When the World Health Organization declared the coronavirus a global health emergency in January 2020, we had no idea how long-lasting COVID’s impact would be. Almost three years later, we’re still feeling the effects of the pandemic. People are still catching COVID. And the damage COVID did to the economy continues to linger. The pandemic crippled the global supply chain — and by extension, the global economy. Plants that made key parts, components and all sorts of products idled due to lockdowns. And shipping companies cut how much they planned on shipping because they thought demand would fall. But demand didn’t fall.
Stuck at home and flush with some extra cash from the U.S. government, Americans turned to e-commerce. Everything from ordering takeout to buying groceries to attending doctor’s appointments happened increasingly online. E-commerce sales grew from $602 billion in 2019 to $763 billion 2020 and $871 billion in 2021.
When demand skyrocketed, the supply chain couldn’t keep up. Disrupted shipping lanes and labor and material shortages wreaked havoc.
The supply chain is still feeling the effects today. Shipping officials in California just triumphantly proclaimed the end of a container ship backup at the ports of Los Angeles and Long Beach that lasted for two years.
The backup started in October 2020 thanks to sky-high demand for imported goods in the early months of the pandemic. By February 2021, the backup grew to 42 ships. It dropped down to nine ships a few months later. But as peak shipping season hit, the backup swelled through the end of 2021 to reach 109 ships by January 2022.
Most people don’t think about supply chains when they buy something. They don’t think about the massive cargo ships transporting products across vast oceans. They don’t think about the workers who pack, label and load the boxes in warehouses around the world. And they don’t think about how broken our global supply chain really is.
But it’s very broken. And we need to reimagine it.
Shipping Solutions
That’s where startups come in. One notable shipping and logistics company is Arka. (We wrote extensively about Arka for our First Stage Investor members. If you’re not already subscribed to First Stage Investor, click here to sign up.) Arka works with third-party logistics providers (3PLs) to help streamline the packaging and shipping process. Its software integrates with 3PL warehouse management systems, monitors packaging quantities and automatically notifies packaging suppliers when the quantities fall below a certain threshold.
Arka’s solution seems like a no-brainer. It’s hard to believe that 3PLs haven’t already adopted technology like this. But 3PLs — like many other parts of the supply chain — are still very much stuck in the past.
LaneAxis is another startup that’s trying to improve the supply chain. Its platform connects shippers and trucking companies (or carriers). Using its app, carriers can receive alerts from shippers, bid on deliveries and negotiate directly. LaneAxis also provides a scoring system for driver and carrier performance, which helps shippers assess risk before choosing a carrier. LaneAxis even uses artificial intelligence to pinpoint available capacity and limit wasted miles of driving with empty trucks. And it tracks the entire shipping process using an immutable blockchain ledger.
SharedChain is an e-commerce and fulfillment platform that’s focused on physical fulfillment infrastructure. It aims to revolutionize the supply chain much like the internet revolutionized information. The company says its platform can link manufacturers, suppliers, producers, service providers, retailers, end customers and others. SharedChain aims to leverage local markets to create network or consolidation effects in fulfillment.
All three startups bring something unique to the supply chain. Whether or not they’ll be successful remains to be seen. But the way I see it, the wider variety of solutions, the better.
Something for investors to keep in mind this holiday season.