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  • The Role of Generative AI in Supply Chain Investment Strategies

    In our earlier blog, AI’s Impact on Supply Chain Investment Strategies, we talked about how the rapid pace of software development and easier access to domain expertise are forcing investors to rethink how they evaluate both new and existing opportunities.

    That pace hasn’t slowed down—if anything, it’s accelerating. AI is evolving faster than any previous technology cycle. Innovations that used to take years are now emerging in months, reshaping what’s possible across industries.

    Right now, there are three broad “flavors” of AI being discussed most often:

    • Traditional AI and automation tools – rule-based systems that depend heavily on human input.
    • Generative AI (GenAI) – creates new content in response to prompts, but still needs user guidance.
    • Agentic AI – can plan and execute tasks on its own to reach a specific goal.

    For this post, we’re focusing on Generative AI and its growing role in supply chain investing. Agentic AI—and especially the “superintelligence” version of it—is still early-stage, unproven, and not yet ready for broad use in the supply chain world.

    What GenAI Brings to the Table

    GenAI can create text, images, or code based on patterns it’s learned from huge amounts of data. The strongest models are built on what’s called foundation models, which are trained on massive datasets to recognize patterns that apply to many different tasks.

    Customizing these models for specific use cases still takes some human expertise, but the process is now much faster and easier. APIs and prompt engineering have lowered the technical barrier significantly. The tougher part, ironically, is often domain expertise—knowing the supply chain inside and out.

    That’s why we’re paying close attention to how GenAI is opening up sophisticated areas like network design, supply and demand planning, and distribution execution to a broader group of users. What once required deep algorithmic knowledge can now be done through more accessible, AI-powered interfaces.

    We’ll break down how GenAI is transforming design, planning, and execution, and then look at four capability areas that are driving these changes.

    How GenAI Is Changing Supply Chain Design, Planning, and Execution

    1. Supply Chain Design: Moving from Static to Dynamic

    Traditionally, supply chain design meant optimizing fixed networks—plants, warehouses, routes. Those models worked fine in stable conditions but could quickly fall apart when the world shifted (which, lately, it always does).

    GenAI changes that. It enables dynamic, real-time design that can adapt to changes in demand, transport options, supplier performance, or even geopolitical disruptions on the fly.

    We’re excited about startups building these types of AI tools—like our portfolio company Optilogic. Founders creating flexible, AI-driven network design platforms will help define the next generation of agile, decentralized, and resilient supply chains.

    2. Planning: From Predictive to Prescriptive

    Predictive AI—forecasting demand, inventory, or production—has been around for a while. What’s new is prescriptive AI, which doesn’t just predict what’s likely to happen but also recommends what to do about it.

    Instead of just projecting demand, GenAI can now tell you how to respond—whether that means adjusting production schedules, restocking certain SKUs, or rerouting shipments.

    Our portfolio company FirstShift is a good example: it’s using GenAI to help companies make smarter, faster planning decisions in real time. These kinds of prescriptive tools will drive big efficiency gains as supply chains get more complex.

    3. Execution: From Automation to Autonomy

    Execution is where GenAI’s potential really shines.

    Right now, AI systems can automate complex workflows like logistics coordination or warehouse management. In the near future, they’ll move toward autonomy—making and executing decisions with minimal human input.

    We’re already seeing it in action. Robotic systems use AI to make real-time order fulfillment decisions. GenAI tools like those from our portfolio company Drumkit.ai can reroute shipments dynamically based on traffic, weather, or political events.

    Over time, these systems will go beyond simple automation to fully autonomous operations—cutting costs, improving reliability, and freeing up people for higher-level work.

    Four GenAI Capabilities That Are Changing the Game

    GenAI is showing up in dozens of ways, but we see four core capabilities driving the biggest impact:

    1. Sourcing and Managing Data
      GenAI can discover, integrate, and clean up all kinds of data—traffic, weather, supplier metrics, inventory—helping teams make better, faster decisions. It can also spot obscure trends that humans might miss.
    2. Process Automation
      AI can simplify repetitive workflows and “self-heal” when things go off track. Think bots that create network scenarios, pull data from multiple systems, or chatbots that handle shipment bookings and customer inquiries automatically.
    3. Rapid Query Formulation
      Voice-enabled GenAI makes it easy to ask complex questions in plain language—like, “What’s my inventory for SKU XYZ across all channels?” That kind of quick insight helps companies react faster to shifts in demand.
    4. Learning Algorithms
      These systems don’t just predict—they learn. GenAI can remember past scenarios, refine its own models, and continuously improve forecasting accuracy. It’s still early, but this is where the long-term magic happens.

    Where We’ve Invested So Far

    We’ve been longtime believers in real-time supply chain visibility, especially data that lives in the public domain (not locked behind corporate firewalls). That’s why we invested in companies like Tive, Zekju, and Macropoint (acquired by Descartes).

    We missed a few interesting plays—Altana and GenLogs, for example—mostly from being too cautious or just late. It happens.

    We’ve also invested in process automation with companies like Drumkit and Rippey.ai (acquired by PayCargo). That space is getting crowded, though—hundreds of startups are competing for attention—so we’ve pulled back recently to wait for stronger differentiation.

    Our planning bet, FirstShift, is moving fast into prescriptive AI and rapid query capabilities.

    And we think learning algorithms are the next frontier. That space is still young but could be a major driver of value over the next decade. Our portfolio company Optilogic is experimenting with learning-based algorithms that outperform traditional fixed-network models.

    How GenAI Is Changing the Way We Invest

    The fundamentals haven’t changed—we still look at the same core things: the idea, the problem, the technology, the go-to-market, the team, and the business model.

    What has changed is speed.

    Building a viable supply chain tech solution used to take 18 months or more. With GenAI, that could drop to nine months—or less. That means founders need to have more of the team and infrastructure ready earlier. Go-to-market and customer support can’t wait until the product is done anymore.

    Sales cycles (six to twelve months) will probably stay the same, maybe even lengthen a bit as large enterprises form AI screening task forces to sort through competing solutions. But the pace of product development and rollout will only keep accelerating.

    We’re also asking new questions, like:

    • Where can GenAI create the highest value for users of their tech?
    • Have the founders built guardrails to prevent hallucinations and ensure consistency?
    • Can the system deliver repeatable outputs—the same answer from the same input every time?

    Enterprise customers demand reliability, and that’s non-negotiable.

    We also want founders with deep industry experience—people who know the space cold, not those learning it as they go. Teams now need broader skills too: early GTM experience, implementation planning, and customer support readiness during development.

    Looking Ahead: Agentic AI and What’s Next

    Agentic AI—the kind that can plan and act on its own—will eventually find its place in supply chains. But we’re not there yet.

    Supply chains are high-stakes environments. Small mistakes—like misallocating inventory or shipping the wrong order—can have big consequences. Until Agentic AI proves it can handle that complexity reliably, we’re keeping a “wait and see” approach.

    Final Thoughts

    The game is changing for both investors and founders.

    AI will speed up everything—development, testing, deployment—but that doesn’t mean we should rush. The key will be balancing speed with sound judgment. Human insight still matters as much as ever.

    For now, we’re focusing on GenAI—where the potential is massive and the applications are real.

    Fun times ahead.

  • AI’s Impact on Supply Chain Investment Strategies

    For at least as long as I am alive…

    Supply Chain Ventures is both an early- and late stage investor. AI is having a significant impact on how we evaluate potential startups as well as mentor existing portcos. The following thoughts focus on how we are going to have to manage our investment decision processes and portfolio management going forward.

    Investing in all companies, not just supply chain ones, will never be the same. AI has gobbled up 55% of venture funding from January to September 2025, with 22% of the startups funded being AI based. This trend is likely to continue and expand into 2026 and beyond. It’s not a fad, it’s real. Software historically ‘ate the world’, now it’s AI’s turn. Let’s explore how AI will impact how investors like Supply Chain Ventures will have to review business plans and investing decisions going forward.

    The Old Days

    We have been around almost 25 years and have seen many revolutions in how supply chains can be managed–from the behind-the-firewall legacy tech, to the SAAS era in the late 1990s to the current ‘everything is AI’ world. There has been one evolving but fairly consistent constant in this process–how founders pitch their companies.

    Founders develop a PPT investment pitch deck. Typical projections would say that the company would take three to five years to reach profitability. The pitch typically laid out an eighteen or so month period where founders would be coding the tech to get ready for initial pilots with prospective customers, followed by perhaps a year of pilots where the tech was improved using customer feedback, followed by a year of landing initial customers, and then entering a growth period of steadily increasing double digit sales. That is how it was supposed to work, except that it rarely did. ‘Hockey stick’ revenue projections over the first five years from zero to $20M ARR were usual in investor decks and rarely believed or happened. But that’s what mentors, online websites, accelerators and fellow founders taught fledgling founders to produce so that VCs would take them seriously.

    We still see these type of pitch decks every day. We still judge them on the founders domain experience, whether the problem they are solving will create significant value for customers, will customers buy it, how are competitors reacting, can the company can become profitable, and if they have (or can acquire) the right team to make it happen to become a company with a $100M valuation–all with a five year time horizon.

    Change is coming to our ability to judge and because of AI, it is coming fast.

    The New Days–Early-Stage Startups

    We also used to get pitch decks (pre AI) from ‘two undergrads at Stanford’ saying that their supply chain tech startup would revolutionize supply chain management, basically using software to automate various supply chain functionality in execution, planning or design. Same basic deal–it would take five years to build the tech, get customers and reach profitability. We would generally reject them (not always, or we would not be savvy early stage investors) on the basis of lack of domain knowledge. Supply chains are inherently very complex systems involving often hundreds of players to get a shipment from origin to destination. The idea that a magical piece of tech could pull all this off is dreaming (and still is). Human intervention is a critical part of making stuff happen in supply chains, although much can be automated. The concept of ‘dark supply chains’ (analogous to dark factories where humans intervene only when there are problems) is still a long way off.

    We are now seeing a different set of ‘two undergrads from Stanford’ proposing a whole new way of creating supply chain tech solutions, using AI coding tools such as Anthropic’ s Claude. They claim to create sophisticated supply chain tech in eighteen DAYS instead of eighteen months (well, not really eighteen days, but months less than eighteen months). We are still quite skeptical–the founders still have minimal supply chain domain experience but the time frame reductions from AI enabled coding is, in a word, concerning.

    These founders are not claiming to immediately replace legacy full-scope supply chain solutions across execution, planning, and design. They are promising to answer sophisticated questions, such as ‘how much inventory do I have across all my channels back the suppliers and are where are the opportunities to reallocate product to maximize downstream profitability?’ Legacy software providers are feverishly working to answer the same questions, but are hindered by having to live in the context of hard coded tools that cannot handle real-time data sets, may not easily respond to modification, or take too much development time. It’s the ability to craft simple code in a few days instead of months to ask relevant questions that ‘parasitically’ sit on top of existing software and data that is changing the investing game.

    If these founders can significantly reduce software development time, can they also shortcut the process of acquiring domain experience? There is no lack of supply chain domain expertise in legacy software providers or in supply chain intensive industries. Attracting the expertise to even a well-funded startup may be difficult, depending on perceived risk, compensation and flexibility to assume multiple roles besides domain expertise in a startup. We are already seeing younger founders with five or so domain years of experience looking to funding AI enabled supply chain companies.

    We can cite many reasons why these founders will not immediately challenge existing software suppliers or venture investors–defensibility of a simply coded platform, security, point rather than broad supply chain solutions, for a few. For investors like us, the lingering thoughts are troubling and twofold:

    1. How long will it take those ‘two kids from Stanford’, given help on domain expertise, to develop a useable supply chain execution et. al. solution? Probably less than 18 months. meaning we have to judge pitch decks differently going forward. Whether they can significantly shorten the customer acquisition process, is an open question. Perhaps AI will shorten the sales cycles as well, as customers strive to outdo or keep up with AI-enabled competitors.
    2. How does this impact our existing early-stage portcos? Probably a lot more than we would like, given their tools were developed over the previous eighteen month or so time frames and are now ‘legacy systems’ whether they or we like it or not.

    Let’s not count out the later stage startups or legacy software players. They benefit from the same fast coding capabilities inherent in Claude and other AI coding platforms. Universal availability of fast coding tools, built at VCs expense, levels the playing field for everyone going forward. It will be a race to the finish among startups and legacy players, with domain expertise driving success as opposed to fast coding.

    How we can evaluate these new startups will tackle the markets with faster, tech, new value propositions and innovative business models going forward will be a big challenge, requiring a reevaluation of how we judge the new breed early stage companies.

    The New Days–Late Stage Investments

    Many of these trends in early stage investing also apply to our investments in later stage companies. Our later stage portcos, such as Capstone, Baxter Planning and nShift, have been around for decades. They have well established, primarily multi-tenancy SAAS tools, to serve their clients.

    The ability to quickly develop code to sit on top of these systems to answer sophisticated customer questions cuts many ways for later stage companies–one option is to develop internal IT teams to use Claude et.al. to code the solutions by aggressively copying new external innovators, another is partnering with these innovators to include their current software, or the third is ignoring the whole trend and potentially becoming an also-ran in the space.

    Our position as an early stage investor will allow is to be a early-warning system for our late-stage portcos–alerting them to new startups that might challenge them with more sophisticated tool sets. We can also nag them to develop internal teams or external partnerships to advance their AI-enabled tech capabilities.

    What’s the Game?

    Supply Chain Ventures is far from the only investor to face these challenges. We all live in two worlds today–somewhat tied to the past by our previous investments and having to decide how best to invest in the future.

    We will have to change how we do business to meet these challenges. Our existing portco founders will need to step up their AI game. often with our help. We will have to evaluate startups in a whole new light (although still following the fundamentals of investing–team, business models and tech). Finally, we will need to keep a much closer eye on the early-stage space to determine which founders can truly revolutionize supply chain decision making, even if their ‘simple AI coded tech’ is only one piece of a successful company longer term.

    It’s always (mostly) a fun day in venture investing…we’ll be sharing a more detailed look into how AI will impact supply chain technology solutions in a later Blog post.

  • The ‘New Normal’ is now the ‘No Normal’ in Supply Chains

    Supply chain disruptions are nothing new. We've had many in the past and will have many more in the future. But this time may be different. Why?

    Historic supply chain disruptions were often caused by single, localized events.  Take the federal deregulation of the U.S. transportation industry in the 1970s and 1980s. Carriers were freed from charging freight rates based on regulated tariffs controlled and monitored by government bureaucrats. The result of deregulation was that shipping rates fell dramatically, enabling carriers (and shippers) to move goods over greater distances at lower rates. Producers, distributors, and retailers sought to expand markets in new regions, set up distribution operations, and serve new customers. Hub & spoke logistics networks emerged, with plant-based warehouses serving a distributed network of regional facilities close to customers. Absent major new shocks to the system, this became the defacto supply chain strategy for many companies until the 2000s. A New Normal for U.S. supply chains was created and lasted for many decades. 

    Of course, we are oversimplifying what actually happened. There were many innovative changes that happened inside this basic strategy and continue to happen. But e-commerce, coupled with globalization and political uncertainties has created a new set of disruptions that will continue to impact supply chains for many decades. And it is likely we will never return to a New Normal in supply chains as a result. Why is today different? 

    The simple answer is that supply chain participants have less control over their shipping environment than ever before. When supply chains were primarily U.S.-focused, shippers and carriers could interact in a regulatory world that was well-known and understood. Adding in trade among hundreds of countries, which began in earnest in the late 1990s and early 2000s, has opened supply chains to many more unknowns-different regulatory schemes, political conflict, impacts of a changing climate, and wars, among other factors.

    Coupled with the rapid growth of e-commerce and you have another disruptor altering carefully plotted supply chain strategies. Consumer gratification, thanks in part to the Amazons' and Alibabas' of the world, has morphed to become 'get it when and how I want it'. Instead of the old paradigm–the manufacturer makes a product, and sells it to a distributor or retailer, who puts it in a store for the consumer to pick it out and up–designing supply chains has become the wild, wild west in terms of satisfying consumer needs.

    In addition to showing up and shopping at a local store, consumers now can get their purchases from many participants in supply chains via drop ship options–the product could be sent directly from a supplier in China, from a U.S. plant, or via a distributor, a regional warehouse, or even from the local or distant store via a courier.

    All this has led to an increased focus on supply chain resilience–meaning that one may need more rather than fewer options to satisfy consumer demand. And it goes well beyond sourcing strategies. Political conflicts, wars, climate change, and concerns about human exploitation are all creating disruptions in established parts of supply chains–product sources, ports, and carriers are not always able to (or should not) handle pre-determined shipment routings. 

    We likely will never see another New Normal in supply chains. Perhaps as the title says, the New Normal is now the No Normal. With hundreds of thousands of independent but interdependent supply chain players making the global logistics systems work, all will have to change the way they do business. And if that is a present and future reality, then we will need a whole new way of looking at supply chain strategies–ones that can have the flexibility to change quickly as global events affect pre-planned operations.

    But that is a subject for a future Blog–stay tuned.

  • SRR—Sustainability, Resilience, Risk Management: The Latest Supply Chain Buzzwords & Investment Opportunities

    Whatever you want to call it, supply chain professionals are now more worried than ever about where their stuff is coming from. And the worries are from a variety of perspectives: Can I assure my stakeholders/shareholders that the stuff I'm making is not being produced by child labor, or by cutting down rain forests? Can I ensure that my supply chains have the resilience to respond to a number of possible crises–both known and unknown? and finally, if a crisis does strike, do I have the capability to respond and manage risk, such as having alternative supply sources for key materials?

    Sustainability, resilience, and risk management  (SRR) issues are not new in supply chains. They have, however, been amplified by the globalization of supply chains over the past few decades. Even so, companies have been slow to adopt the tools and technology to better manage SRR in supply chains. There are a few reasons:

    • Episodic Events--most supply chain disruptions in the past (pre-COVID) happened only once in a while–an earthquake in Japan, a flood in Bangladesh–might shut down a supplier for a few weeks or longer. Bad news if that was a single-source supplier, but after a few months all was back to normal and likely forgotten
    • Cost versus Benefit–it's hard to convince senior executives to spend a lot of money to mitigate events that happen only once in a while, or never
    • Woke Consumers–it's only been in the last few years that consumers have started to ask companies where their stuff comes from–no blood diamonds, no child/prison production labor, no tearing down of rain forests, etc. No pressure on senior managers means no mandates to improve supply chain visibility & sustainability.

    The pandemic is resulting in fundamental changes in supply chain thinking around SRR. Even before COVID, major manufacturers and retailers were requiring suppliers to document where their products were coming from and that they were produced in a 'sustainable' fashion. COVID has only accelerated that trend and piggybacked sustainability with risk management in the process. If you are going to make sure that your suppliers are playing by the sustainability rules, you can also get a better idea if they might pose a risk to your sourcing strategies going forward.

    Like flowers in a desert after a rainfall, SRR now appears on many software provider websites, whether or not they have the capabilities to provide deep insights into the issues and a process to mitigate them. We are pretty sure that these providers are only selling a lot of vaporware. SRR requires complex technology built to specifically focus on identifying and documenting suppliers at all tiers (1,2,3,4 and beyond) in a product supply chain. That's where we have made our initial investments in the space.

    Our first investment was back in 2002 when we funded risk & resilience management company Resilinc. Resilinc's heritage was helping companies find alternative sources before their competitors when a natural or man-made disaster struck a supply chain. Their vision is for the world to have a place where suppliers and customers can collaborate securely with transparency and trust as the foundation. For a stronger, resilient, sustainable, and fairer supply chain that delivers on the promise of its positive impact on our lives. Today Resilinc’s flagship supply chain visibility, mapping, and AI-powered monitoring, and predictive analytics platform are widely considered the gold standard for resilience.

    In 2017, we made our second investment in the SRR space, supplyshift. supplyshift provides supply chain transparency and responsibility software that helps companies discover the insights they need to mitigate risk and improve supplier performance — protecting your business, people, and the planet. supplyshift's primary focus is on sustainable supply chains, allowing companies to assure consumers that the products they are selling are coming from ethically-based supply chains–ones without labor exploitation, planet damaging sourcing, and illegal/counterfeit products, among other factors. They provide a suite of tools purpose-built to accelerate a company's supply chain responsibility efforts–from smart assessments upfront to sophisticated data, dashboard and analytics. 

    What do we look for in SRR investment opportunities? Our two investments collectively do a fine job of covering the basics in the space. Here are a few factors we consider when evaluating other investments:

    • Native, purpose-built technology— many legacy providers are now claiming to have similar SRR capabilities, but their platforms were not built from the ground up to address SRR issues. We look for unique technology specifically focused on the end solutions-mitigating risk, enhancing resilience, and documenting sustainability.
    • Clear business cases–as we said earlier, it's tough to create cost/benefit analyses showing how your SRR product can create real value for a company. We look for well-documented cases where real value has been created.
    • Consistent, not episodic use–one of the early issues in the SRR space was that the solutions were not used on a daily basis and risks were low for supply chains disruptions. Since COVID, all that has changed and it may be years before a new normal (stable supply chains) emerge. The software should be designed to provide valuable data on a daily basis to supply chain decision-makers. 
    • Unique market solutions–supply chains are as unique as the products they serve. Opportunities exist for new SRR solutions to serve various unique verticals that do not fit into existing SRR solutions. 

     

     

     

  • 3PLs–Investing in the Next Generation of Outsourced Supply Chain Solutions

    3PLs (Third-Party Logistics Companies) have been around supply chains, well, forever. Using outside logistics capacity to supplement (or replace) in-house distribution capabilities is a lower cost (think operating, not capital costs) way to add extra trucks or warehousing space during peak shipping cycles or in new regions where product demand is still emerging. With the growth of eCommerce, 3PLs have taken on entirely new roles for many organizations, providing next-day/same-day shipping when such capabilities do not exist in-house. A number of our e-commerce investments–Shipmonk, Alaiko, and Mercado Labs are also some form of 3PL–either asset owning, or asset-light–and focused on the e-commerce space. Other of our 3PL investments are more generalists or focused on a specific industry segment, like cold chain logistics or cross-border freight.

    Our investments in 3PLs started about five years ago when we invested in Lineage Logistics. Founded in 2008, Lineage has grown to the largest global cold-chain logistics company. Lineage is the Journey of Food. Reimagined. They are transforming the supply chain by preserving, protecting, and optimizing the distribution of food around the world – in a way that hasn't been done before. In 2021, Lineage acquired another of our portfolio companies Perishable Shipping Solutions to enhance its Producer-to-Consumer (P2C) cold chain direct offerings.

    Transplace, was our second 3PL investment in 2017, partnering with the TPG Industrial Fund, investing, and joining the Board of Directors (Dan). Transplace powers one of the largest managed transportation and logistics networks in the world with ~$15 billion of Freight Under Management (FUM) and 62,000 unique users on their platform. They are committed to achieving supply chain excellence for customers by providing greater visibility and control of logistics networks to drive continuous performance improvement. Companies of all sizes rely on Transplace to deliver trusted outcomes through best-in-class logistics management, strategic capacity, and cross-border services. They deliver on the customer promise with our tech-enabled solutions platform that is backed by the unrivaled combination of innovative technology and a dedicated team of domain experts, engineers, and data scientists. Transplace was sold to Uber Freight in November 2021.

    In 2021, we invested in Capstone Logistics along with H.I.G Capital and Dan joined the Board. From inbound logistics through last-mile delivery and returns, Capstone's integrated logistics services optimize supply chain performance for their partners by reducing costs, adding unique value, and mitigating risk. They offer a full suite of warehousing and fulfillment solutions that enable their manufacturing and distribution partners to outsource supply chain activities and create efficiencies. Through their freight management and last-mile divisions, we provide a wide range of reliable, high-touch transportation capacity services.

    What do we look for in new 3PL investments? Here are a few criteria:

    • Unique Markets–we look for providers who serve higher margin and stable companies, ones that understand the logistics in the space
    • Fewer Competitors–There are thousands of companies that call themselves 3PLs. Many are very generic providers with no service specialties. We prefer 3PLs with a narrower focus that can meet emerging market needs profitably.
    • Advanced Technologies–3PLs with world-class planning and execution technologies, coupled with sufficient (but not excessive) automation, will be the winners over the next decade.

     

  • Supply Chains–Capitalism’s Greatest Success Story and Biggest Problem Going Forward

    Call me a curmudgeon, but I'm tired of the 'misery du jour' surrounding current supply chain problems.

    Supply chains have become the whipping boy of the global press. It's hard to not find a daily derogatory story about how Christmas will be ruined, carmakers can't get enough semiconductors to finish/sell vehicles, or the number of ships waiting to unload at LA/LB will cause chaos in the US. Wait a minute. Supply chains are working so well that store shelves remain mostly full, Amazon Prime packages still arrive (perhaps a day late) and one can still get their Big Mac every day at thousands of McDonald's across the globe. Enough chaos nonsense already…

    Why are supply chains one of Capitalism's greatest success stories?

    We had a non-supply chain-oriented friend ask who controls the global supply chains? Is it the United Nations? Some other regulatory body? Of course not. 

    Supply chains are one of capitalism's best success stories. Getting a product from a manufacturer to a consumer involves thousands of totally independent players doing their own thing. Think of bringing a product from China to the US:

    • Local Chinese suppliers ship to a local manufacturer
    • The manufacturer makes the product 
    • A container is loaded, perhaps for more than one manufacturer
    • Local drayage companies moved the container to a local port
    • Freight forwarder arranges ocean shipping with carriers
    • Customs broker arranges custom clearance in receiving country
    • Port operator loads container on the ship
    • Container shipping company moves container to US port
    • Port unloads and drays container to a railhead/local logistic hub
    • Over the road/rail flows from the hub to distributors or retailers
    • Retailer moves the product to the consumer via e-commerce or pickup

    As any supply chain professional can tell you even the above movement complexity is a gross simplification of what actually happens. And this is only a single shipment. Millions of such moves are initiated and are taking place on a daily basis across the globe.

    All these logistics providers are generally separately owned and operated. Supply chain management is a fragmented business, with numerous small and large companies all performing specific tasks to make a move happen. Of course, some global players like Maersk are looking to manage all aspects of movements for shippers, but when you look under the hood, they are still dealing with many local, forwarders, brokers, drayage companies, etc., to make a move happen.

    So everyone please relax for a bit. We definitely will be missing holiday presents, but we still have plenty to eat (well, most of us), thanks to our well-run supply chains. Perhaps it's the year to give experiences and/or services to our kids and friends as opposed to a product. With all the products stuck in the US to China supply chain, there will be plenty of bargains available in January and February to satisfy our need for physical possessions.

    Why are supply chains one of capitalism's biggest problems going forward?

    We discussed the emerging evolution of supply chains in a previous Blog–Ship Anything From Anywhere. The basic premise is that our current supply chain technologies allow us to create even more instant gratification options–basically getting a product or service when we want it, from where we want it, and how we want it, regardless of the environmental and social costs.

    The poster child for this is Amazon, currently building out over 450 processing/delivery sites to handle both the holiday shipping crunch as well as position the company for the new world of 'get my stuff (nearly) instantly'. All this supply chain development is occurring in the midst of one of the greatest crises civilization is facing–global warming. We know some of you consider this a fallacy, but the reality is that as we add more single shipments to supply chains we are increasing carbon emissions with little consideration for the consequences. Technologies are emerging, such as electric delivery vehicles, which will reduce some of the impacts, but we also need to consider how we will make the electricity to charge all these vehicles.

    We are not going to get all preachy about the emerging issues around how supply chains will exacerbate global traffic congestion, create new environmental externalities and spawn unseen impacts on quality of life going forward. We would rather focus on solutions than on yapping about the problems. The trick will be to get millions of independent supply chain partners to act in ways to collectively mitigate these issues, something that they have never had to do in the past. It's going to be an interesting next few decades.

     

  • Deep Technology in Supply Chains–Defining the Future

    Deep technology–generally defined as technology that could take a decade or more to reach commercialization–is not a favorite investment of most VCs. Long time horizons, costly development costs, and early-on marginal market acceptance all make the typical VC firm shy away from such investments. But we need to bet on the future as many of our current technologies in supply chains are not sufficient solutions in the emerging new world order.

    We were first introduced to Deep Tech when MIT founded The Engine. MIT faculty were coming up with many potential innovations, such as driverless cars, and having trouble getting venture capital firms to listen to them. Starting with a $150 Million deep tech fund in 2015, The Engine has a portfolio of over thirty innovative companies housed in an incubator in Cambridge and soon Somerville, including two that Supply Chain Ventures has invested in:

    • Mori–an all-natural protective layer that slows down the spoiling process of fruit, veggies, meats, and seafood to help you enjoy fresher food for longer. Mori is pioneering a natural, ultra-thin water-based coating that is applied to food to slow the exchange of gasses that cause decay. About the thickness of two red blood cells or just a fraction of the width of a human hair, their coating is tasteless and invisible, giving food drastically longer shelf life, without altering it in any way. The coating also enables less or alternative packaging, as it extends shelf life independent of plastic wraps, a fact that is not lost on food producers, retailers, and environmentally conscious consumers. Born out of Professor Fiorenzo Omenetto’s silk lab at Tufts University, the startup’s core technology was co-invented with Benedetto Marelli (now a professor at MIT with a lab dedicated to materials science and its intersection with agriculture). The pair were investigating the power of silk to stabilize drugs and vaccines when Marelli had the idea to stabilize something significantly larger: a strawberry. He coated the fruit with a silk solution and waited. Days later the strawberry still looked fresh—the coating worked. It was Omenetto and Marelli’s relationship with Mori co-founder Livio Valenti (also the founder of Vaxess Technologies, a silk-based technology company) that brought CEO Adam Behrens into the fold. For Behrens, harnessing a commodity material like silk to do something profoundly high tech, was nothing new. “The underlying theme of everything I worked on in my academic career was cost sensitivity. I fell in love with developing solutions out of seemingly unsophisticated materials,” he notes of his time as a doctoral candidate at the University of Maryland College Park. Behrens also spent time at MIT’s Langer Lab, where he worked on technical solutions to problems in the developing world, including single injection vaccination, point-of-care detection of infectious diseases, and food fortification. The mission-driven nature of this academic work, funded in part by the Bill and Melinda Gates Foundation, has compelling similarities to work at Mori. In both cases, Behrens is helping to solve problems that disproportionately affect those on the margins. Its founders consider Mori an “anti-waste company” and its mission is to make healthy food more accessible by keeping it fresher, longer.
    • ISEE–ISEE is engineering next-generation, humanistic AI to automate the logistics industry from dock to door. ISEE was the first autonomous driving company to achieve exit-to-exit autonomous highway driving, the first to merge onto a highway in heavy snow, and can handle congested traffic better than one of the most well-funded autonomous driving startups in the world. ISEE’s core technology is purpose-built for complex environments with high uncertainty (like shipping yards and congested highways). It understands context and infers the intentions of other drivers to navigate all possibilities as they arise, unlike other AI solutions that require hard-coding. Co-founders Yibiao Zhao and Chris Baker based the technology on the theory of mind, or the ability of humans to comprehend the intents and beliefs of others. They realized that if they could design an AI that could infer, then that AI could successfully navigate dynamic and unpredictable roadways. It wouldn’t need to know all possible solutions to a problem, it would just need to know how to react at the moment. The logistics industry is not one-size-fits-all. And that’s precisely why ISEE chose to pursue it. With its multiple vehicle types, highly variable operational settings, and shortage of drivers, logistics is uniquely suited to the value ISEE can provide. Its AI can boost efficiency in a shipping yard just as easily as it can navigate a highway trip or the stop-and-go traffic in a city at rush hour. And for logistics companies, there’s no need to buy new vehicles—the entire ISEE platform can be retrofit onto existing infrastructure. 

    Another MIT-founded company, Thiozen, is also an investment by Supply Chain Ventures. Thiozen is a newly formed company focused on commercializing a novel chemical process to generate low emission hydrogen from sour gases. Their new process has the potential to dramatically reduce emissions from sour gas processing and hydrogen gas production. In 2021, Thiozen raised a seed round led by Eni Next with participation from Good Growth Capital, Supply Chain Ventures, and Mount Wilson Ventures. Thiozen will use these funds to scale its technology to a commercial demonstration. Success will accelerate the energy transition by allowing large energy customers to turn a sour gas waste stream into valuable low emission hydrogen. Current methods to produce hydrogen contributes to over 2% of all greenhouse gas emissions. Thiozen’s process dramatically reduces those emissions, with the power to avoid 300 million tons of carbon dioxide per year – double the amount of decarbonization achieved by installing solar panels on every US household.

    Our investment in deep tech for supply chains is opportunistic. We do not see many such innovations directly. Often universities and other labs recommend such companies to us. If you know of any worthy of investment, please let us know.

     

  • Has the DFN Train has Left the Station?–Why we don’t invest in ‘Popular’ Supply Chain Trends

    We are often asked why we don't invest in 'hot' supply chain spaces–digital freight networks, local delivery companies, etc. It's just not true that we do not invest in these spaces.  We just do not invest in 'me too' companies that have no differentiation among the competitors. We have looked at over twenty-five DFNs in the last few years and have found a few that solve unique problems in freight matching that others have not tackled.

    Loadsmart, for example, was one of the first DFNs to incorporate AI into evaluating past freight flows to determine patterns that aid in the creation of efficient backhaul. Torch Logistics, another DFN, is focused on the short-haul (daily turn) freight matching space–one often treated as a second cousin by the big brokers, but one rising in importance as more short-haul truck moves are needed in eCommerce operations. Transporeon is a cloud-based transportation sourcing and management platform in Europe. And Leaf Logistics focuses on booking moves many days in the future, whereas most freight is booked in one to two days before moving. Pelicargo is focused on helping smaller freight forwarders and shippers book air cargo space, something the big brokers don't like to handle. 

    There are other ideas in the space that are also interesting if a founder came along with a fundable business plan:

    • DFNs incorporating real-time data (including traffic, dwell times facilities, and weather)–we are seeing transportation management systems starting to use real-time data in an a posteriori sense as the load is tracked, but not a priori as the freight is being booked
    • DFNs focusing on other unique movements (similar to short-haul freight)–cross border flows are one example, especially with  moves a few miles of the border
    • DFNs–surprise us with something completely original.

     

  • Visibility in Supply Chains–What are the Emerging Solutions?

    One of our long-term investing themes at Supply Chain Ventures has been shipment visibility in the supply chain.

    Why have we not been big fans recently of the traditional supply chain visibility space?

    Here are a few reasons:

    1. It's a crowded space–we have probably looked at 25+ startups doing what other providers are already doing very well over the past few years 
    2. Business case/value proposition–beyond hi-value products, there is not a great demand for real-time shipment tracking–close enough is OK for most shipments
    3. Visibility is not a standalone solution–its value lies in being integrated with a suite of supply chain software and used to make supply chain decisions.
    4. Innovation–there are new players emerging that will upend current visibility providers.

    We do think visibility is a key part of supply chain management. The visibility space is fast evolving and new technologies are creating more valuable shipment-specific data than just answering the 'where's my stuff' question. We like to stay well ahead of current technology in our investing, preferring 'what's next' rather than 'what's hot today' investing themes.

    Let's look at examples of the current state of technology in supply chain visibility:

    Old School Visibility–We started investing in visibility startups over 20 years ago. LeanLogistics, the first native SAAS Transportation Management System (TMS) founded by my now partner, Dan Dershem, and currently part of BluJay, was the first investment in our Fund I. Early on, we found that customer service teams at clients were constantly pinging the TMS data for shipment status reports to answer customer questions on when orders would arrive. In most cases, shipment update data was provided by the carriers who were delivering a load. Many carriers rely on telematics data from numerous providers (Verizon, among others) who track vehicles using GPS technology and provide updates to carriers on vehicle location, among other information. We also discovered that many owner-operators had no way to update carriers who were using them to deliver a load (except a barrage of phone calls). That led us to invest in Macropoint, which provided owner-operators with an app on their phone tied to GPS that would provide a constant update via the Macropoint platform to both carriers and shippers. We sold Macropoint a few years ago to Descartes Systems.

    Current Visibility Players–Project44 and Fourkites have done a superb job of bringing together many disparate visibility databases for all modes, not just trucks to create close to 'full move' visibility data. Black holes in visibility data still exist, such as inside many ocean ports and for drayage providers, although more info is becoming publically available. Other players include Clearmetal and Blume, each of which provides multi-modal shipment data, often including international shipments. The issue we have with the current players is that visibility is based on a melange of databases some compatible, some not. And these solutions lack other relevant information on a shipment, such as temperature, humidity, shock, etc.

    Emerging Visibility Solutions–sensor-based shipment tracking is the source of visibility data, now and in the future. Although only a small percentage of current shipments are sensor tagged at the moment, this will grow rapidly over the next five years. Why? The sensor data provided is much richer than just TMS-based information, detailing temperature, shock, humidity, tamper alerts, etc. Although historically high values goods such as pharmaceuticals and electronics could afford to put expensive sensors on a shipment, the cost of a sensor has come down significantly in the past few years, making the technology cost-effective for almost all shipments. We have invested in a leading player in sensor-based supply chain visibility, Tive.

    How will the future of visibility play out? It's already starting. Transporeon, one of our portfolio companies, has just announced partnerships with two sensor-based visibility solutions–Tive and Roambee. The partnerships will allow Transporeon to marry telematics data with sensor-visibility data, reflecting the growing need for shippers to manage condition-sensitive shipments amid a congested global environment. Sensors capture significantly more real-time data on shipment conditions than traditional GPS-dependent vehicle tracking data, ensuring for example that temperature-sensitive shipments can be monitored throughout the trip and corrective actions taken quickly, as opposed to upon delivery when it may be too late to save the products.

    What do we look for in Emerging Visibility Companies? There are three key areas:

    1. Software–does the company have the software to create meaningful information from the plethora of real-time data generated by the sensors? Current supply chain legacy tools, such as SAP APO, cannot easily integrate such information into decision tools
    2. Use Cases–does the company have a number of interesting use cases across a variety of industry verticals as to how the real-time data can be used for other applications, beyond traditional shipment visibility. An example would be measuring if shock-sensitive chemical shipments were mishandled in transit, resulting in quality degradation.
    3. Sensor agnostic–there will be a variety of special-purpose sensors developed going forward. No company should be dependent on a single sensor for all applications.

    One final note–sensor-based applications will become increasingly important in the emerging Internet of Things (IoT) space, opening up a number of new market opportunities for emerging visibility companies. That's a topic for a future Blog post…

     

     

  • The Mule and the Farmer–a Modern Parable for Founders

    A parable is told of a farmer who owned an old mule. The mule fell into the farmer's well. The farmer heard the mule 'braying' -or whatever mules do when they fall into wells. After carefully assessing the situation, the farmer sympathized with the mule but decided that neither the mule nor the well was worth the trouble of saving. Instead, he called his neighbors together and told them what had happened…and enlisted them to help haul dirt to bury the old mule in the well and put him out of his misery.

    Initially, the old mule was hysterical! But as the farmer and his neighbors continued shoveling and the dirt hit his back … a thought struck him. It suddenly dawned on him that every time a shovel load of dirt landed on his back, he should shake it off and step up! This he did, blow after blow. "Shake it off and step up…shake it off and step up…shake it off and step up!" He repeated to encourage himself. No matter how painful the blows, or how distressing the situation seemed the old mule fought "panic" and just kept right on shaking it off and stepping up!

    It wasn't long before the old mule, battered and exhausted, stepped triumphantly over the wall of that well! What seemed like it would bury him, actually blessed him…all because of the manner in which he handled his adversity.

    It's the life of a founder. The more you get challenged, the more you rebound, brush yourself off, and move closer to your envisioned destination–a successful startup. There are few shortcuts, as the mule found out–go with the flow, deal with the challenges, and hope to come out on top.