By Maija Ehlinger
August 12, 2022
What a difference a year makes.
Summer 2021 was all about shipping containers, as alarm bells went off that Christmas presents would be stuck at US ports and consumers could expect delays in just about every item on their wish list.
This summer, all eyes are on warehouse shelves. A seemingly perfect storm of easing Covid restrictions, inflation, economic uncertainty — alongside the fact that back-ordered goods finally arrived – means massive excess inventory for big box stores and e-commerce retailers alike.
“This is the perfect example of the bullwhip effect,” Atlanta-based entrepreneur Jonathan Porter told Hypepotamus, which is a phenomenon seen as small fluctuations in consumer demand ramps up quickly to create manufacturing and distribution problems.
What that all means for the state of e-commerce and consumer-product brands in the long-term is still being sorted. But it has shown that supply chain logistics companies are still in high demand.
Investors are certainly taking notice. 53 PE deals in the US supply chain sector in 2021 reached $20 billion in total deal value, up from 37 deals totaling $7.9 billion in 2020 and $5.1 billion in 2019, according to PitchBook. Venture capital funding is showing similar growth in the sector.
K&L Gates partner Rick Giovannelli told Hypepotamus that third-party logistics companies and those using technology to help broker better shipping deals and those startups optimizing supply chain workflows have been increasingly interesting to private equity firms.
What That Means For Local Startups
Atlanta has been a supply chain and logistics hub for many years. But the city has seen an entirely new crop of startups get off the ground since the start of the pandemic.
One of those is PorterLogic, founded by Georgia Tech graduate Jonathan Porter. It is a low-code workflow automation software for supply chain. Beyond just building dashboards, PorterLogic helps businesses sandbox out inventory levels to best prepare for what’s to come.
The reality is that each company has unique requirements about how they source, store, and ship products, Porter explained. Traditionally, warehouse management solutions are either highly customized or incredibly manual, which makes it difficult to keep up with macro and microeconomic changes.
While supply chain isn’t quite the buzzword it was last year, the industry is still tackling important problems for consumer product brands.
“It’s no longer that supply chain is broken, which that’s been what we’ve been hearing for two years. But now there is a greater lens being put on supply chain,” said Jonathan Porter. “While there are absolutely disruptions still going on, I don’t think that it’s as broad as before and you are starting to see more localized and individual disruptions.”
Another relatively new startup in town is Carpool Logistics, a fast-growing team out of Atlanta Tech Village.
The company, founded by Michael Malakhov, recently added two new co-founders and raised a $2 million seed round from Atlanta Ventures this summer. This is the startup’s first bit of outside institutional investment to date.
Carpool Logistics was bootstrapped for about a year and said they didn’t want to fundraise until they had traction with customers and the product. Now, the startup is ready to scale in the growing automotive logistics space.
“I really don’t see any slowdown in the automotive space. There has been so much pent-up demand by consumers to purchase vehicles, especially for new vehicles because of the chip shortages in the industry,” Malakhov told Hypepotamus. “And sticker price [for used cars] is going down some, but demand is still there. A lot of people have been on the sidelines, waiting for the prices to drop. So demand is really strong still and we see quite a bit of activity in the space. I really don’t see any downturn.”
Later-stage and more established startups are also continuing to build.
Verusen, an Atlanta-based inventory optimization startup, recently rolled out its Trusted Network to help companies better scenario plan. “The results are continuous inventory balancing, sourcing intelligence, and supply risk reduction delivering the perfect balance of capital to risk across their network. Organizations can expect 15-25% working capital reduction and less unplanned downtime,” Paul Noble, Verusen’s CEO and founder, told Hypepotamus.
That is crucial as companies navigate uncertain economic times on top of changing supply chain dynamics.
“Leading manufacturers are investing in purpose-built materials management solutions, allowing them to quickly implement the MRO (Maintenance, Repair, and Operations) decision support tools they need, all without the heavy lifting many enterprise solutions require. Not only does it provide quick ROI, but it also allows them to achieve their desired results proactively. Organizations choosing not to take advantage of MRO optimization opportunities may find themselves in an adverse situation should economic conditions worsen in the months ahead.
Atlanta-based Stord has also been busy building out new products. Stord One Commerce launched earlier this summer as a unifying the supply chain data stack for tracking materials from “port to porch.” The goal, the company said, is to be a type of “control tower” for their customers’ ever-evolving supply chain issues.
As startups continue to build, investors are also continuing to eye the supply chain logistics space. While venture capital and private equity funding dropped significantly year over year, supply chain-related transactions remain high.
We asked Giovannelli about how he is feeling about the space given the uncertainty. He remains optimistic, saying: “We see a number of companies coming to market right now. Private equity investors are often opportunistic, and if they see a dip in valuations, they will see that as an opportunity to buy. In fact, we are seeing a number of companies that have been venture capital backed with high valuations based on where the market was over the past few years, that are now struggling to raise their next round of capital. And those companies are often being put up for sale and private equity investors are often the buyers for those companies. So I think we will see more of that as the year goes on.”
Check out the original article here.