The Pandemic Reminded Us Why the Supply Chain is Vital. Now Innovators Should Seize the Opportunity to Transform It.

By: Harpinder Singh, Dror Berman, and Natasha Gunther

Perhaps one of the pandemic’s biggest surprises was the sudden visibility into the complexity and fragility of the supply chain that underpins every industry involving the physical world. Even 10 months after the pandemic was declared, the shock to our supply chain is still apparent. This time, struggles with last-mile logistics are causing a slow start to deployment of COVID vaccines.

Everywhere we look, supply chains built for B2B have been frankensteined to accommodate more nodes and more complexity. Today’s most innovative founders see opportunities in the patchwork solutions that have deployed to address near-term pain points. Their new ideas will help industry partners build a future supply chain that’s full of advantages, not bottlenecks. For the corporate partners, the question remains of exactly how to capitalize on the shifting market trends, especially when the time-old tradeoff between resilience and efficiency remains painfully true. Even if it were possible to rip and replace your B2B-optimized supply chains for a D2C infrastructure, few players have the e-commerce or distribution volume to justify owning a network of tens of regional and national DCs, tens of thousands of air freight/trucking/carrier fleets, last-mile distribution, and the online marketplace to cap it all off. Therefore, the challenge becomes how to transition B2B or retail-oriented supply chains to the demands of today’s e-commerce-oriented consumers — without downtime, without massive capital expenditures, and without needing to start from scratch.

As an investment firm, we view the supply chain opportunity through the lens of Super Evolution, this notion that the convergence of ubiquitous data, compute, and engineering/automation will set a rewarding and relentless pace of change. These factors will each play a vital role in supply chain transformation, enabling companies to overcome some of their biggest issues. They’ll be able to react to change quickly and proactively; adapt to labor shortages (e.g., a dearth of truckers); and implement delivery networks that can profitably meet a same-day delivery demand.

Here are some examples of how this looks in practice. If the data from sensors on trucks, containers, boats, railways, etc., were actually leveraged to find new ways of addressing old problems, the global supply chain would look and behave dramatically differently. If accurate real-time inventory were integrated with e-commerce and customer demand forecasts, businesses could forward-deploy to customers (without needing 6 months or more for implementation). If machine learning could let companies dynamically optimize delivery, businesses of all kinds could offer fast, same-day delivery to customers using multimodal fulfillment and delivery options (e.g., seamless shipping from a regional DC or micro-fulfillment center to a last-mile delivery/biker).

We’ve seen our portfolio companies turn these ‘If’ statements into a reality already. During Covid, it has offered a lifeline to many of their customers. Post-Covid, these new systems will provide customers with a critical competitive advantage. For example:

• Afresh focused its machine learning algorithms on demand data relevant to Covid buying patterns. At a time when global trade has never been less predictable, this kept its grocery customers from flying blind.
• ClearMetal deployed its machine learning algorithms to improve inventory and asset placement based on global demand.
• Gatik continued to enable an autonomous middle mile to relieve the growing pressure of the trucker shortage exacerbated by Covid.
• Third Wave answered the call for safer warehouses with its human-in-the-loop autonomous forklifts.
• Fabric brought high-turn SKUs even closer to customers from its automated micro-fulfillment centers at the heart of our cities to achieve same-day and 1-hour delivery.

But just having breakthrough technology isn’t enough. The most successful founders have a deep understanding of their users and customers, how they’re incentivized, the way they adopt technology, how to help customers execute change management and drive buy in. And, the founders need to do all of this from the underdog’s position of being a small start-up. They understand that customer partners running supply chains aren’t motivated to take big risks and that incremental changes feel wiser than taking a chance on a new technology — hence the criticality of your team’s deep operational expertise complemented with the right advisorship. Smart founders will think through these factors as they consider the best way to make inroads that ultimately transform entrenched, legacy supply chain models.

There is still a huge opportunity to innovate in the supply chain, and the pandemic has accelerated this. We see those possibilities with our portfolio companies, our LINK partners, and the founders we speak to every day. If you’re looking to apply your tech, vision, and experience to the supply chain, we’d love to hear about what you’re building. We enjoy incubating companies and would love to partner with 1–2 teams in this space.