Can 3 Stanford Grads Re-Create The Shipping Industry?
Startup Designs New Category To Save Billions
The problem is clear. Global shipping logistics is broken. Adam Compain and his band of ClearMetal geniuses from Stanford want to fix it. We at Play Bigger are having a blast helping them on their mission.
Here’s their story.
First, let’s clarify what we mean about the shipping logistics problem. We are talking about the problem, highlighted in a recent Forbes article, of moving more than 18 million shipping containers, carrying the bulk of all goods produced and sold in the world, across 10,000 port calls per week, representing a total value of more than $4 trillion annually. It’s big.
When we met Adam, Will and Diego at their office in San Francisco, we asked what we always ask — “What problem are you solving?” After a few hours, and two whiteboards later, the answer left us quite stunned. (BTW — Will is pictured below on the left, Adam is in the middle, and Diego is on the right).
Turns out that moving giant metal containers is a highly manual process. Some of the smartest shipping logistics people on the planet were literally taking educated guesses on what containers go where and when. Every week. On whiteboards, and paper, and Excel spreadsheets, using the most basic of forecasting models.
So, we then asked Adam and team, what are the ramifications of not fixing this problem? Flash forward to another hour long conversation and another whiteboard of notes. First of all, easily 1 out of 5 containers in the world is traveling empty. Empty containers represent more than $15 billion in revenue losses a year. And these container ships are responsible for 3% of all global carbon emissions.
- A single mid-sized carrier could spend $750M on global equipment and repositioning cost each year.
- In the US, alone, carriers can spend >$1M per week moving empties out to the coasts.
If that is not bad enough, carriers have to deal with ever changing demand from the “shippers”, which is lingo for retail and manufacturing companies like Nike, who use these containers to ship their stuff around the world. If a shipper changes their order at the last minute, there is not much a carrier can do except eat the cost. Lastly, throw in the effort to predict weather, such as how hurricanes (Al calls them cyclones) impact delivery times, and you have a giant problem that is currently unsolvable with pencil, paper, and spreadsheets, or with antiquated, inaccurate logistics software that cannot ingest modern shipping data.
Then, we asked how the hell these guys were going to solve this problem? This was the moment the pirates of ClearMetal started beaming.
Turns out that moving metal is a big data problem not a shipping problem. Specifically the answer lies in a data science method called predictive analytics and intelligence. Adam, Will and Diego invented a predictive intelligence engine that could calculate millions of possible factors involved in shipping including weather, order patterns, seasonality, fuel prices, shipper (retailer) behaviors and patterns, and more…Their plutonium would then calculate where every container would be and should be around the world…down to the day and specific container yard.
In the world the rest of us live in, this may not seem that big of a deal. We can order Amazon stuff and it arrives that day. But in the world of shipping, this type of solution was met with massive disbelief. Shipping is a world where you over provision (putting extra containers on the ship) by a huge factor. Said another way, marginal increases such as a a single percentage of utilization yields millions of dollars. Or one marginal error, like a single wrong prediction, can accumulate to tens of thousands of containers sitting in excess and incurring global costs each year.
So, how did the ClearMetal crew go about convincing a very conservative and slow moving shipping industry that there is a new way to move metal around the world? They launched a lightning strike announcing the ClearMetal Predictive Intelligence Platform and defined the new category of Predictive Logistics. They picked the Trans-Pacific Maritime show in early March in Long Beach, CA to unveil the category and their solution. The TPM show is the biggest event of the year for the global shipping industry.
Adam and crew understood that category design is a mind game as much as anything. If you can get to the few influencers that matter, frame the problem with conviction, and demonstrate a new category of solution, then you are setting yourself up for success.
Those influencers were at the TPM show, and everywhere they went, they saw Adam and ClearMetal. Grab a cup of coffee and you saw the ClearMetal booth and demo. Attend the Big Data session, and Adam was introducing the session on Supply Chain Data & Visibility. Sit down for the main event, and you found a ClearMetal whitepaper defining the new category of Predictive Logistics under your butt. Search for ClearMetal on Google and up pops their shiny new website.
The pièce de ré·sis·tance of the ClearMetal strike was their funding announcement. It’s one thing to talk about your new category and solution, it’s an entirely different result when you announce that NEA, Skyview, and (Google Chairman) Eric Schmidt’s Innovation Endeavors backs you.
ClearMetal has the hard yards in front of them to move the entire shipping logistics industry from spreadsheets to Predictive Logistics. But if you spend more than 10 minutes with Adam, Will and Diego, it’s easy to place your bets that they will get the job done.
Who knows, if they can fix logistics over the ocean, then maybe the land and sky may be next on the list.
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