Maersk Growth’s Outlook for 2023
Through the lens of Economy, Supply Chain Tech and Venture Capital
As we look to the year ahead, the business landscape is shifting yet again in new and unpredictable ways. After a period of record-breaking growth within logistics and supply chain tech, macroeconomic factors have begun to take their toll, leading to freight normalisation (but what is normal about it?!), reduced economic growth and higher uncertainty.
“The pandemic has shown the world how fragmented and fragile the global supply chain really is — fundamentally due to lack of technology. And even though overall volume and pressure currently are down, the problems haven’t gone away. This underlines how innovation is needed to structurally reshape and redraw how logistics is done across the supply chain.”
- Shereen Zarkani, Managing Partner of Maersk Growth.
Understanding and navigating these developments, we sought insights from our Chief Economist and technology leaders within Maersk, along with our Partners here at Maersk Growth, to get their perspective on what could be on the horizon of supply chain tech in 2023.
This article is a peek into the outlook and predictions for 2023 from an economic, venture capital and supply chain tech perspective.
To concisely describe the current economic trends and their implications on supply chains, we invited Graham Slack, the Chief Economist of Maersk, for a chat about his thoughts and perspectives on the outlook of 2023. We synthesized that into four key trends:
“Shifting from globalisation to glocalisation to localisation does not reduce risk; it merely changes the risk profile. Resilience, therefore, is a matter of being able to respond to risk by adjusting your approach — in other words, agility.” — Graham Slack, Chief Economist, Maersk.
- Volatile markets: Global logistics markets will be volatile over the coming 12–18 months as inventory levels, and disruptions normalise after the challenges of the last three years. Hence, agility to respond to shifting demand patterns will be key to avoiding lost sales and unwanted inventory build. At the same time, companies need to prepare for a coming paradigm shift in global trade and logistics supply chains if they are to remain competitive.
- Need for resilience: Global supply chains will undergo a huge transition between now and 2030. The change will be driven by a greater need for resilience, by the sustainability imperative, and by technology. The shortening of networks is inevitable and arguably was before the disruptions of the last three years.
- Regionalisation: As we head towards 2030, reshoring, diversification, and regionalisation will all play an important role in the supply landscape. We will see shorter and less fragmented value chains, a wider distribution of economic activities, and an overall shift from global to regional and sub-regional value chains.
- Circularity: We can expect to see an increase in the use of circular supply chains as manufacturers and retailers look to reclaim materials for re-use or repurposing and reduce waste and raw material extraction (we will further touch upon this later).
“As consumers demand and expect more, getting closer to them will be both a competitive advantage and operational necessity.” — Graham Slack, Chief Economist, Maersk.
The headline, and the most pivotal parameter of the venture scene in 2023, is the new economic reality which we must face. According to Peter Jorgensen, Partner at Maersk Growth, VCs will prioritise liquidity to their existing portfolio whilst still investing early stage to take advantage of lower valuations and better term sheets due to the economic downturn. Investors will likely want to see some validation of business models that thrived in 2020–2022 and test whether they can sustain without high growth before investing. The VC ecosystem is quite sensitive to interest rate changes and the cost of money.
“We will see who has developed and deployed disruptive technology and those who ‘just digitised’, where the latter may struggle even to have on-par margins with the incumbent.” — Peter Jorgensen, Partner, Maersk Growth.
As a response to the economic outlook, Managing Partner of Maersk Growth, Shereen Zarkani, advises founders selling to B2B enterprise customers to focus on solutions with more immediate cost reduction opportunities, but only if change effort is minimal and doesn’t require significant investment with longer payback. This could help accelerate the B2B sales cycle.
Why ClimateTech sustains high growth
“Hardware, not software, will decarbonise the world” — Peter Jorgensen, Partner, Maersk Growth.
Despite the economic downturn, the landscape for ClimateTech will continue to thrive as ClimateTech funds have raised considerable amounts of capital in recent years, which they will need to deploy. The significant amount of investable dry powder could result in the “ketchup” effect, where the competition will increase rapidly compared to current activity levels, focusing on what investors bring of value add and knowledge in the space versus valuation and round sizes offered.
Whilst probably biased, especially within hardware decarbonisation tech, Peter Jorgensen foresees large opportunities for agile CVCs. With the right combination of investor and strategic mindset, they will be a valuable partner to startups and lead investors. Peter further believes that hardware investments ultimately will deliver the same ROIC as software. He argues that not enough capital is being deployed into those difficult development areas with long investment horizons and higher risk profiles.
“If not enough investors embrace that, then we’ll end up not getting the impact we need on CO2 reduction (and miss all targets) as the software will only take us part of the way.” — Peter Jorgensen, Partner, Maersk Growth.
The year of ClimateTech acceleration
Head of Strategic Insights at Maersk Growth, Jannik Pedersen, believes that customers’ increasing willingness to pay premiums for green logistic solutions will open new logistics categories and models. “We will see interesting innovations from startups and incumbents innovating hard-to-abate areas while being guided by cumulative C02e reduction potential. I would assume that this will correlate with financial returns. Within these areas, there is ample room and a need for breakthrough innovation in a supply chain context, incl. the ecosystem of tech around scaling alternative fuels, electrification and infrastructure, green construction materials, and mgmt. of energy resources around logistics sites and more”.
“2023 will be a significant year for the acceleration of supply chain electrification across the entire hardware and software stack, driven by regulation/incentives, learning curves and startups transforming the green cost premium into green revenue premiums” — Jannik Pedersen, Head of Strategic Insights, Maersk Growth.
Within supply chain electrification, we can expect more cross-value chain partnerships, which are critical for building the net-zero supply chains of tomorrow. This includes a full electrification tech stack from multi-class EVs, charging networks, storage, Virtual Power Plants, and Distributed Energy Resources bundled into turn-key solutions managed by powerful software.
I am hopeful that 2023 will be the year where we see an acceleration of successful startups within circular logistics models (reduce, repair, resell, recycle). — Jannik Pedersen, Head of Strategic Insights, Maersk Growth
This will materialize in innovation in specific nodes of such loops or fully managed models for individual industry verticals going beyond li-iron batteries, where we have already seen such models introduced.
The perspective of Maersk’s technology leaders
To further understand the supply chain tech outlook for 2023, we spoke with Ashish Saxena, VP of Logistics & Services Platforms and Scott Horn, VP of Logistics & Services Technology.
According to Ashish, management will focus on efficient supply chains over the next two years to counter the economic downturn. Compared to constrained capacity and disruptions, which over the past two years have been headlining the industry, this is a pivotal shift. As a result, warehouse growth may not be as high as initially in Q4’22. Ashish expects it to slow down as the market moves towards overbuilt capacity, especially in North America and Europe. On the contrary, transportation will become a higher priority due to considerable opportunities for cost reduction, improving speed, SLAs, and reducing carbon footprint.
AI (beyond ML) will continue to play a key role in getting more profound insights into the supply chain and optimisation. More retailers will also push for omnichannel solutions on the selling side and logistics. Overall, network optimisation, inventory optimisation, and visibility will be in high demand from the market since there are largely still unsolved challenges. The current startup community may be a bit shaken; however, I see startups continuing to play a huge role in leading disruption. Some new areas that could be interesting are robotic automation of supply chains and faster and cheaper solutions for IoT, especially for transportation use cases.
“While visibility solutions may be plenty, we don’t see a lot of optimisation solutions, hence still a significant opportunity” — Ashish Saxena, VP Logistics & Services Maersk.
Scott Horn states that the cost of integrating a customer with their supply chain continues to be a burden. The more customers that can “re-use” pipes of information between them and their partners — the lower the cost. Offering more standard ways to interface between a customer’s systems and the logistics service provider allows for more accurate data exchange and modern tools that evolve from simple analytics all the way to AI/ML optimization. As startups are less bound by their technical legacy, they will have the ability to disrupt the old-fashioned way of connecting.
“Supply chain tech, particularly for operators and partners, is still not compared with consumer technology — but why not? What is stopping the experience you have when arranging your supply chain from the factory to the sofa or from having an interface like you have when booking a flight or buying from companies like Apple or Amazon? In 2023 we will see more companies find ways to make this possible and empower both enterprise supply chain managers and small shippers with the tools to power, control and optimise more of their supply chain at the click of a button or tap of a screen,” says Scott.
2023 — the year of AI, upstream SaaS, transport networks, and ‘actionability.’
“On supply chain tech more specifically, then I would expect some hesitancy as investors want to see or validate whether business models that have grown and raised substantially through 2020–2022 can sustain without high growth or high valuations” — Peter Jorgensen, Partner, Maersk Growth.
In terms of exciting innovation and investment areas, Jannik Pedersen highlights that in 2023 we will see wider adoption of upstream procurement SaaS providing insights into sourcing risk, ESG ratings, and product emissions while facilitating supplier selection and potential negotiation of this. Second, he still believes there is ample opportunity within software that optimises transport networks and routing, utilisation, modality, demand and energy or behaviour choices, enabling cost and emission reduction if approached holistically across the E2E supply chain. Third, what is undeniable, according to Jannik, is that 2023 will be the year AI will be translated into supply chain applications, e.g. within CX and operations, to transform current manual processes across the logistics landscape.
In addition, Shereen Zarkani highlights that automation is another trend that will continue as fundamentally; the same issue still exists due to challenges such as driver and warehouse worker shortages, labour costs and skill sets. The robots are coming but may take a little longer than indicated during the pandemic. Shereen further elaborates that “actionability” will soon become an emerging need from customers to optimise and orchestrate supply chains, while visibility will become table stakes. This increases the need for linkages, control and digitisation of assets to become connected devices instead of dumb steel.
Opportunity for strategic collaborations
Another key theme of 2023 will be a mutual opportunity for startups and corporates to collaborate to advance digitalisation within supply chain tech and overall decarbonisation, says Camilla Ley Valentin, Head of Explore at Maersk Growth.
“Having worked on both sides, in corporate leadership and as a founder, I feel strongly that the collaboration between the two on a client/vendor basis is critical for growing successfully. From the startup perspective, as funding becomes increasingly difficult and valuations decrease, generating revenue and profit takes priority over rapid growth rates. The solution to this in the B2B space is obviously paying customers, and commercial partnerships with corporates is a central element in sustainable growth.” — Camilla Ley Valentin, Head of Explore.
Whilst collaboration with startups, from a corporate perspective, can be tricky if compared to more traditional technology vendors, strategically founded collaboration in the shape of procuring new technologies from startups can escalate the use of innovation and support emerging business models at speed and with reduced risk compared to, e.g. in-house development.
“One challenge that the pandemic-accelerated funding in supply chain tech has brought to attention is the limitations of the siloed innovation, resulting in a somewhat limited gain of the real benefit of a connected and integrated supply chain. The current economic climate might result in more M&As and consolidation across the startup ecosystem to offer more integrated full stack supply chain solutions” — Shereen Zarkani, Managing Partner of Maersk Growth.
Are you an agenda-setting startup, a visionary founder, or do you know someone who figured out exactly where supply chain tech is heading next? Let’s have a talk!
You’ll find us at Growth@maersk.com or on LinkedIn.
