Inna Kuznetsova is the COO of 1010data and an Independent Non-Executive Director of Global Ports Investments pic. In the past she was the President & COO of INTTRA until its acquisition by E2open in 2018, CCO of CEVA Logistics and a VP of Systems Software Sales and Marketing at IBM. Inna knows better than everyone else about digitalization in container logistics and we’re super proud to have her as a guest for container session #9 about digitalization in container logistics and shipping.
When you changed your career and moved from a sales & marketing position at IBM to CEVA Logistics, what was your first impression of how things go in the maritime industry?
As many technology alumni joining logistics I was surprised at the low use of software and reliance on manual labor in many tasks. I remember us missing a KPI on volume allocation for a large customer and asking the COO, what software we used for it… and he said ‘what – WHAT – we use?”. We used Excel sheets and weekly phone calls.
With time, though I realized that there are deep reasons for it. First, the logistics industry is very pragmatic: it has much lower margins than software and as a result, has a stronger focus on returns and execution. As a services industry it faces higher risks of overrunning costs – it is easier to exceed hours of labor than deliver more software subscriptions – and therefore has a culture of being cautious when approaching new risks, including investments in technology. Many IT companies promise you a good ROI, but not only you have to wait a couple of years, but the results seldom materialize: the shippers cannot fire half a person who does the work manually. Second, it is very fragmented: a box passes through several transportation providers on its way from plant to shelves. Automation goes as far as the weakest link of the chain. It is difficult to reap the benefits of visibility and optimization if one of the vendors does not use technology – and in some countries and locations the choices for transportation partners are slim. Last, the industry evolved though acquisitions and working through regional agents, each with its own P&L and standards in data – all of which holds the industry back on its way to digital transformation.
What was the status of digitalization in container logistics back in 2012 and what has changed within the last 7 years?
Over the last few years the industry went over the tipping point in digitalization of its core processes such as booking, invoicing and tracking. For example, various reports point to over 50% of large companies using a TMS and the whole TMS segment growing at 15-20 a year. The volume of containers booked on INTTRA network grew double digits, reaching over 45M containers in 2017, the last full year before its sale to E2open. The new generation of digital forwarders has emerged, building their business around IT systems as a core differentiation such as Flexport, Twill and ZenCargo. Just over the last year we saw a major growth in using IOT sensors to track temperature, humidity, tilting and power consumption by reefers with HL and Maersk solutions, new deal announced by Global Tracker and SeaCube for ONE, investments in Traxens, etc. Multiple blockchain-based networks build the echange of trade documentation, customs documentation and other important data elements.
The industry has gone to the point where it is accumulating a significant amount of data but does not yet make a good use of it due to lack of standards and under-investment in data analytics to develop actionable insights. A reefer from one carrier equipped with IOT travelling on another carrier’s ship may not be able to talk to its server. That will come in the next phase of the journey towards digital transformation.
With INTTRA and CEVA Logistics you have seen two different perspectives in container logistics. What can traditional players learn from technology startups to master digital business transformation successfully?
I would not necessarily call the perspectives different. In fact, back in CEVA days we invested well for the industry standards in technology and innovation in logistics. It ranged from our own software-based service to track cargo and recommend corrective actions in a case of delays to tracking deliveries on mobile phones. One of our car distribution centers in Asia developed its own tablet-based solution to take pictures of car damaged in transition to accelerate insurance claims. However, CEVA was mostly the user of technology while INTTRA developed SaaS solutions for the whole maritime industry as its primary business – the booking of containers, track and trace, filing of VGM and various data analytics services. So, their vantage points were different but the passion for innovation through technology and processes changes were similar.
As for the second part of your question, I think both groups can learn from each other. Startups bring a culture of experiment, quick trial and error, openness to new. In logistics, the appetite for new technology is relatively low: throwing people-hours at any problem is a more traditional way to solve it than automation. It often gets in a way of logistic tech to scale and create more value for shipping industry.
Yet, there is a lot that startups can learn from 3pl, including it’s pragmatism and focus on customer pain points. It is a common knowledge that 90% of startup fails but not everyone knows the most frequent reason: the lack of demand for the product. In other words, a lot of startups fail to create a solution for a recognized and persistent customer pain. Many of them look for a good use of a technology created – a hammer in search of a nail – or settle to quickly in addressing a nuisance, something people complain about but are not willing to pay for. It is one thing to explain to investors how much will logistics gain from doing things differently, it’s another thing to provide a solution so appealing that the customers will risk disrupting their current processes.
You were talking about the definition of visibility and how it is stretching beyond container or truck tracking to bundle more supply chain activities. What do you recommend SMEs in container logistics to do now in order to stay in business in the future?
Today, as a result of globalization, proliferation of small brands and major consolidation on retail side the companies compete on the supply chain side as much as product. 80% of new consumer products do not survive their first year on the shelves. The competition stretches beyond the costs alone to the flexibility, ability to anticipate changes and react to them. So, providing the BCO customers with tools to run their supply chains differently will define success.
The digital divide in container logistics is growing and finding yourself on the right side of it becomes more important than ever. With the speed of digital transformation in the industry catching up in a few years may not just become expensive but costs and time-prohibitive. Yet, logistics industry has always been selective in its investment in tech due to low margins and IT resources available. So, selecting the tools that help to address the real pains that BCOs experience or reduce your own costs dramatically becomes more and more important – from SKU-level visibility to network and shipment plans optimization, from saving time on online price quoting to saving money on street turns and empties repositioning.
You recently left INTTRA to join 1010data, a company that focusses on data analytics and customer behavior to optimize decision making. What responsibilities does your role include and how does your new job fit into your career in marketing, technology and logistics?
As the COO I am responsible for the company’s performance and growth goals, from sales and customer success to technology. 1010data empowers large retail, CPG and financial sector customers to turn big data into actionable insights through time-series analytics and data sharing.
Some of our retail customers, the major national chains, uses 1010data solution to monetize their data and empower their suppliers to make better decisions. For example, one of them provide sales and supply chain data from thousands of stores to their CPG partners who use the 1010data reports to maintain stock rates, plan promotions better and place products in stores based on basket affinity analysis. Just to offer an illustration, by changing a pre-calculated placement in aisles – putting knee braces and pain medication next to each other – a customer achieved a double-digit growth in pain medications sale.
With the consolidation in big retail and the financial pressures the brick-and-mortar stores experience making decisions based on data becomes the only way to run a business profitably. A few percent changes in stock rates of certain anchor products may have a devastating impact on sales: customers leave for another store and fill up their baskets there. Also, promotion in thousands of stores may have a very small impact on stores in one region, but require to double the amount of replenishment in others. Looking at weekly averages will lead to wrong decisions with major financial implications – all stores will receive an average increase, leading to overstock in one group and empty shelves in others. Getting a granular report is critical.
But there is a reason why I am excited about data analytics beyond helping customers to address their pains today. It creates the foundation for machine learning and artificial intelligence that will help to automate and improve a lot of decisions in the future.