Our Investment in Route42
At Peak Capital we like to make bold (though informed) bets on big markets and companies that solve big problems. One such massive industry is the logistics industry that powers and connects much of Europe.
The logistics market in the Netherlands alone is a ~EUR 50bn market. The logistics industry is not quite as sexy as video conferencing these days, but the industry is vital to keep the economy running, especially now.
Ever-increasing pressure on flimsy margins
Despite its age-old adage the logistics industry is very much in flux. Ever-increasing pressure on margins and a shift in power balance from carriers towards aggregators is increasingly putting logistics companies under pressure.
Increasing oil prices (until recently), increasing labor cost due to a tight labor market, roadside congestion and increasingly strict environmental regulation are just some of the factors exerting pressure on transport margins leading to flimsy 1-2% net profit margins.
In the coming decade the balance of power is expected to shift from client-carrier relationships towards freight aggregation platforms such as Shippeo and Uber Freight.
Such a shift in the balance of power could further put downward pressure on margins and relinquish much of the control logistics companies still hold today.
IoT Opportunities: A New Frontier in Logistics
Whilst the logistics industry faces plenty of challenges impacting their margins, I0T solutions powered by sensor technology are presenting new opportunities.
Historically the logistics industry has been a laggard in terms of digital transformation. This is about to change however as carriers increasingly equip their fleet with the latest onboard computers and sensor technologies.
The wealth of data unlocked by sensor technology opens up a host of exciting opportunities that are piquing the interest of investors.
Samsara, an industrial IoT platform with a sizeable footprint in logistics raised EUR 300mn in September 2019. Flexport and Sennder also made waves.
Onboard computers collect data from various sensors and help track fuel consumption, track assets, plan routes, and communicate with drivers.
Connected assets generate a ton of data which can help carriers massively increase control over their operations. Can, that is. Because making sense of the data is no small feat.
Role of Route42:
This is where Route42 comes in. Route42 helps turn data into top-line growth and bottom-line margin improvements.
Route42 aggregates data from a fragmented landscape of telematics players (onboard computers), enriches data with third party sources of information such as weather and traffic, and turns the data into actionable insights (what should you do to improve your operations).
Enhanced Predictive Capabilities
The landscape of telematics providers including Transics, Trimble, and many others is fragmented.
Carriers typically have a mixed fleet with trucks (some with inbuilt telematics) from different OEMs and make use of different telematics systems within the same fleet.
Route42 provides a cockpit solution that allows you to oversee and manage your fleet in a single consolidated interface.
Route42 enriches data with third-party sources such as vehicle data, weather data and traffic data. These additional data points help improve the quality of predictions on e.g. exactly how long a trip will take or what the optimal time is to make a trip.
Better planning with a higher degree of predictability ensures less waste of time and fuel as well as improved coordination with third party stakeholders such as customers or freight forwarders.
Practical Applications and Impact
Most importantly Route42 helps normalize and structure data such that the wealth (or overload) of data is turned into piecemeal insights. These insights can be acted upon immediately by various stakeholders throughout the logistics company:
- Driver coaches use dashboards which amongst others help them identify top or bottom performers, review recordings of unsafe driving behavior or benchmark fuel consumption and waiting times.
- Planners use dashboards to track assets, plan trips or calculate the unit economics of a single trip.
- Drivers can log in to the driver app to get real-time feedback on their driving.
- Operations managers or C-level execs can benchmark their firm’s performance against industry benchmarks, and understand what operational efficiencies can drive top-line growth and bottom-line margin improvements.
The Team
The logistics industry is one of the more offline, conservative industries out there.
It requires deep knowledge of the transport sector and its inherent challenges to have an eye-level conversation with management, add real value, and (not unimportantly) close deals.
The Route42 team has exactly that deep level of knowledge and robust industry relationships which help them stay ahead of the curve.
That’s why they are trusted by customers such as Jan de Rijk, HSF Logistics, Post Kogeko, Verhoek Europe, and many more. Today 1 in 10 trucks in the Netherlands are connected to the Route42 platform.
Conclusion
We firmly believe that the digital revolution within logistics is only getting started. We are excited to ride this wave of digital transformation together with Route42.
You can read the rest of “Why we invested in” collection here:
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