies that scale with multi-party network moves.
You are probably wondering what this means. Here are two examples.
First, because Leaf sees plans, demand, and supply across organizations on a headhaul and backhaul basis across the United States over time, the platform is in a better position to solve the coordination and orchestration problems that are the bane of every transportation and logistics manager's existence.
For example, rather than one member facing the cost of deadhead miles on the backhaul of a freight delivery, Leaf can automatically assign that capacity as headhaul capacity to another member from whom this option would have previously been hidden. Such transactions and exchanges of value can happen automatically, without people needing to make phone calls or exchange emails with one another. This sort of automation drastically reduces the friction involved in coordinating between independent parties who wish to transact with one another in this way.
This cross-member, cross-industry, comprehensive, and geographically-scalable networking capability enables Leaf’s members to benefit from:
Transportation plans that are capable of withstanding, and recovering from, exogenous and endogenous shocks with greater speed and agility than would otherwise be possible;
Greater cost efficiencies than their competitors who are not utilizing a system similar to Leaf Logistics;
Increased asset utilization AND unprecedented opportunities to cut costs or generate supplementary revenues;
Planning and scheduling horizons that extend much farther into the future than would have been possible without Leaf;
A denser network that offers many orders of magnitude more coordination and orchestration possibilities for any given scenario; and
Opportunities to reduce carbon-dioxide emissions that arise from trucks traveling empty over long distances because there has been a failure to match trucking capacity with a load.
Second, by converting what might be multiple, separate freight moves into a single, continuous move with no deadhead miles, Leaf helped one of its members realize an 80% reduction in carbon-dioxide emissions for a trial trip. The customer has subsequently decided to expand its use of the platform across its transportation portfolio. With estimates that 30% of capacity in the $800 Billion U.S. trucking industry is lost to deadhead miles due to a lack of proper coordination, this is a big deal for Leaf’s members.
The team at Leaf Logistics can walk potential customers through more detailed case studies of the above scenarios, and others.
As organizers of The New York Supply Chain Meetup, we had the privilege of shining a spotlight on Leaf Logistics during an extensive public demo of the platform in February 2019 at #TNYSCM11: Supply Chain Logistics Technology. It was impressive then, and one can only imagine the advances that the team has been able to build into the platform since.
A Team That Has Been in the Trenches Together - Solving Transportation Problems for Large Clients
One of the concerns that our team at REFASHIOND Ventures often has about #SupplyChainTech startups is our fear that startup founders and their engineers might not be sufficiently focused on the needs of their customers. To succeed in building, deploying, and scaling a startup building a software product or platform for supply chain and operations management, founders need to have an obsessive focus on their customers’ needs. As we put it; Innovations for supply chain and operations are mission critical. Startups will only get one shot with each customer. Success depends on exceeding that customer's expectations in a way that builds and solidifies trust between the customer and the startup. This trust becomes the foundation on which long and mutually fruitful relationships can be built since platforms like Leaf Logistics provide best in class solutions to critical business problems.
The team at Leaf Logistics understands this very acutely. By listening to its members AND during the day-to-day interactions Leaf Logistics’ team members have with its members, Leaf Logistics is constantly gathering insights about customers’ needs, and thinking about ways to satisfy those needs through: New products created by Leaf; Integrations with existing products from potential partners; Completely new offerings on the platform that Leaf co-invents with new partners. In this way Leaf is evolving into what one may describe as an innovation platform, that is, a platform which enables participants to transact, create, and exchange value directly with each other on the platform without Leaf acting as a direct intermediary.
A commonality that is shared by Leaf’s cofounders is their tenure at A.T. Kearney, where, in their various roles they were each intimately involved in solving transportation management AND analytics problems for large private and public sector clients of the management consulting firm.
For example, Anshu Prasad, Cofounder and CEO of Leaf Logistics, built and led the global Analytics Practice at A.T. Kearney, and has significant experience building teams in the US, Europe, and Asia to use data and analytics technologies for business transformation. Similarly, Stefan Friederichs, Cofounder and Engineering Lead, brings to bear significant theoretical knowledge and practical experience that spans operations research, software engineering, management consulting at A.T. Kearney, supply chain management, and supply chain logistics. Stefan holds a PhD in operations research from the University of Cologne. Anshu holds an MBA from Oxford University and a BA in biochemistry from Cornell University.
The team is surrounded by a cohort of advisors, each of whom has significant industry experience from which Leaf Logistics draws directly.
Potential Customers Are Actively and Desperately Seeking The Solutions From Leaf Logistics
Through our role as grassroots community organizers, since the early days of the pandemic we have heard from people on the frontlines of supply chain and operations management for organizations of all sizes that their companies are desperately seeking solutions to problems that have now become too acute for them to ignore.
These murmurings at the grassroots are now being confirmed publicly by senior executives and investors. In other words, the top-down view is now confirming what we have known for some time now based on bottom-up engagement.
In Shipping and Logistics Costs Are Expected to Keep Rising in 2022, published in the Wall Street Journal on December 19, 2021, Jennifer Smith and her colleagues reported that supply chain disruptions have led to higher transportation costs across the board, with executives expecting higher costs to affect every mode of transportation.
Also, in World’s largest wealth fund warns ‘permanent’ inflation will hit returns, published in the Financial Times on January 30, 2022, the head of Norway’s $1.3 Trillion Sovereign Wealth Fund warns that inflation may “. . . become a permanent feature of the global economy . . . as the world experiences high demand and lingering disruption to supply chains.”
Other recent reports in the media highlight similar themes, including, A Normal Supply Chain? It’s ‘Unlikely’ in 2022, published by the New York Times on February, 1, 2022; The Supply Chain Crisis and the Future of Globalization, published by Foreign Affairs on February 2, 2022, and; How We Broke the Supply Chain, the February 2022 special Issue of The American Prospect magazine.
There’s one point on which they all agree; The supply chain problems companies are wrestling with now cannot be solved easily or quickly.
That conclusion makes sense when one realizes that on June 19, 2018, the Wall Street Journal published Companies Spent a Record $1.5 Trillion on Shipping Costs in 2017, stating that “In 2017, total spending on logistics rose to a record of nearly $1.5 trillion, up 6.2% from the year before, and about $250 billion more than companies spent on logistics in 2008. Rising interest rates, the higher price of fuel and impending tariffs on imports are expected to add to business expenses in the coming year,” according to authors of the Council of Supply Chain Management Professionals’ annual State of Logistics report.
As I observed in Commentary: Can supply chain tech startups survive COVID-19?, which was published by FreightWaves on April 9, 2020, startups like Leaf Logistics do 3 things;
They help their customers optimize operations,
They help their customers reduce waste, and as a result
They can help their customers identify and target new opportunities to earn revenues and profits that do not require additional outlays of capital.
Where supply chain executives in the past may have been tentative about testing and adopting new technological innovations to assist them better manage their companies’ supply chain costs and risks, that approach will now be punished by customers and investors alike. In a macro environment such as this one, investing in supply chain innovation and technology is the best defensive investment any large company could make.
Leaf Logistics proves the point; It reported “a 10x annual revenue increase and the growth of its nationwide transportation network to more than $23 billion in data” when it announced the close of its $37 million Series B round of financing.
Breakthrough Innovations Can Only Be Identified in Hindsight, but Customer Value is Key
At REFASHIOND Ventures we constantly remind ourselves that “Breakthrough innovations significantly depart from common practices and can potentially reshape existing markets, create new markets, and prompt the emergence of new technological trajectories.” However, we also recognize that breakthrough innovations can only be identified in hindsight. To have the opportunity to one day be recognized as a breakthrough innovation, we believe that founders must focus on creating value for their customers, and finding a sustainable, repeatable, and scalable business model.
That is why we are encouraged by the rapid adoption of Leaf’s platform, after having followed its evolution from the very very early days; It’s evidence in support of our overarching thesis that the world is on the cusp of an era that will be characterized by software-powered supply chain networks, platforms, and ecosystems.
Leaf Logistics’ Series B round of financing was “. . . led by Sozo Ventures, with participation from Madrona Venture Group, as well as previous investors including Playground Global, Floodgate, Schematic Ventures, and Supply Chain Ventures. Notable individual investors joining the round include the founding teams at Flexport and The Intercontinental Exchange. The fresh capital will be used to fuel significant hiring plans and scale product development and commercial deployment.”
We are encouraged that downstream investors have awoken to the opportunity in #SupplyChainTech, with the Wall Street Journal’s Jennifer Smith reporting that Investors Are Piling Into Supply-Chain Technology, and Bessemer Venture Partners recently outlining and publishing their own #SupplyChainTech thesis in Roadmap: Supply Chain Software.
At REFASHIOND Ventures, we couldn’t be more excited to back supply chain technology founders at the early stages of their journey to transform the way the world makes, buys, moves, stores, and consumes the products and services that we all need. Having first met Anshu and others on the Leaf Logistics team in 2017, we are excited to finally be in a position to support them as they solve the coordination problem in supply chain logistics, at global scale.
