Pulse of the Market: Takeaways from the BGSA Conference 2019

Trucking capacity, autonomous trucking, IoT, and the resurgence of the incumbents

I was lucky enough to attend the BGSA Conference last week, pitching my company’s vision of practical AI for trucks. The conference is basically the Davos of USA logistics. I think it earns the title for two reasons. First, it is extremely exclusive. Job titles were basically CEO, CFO, or SVP. Just like the World Economic Forum politely declines when a CEO asks to send her 2nd or 3rd in command, I get the impression that BGSA politely keeps the attendee list tight and strong. Second, the conference has a reputation as a place to make deals, but not necessarily sales. There weren’t the usual booths and halls of vendors. Dozens of M&A or financing deals have their origin at the conference. In the rest of this short blog post I wanted to share four insights I found interesting at the conference.

#1: Trucking Capacity:

The battle for capacity

A major theme of 2018 was under-capacity in the USA trucking market. Although capacity grew in an absolute sense, demand outpaced it. Many of the panelists commented on this fact, what it meant for their businesses in particular, and gave some prognostication for 2019. These ranged from contrarian bearish (Paul Svindland of Celadon) to extra bullish (Nick Gowen of JB Hunt). But Dennis Morgan of Cowan Systems added some color that’s worth repeating. He described a situation which I’d call “constraint in depth”. Trucking requires a driver, a tractor, and a trailer. Apparently all three are experiencing shortages. Driver shortage is well documented and a long term demographic trend. New tractor units, which historically were delivered in under 60 days from order, are now on 9 month or greater backorder. Trailer builds are likewise backordered about one year. Tariff and trade war means manufacturers won’t fix full prices at time of order and risk exposure to input costs rising. Taken together, it implies a trucking capacity that has multiple independent constraints in 2019.

#2: Autonomous Trucking:

Panelists and attendees returned to autonomous trucking on several occasions. On platooning, several attendees expressed disappointment. Alan Farnsworth of Vnomics was skeptical about claimed theoretical fuel savings, and given his company’s sole mission is fuel savings it should give pause. Others referred to announcements by Daimler that platooning trials are being dropped. But I think the most interesting points were raised by Darren Hawkins of YRC Worldwide, who intuitively redirected conversations about autonomous trucks to driver assistance. That reframe is both telling and useful. It is useful because “driver assistance” is much more positively embraced by the general population compared to job-killing robot trucks. As Darren described, the driver assistance is doing the work of autonomous trucking in incremental steps. Rear-collision sensors and cameras have virtually eliminated crashes from backing a truck in his fleet. But the reframe Darren proposes is also telling because it’s how all artificial intelligence technologies reach deployment. Outstanding technology becomes mundane as it reaches mass adoption, relabelled in our minds as “just” computation. In that way we have arrived at features like active cruise control being no big deal, rather than a step away from eliminating a whole category of jobs.

#3: IoT Devices:

IoT

Instrumentation of the supply chain continues at pace. At BGSA there were 3x startups pitching ideas around IoT sensors in transport, and at least one additional vendor in attendance. The business case is simple: valuable cargo justifies ride-along sensors that monitor physical state (temp, shocks, humidity, etc) and reports on real-time location. This is becoming crowded space for vendors, but one stood out.

Its not part of my day job, but I have a viewpoint on what to look for here. First, I’m a fan of hardware as a service as the business model. The alternatives of selling hardware purely or making hardware optional both make wrong assumptions about the availability and compatibility of the software and hardware compliments. In 2019, we don’t yet have good off the shelf hardware nor appropriate software, so a successful solution needs to provide both. Second, hardware matters in at least two places: battery and connectivity. Sensors need to make their own connectivity rather than relying on gateways. In effect this means each sensor is connecting to mobile data plan, similar to a phone. Third, the sensor returns process is crucial. Sensors are sophisticated devices that are too expensive to be used only once. They need a viable reverse logistics & re-use plan. And that plan needs to come from the vendor as an integral part of their offer, or else the customer is setting up a new reverse supply chain just to instrument their forward supply chain. Based on these three factors— hardware enables service business model, hardware specs, and reverse logistics process— Tive caught my eye. I met their founder at BGSA and was impressed with what they have. I’d recommend them to my network, take a look yourself.

#4: The Empire Strikes Back

Ben Gordon’s opening remarks including a trend worth repeating. Since about 2012, investments into startups has been driving technology disruption in logistics. Companies like Bringg, FlexPort, and Convoy, are all winners in this game. But Ben’s point was that the industry, which was caught flat-footed, has begun rallying to the challenge. He reports that incumbents are embracing technology both as a defense against start-ups and as a new means of growth. These technologies come via acquisitions and also internal development, and appear to focus on robotics (material handling) and analytics. Panelists throughout the conference provided anecdotal evidence. Denis Reilly of Kenco Group discussed stand-alone testing facilities for novel tech. They are now offering these facilities to some customers for joint development. Nick Gowen of JB Hunt reported on the progress with their Marketplace 360, which handled ~$170m USD in transport spend in Q4 2018. At the same time, it’s worth mentioning that the best performing startups in logistics-tech have moved closer and closer to traditional logistics business models. For example, Convoy and FlexPort look like a traditional broker and freight forwarder beneath their customer-facing web portal. My take-away here is that both startups and incumbents are finding a viable middle ground that looks like a “tech enabled 3PL”.

In summary, it was a great event made special and relevant by the concentration of executives over vendors. Well done the the BG Strategic Advisers, one of whom I was able to pull into an impromptu selfie:

Jonah and Dave Stubbs

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