Dynamo Dispatch (09/10/18)

Issue 34 | Amazon & Walmart Delivery, Nidec & Munich Re M&A, Micromobility

Dynamo Dispatch. Weekly update from Dynamo covering the latest and greatest in commerce and trade, #logisticstechnology, and building venture-scale businesses.

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Weekly Commentary 💭

It’s National Truck Driver Appreciation Week. Everything we own has been in a truck at some point (and perhaps even multiple times). In 2017, trucks moved 70% of freight in the US or 10.8B tons and generated $700B in revenues (79% of American freight costs) with the help of 7.7M people, 3.5M who are drivers (1.7M in heavy and tractor-trailer). Driver turnover is also at 94% based on recent ATA reports and is exacerbated by ongoing driver shortages that’s turned a year-long increase in freight rates into a secular issue. A trucking executive recently told us that we need almost 10 new drivers for each 1 lost to make up for a lack of experience and continually rising freight volumes. Provides some perspective as to why companies continue to flag rising freight costs as an issue.

Spending time with truckers and executives over the last couple years has allowed me to gain empathy and gratitude for a grueling job we all often overlook but benefit from. While we speak of autonomy and other technologies relevant to trucking, we don’t lose sight of the fact that it will impact millions in the business. It’s obvious that such a change won’t be easy but it’s important to understand the impact and prepare the workforce for an era where trucking is managed by technology and humans are utilized in roles that require high levels of emotional reasoning and judgement that’s hard for a system to have.

Increasingly, I believe we’ll see a set of startups that provide education/re-education for roles in trucking, warehousing, and related logistics roles. Those people in routine, dangerous, labor intensive functions can have the opportunity to retool their skill set to fit an industry that will increasingly use “bits n bytes to move boxes.” In the coming decade, we could increasingly see drivers evolve into planners who guide and monitor fleets remotely, mechanics shift to mechatronics specialists who service robots, and distribution personnel spending more time outside of their “boxes” selling the services that occur inside them. It will be a gradually shift but it does behoove us to start the education process sooner vs later and iterate them to a point of success at scale. As I was finalizing US Xpress announced their new higher education program for drivers.

I would love to hear thoughts on this point of labor education in the face of change — reach out if you would like to chat! Thank you to our truck drivers!

We Are Dynamo,

Santosh 💥

What We’re Reading 📖

The Week in Last Mile Delivery: Amazon Increases Order for Mercedes Vans to 20,000 from 4,500 and Walmart Tries Home Delivery. If the 20,000 vans do hit Amazon’s last mile network, it’s still smaller vs UPS (119,000 vehicles) and FedEx (60,000 FedEx Ground vehicles) but significant. A bank asked me back in July if I thought it would be a savvy business move to set up an Amazon last mile outfit — clearly many believe it is. I suspect that a combination of volumes/density, attractive equipment pricing, and technology could help one build an interesting business/operation. It’s worth remembering that last mile delivery is hard to do without volume/density even if one has technology. I would also caution that experienced last mile operators would have an advantage in setting up operations (things like batching outbound, delivery planning, etc) and dealing with Amazon’s temperament.

Walmart has experimented with a variety of configurations for delivery and it looks like they too are setting up an internally managed solution. Spark Delivery will crowd source drivers in an attempt to delivery groceries to 100 major metro areas. It could be that we end up seeing an Uber/Lyft dynamic where service providers work both for Amazon/Walmart while abiding by their respective service standards. Great business can be built provided the retailers can guarantee volumes across a density of locales for owner/operators. The result could be a cohort of businesses that grow, gain regional strongholds, and end up attractive in the eyes of PE vs VC (somebody say roll up strategy?). Related: visualizing Amazon’s distribution network and why USPS could be the best last-mile company.

When Micromobility Attacks. Horace Dediu shows us data that highlights the impact of bikes and scooters on mobility. The mileage on micromobility form factors, in aggregate will rival that of ridesharing as could related revenues. Speaking of data, Charlotte Providers Compelling Data for e-Scooters. Early metrics show residents took 100k+ rides in July, scooters were rented 4x/day on average with average trip distance of 1.4mi. This beats the activity on dockless bikes that the city is also piloting. It looks like Charlotte’s open data approach in their micro mobility pilots is a model for other cities. Increasingly, we’re seeing that the cavalier tactics of Uber in the ride sharing ramp aren’t working for Bird, Lime, et al. Recode expands on why Uber’s tactics won’t work for scooter startups.

Noteworthy Acquisitions: Nidec to Spend $450M on German Robotics Acquisitions; Munich Re Buys Relayr for $300M. Nidec is a leader in electronic motor manufacturing and has been highly acquisitive through its lifetime. The purchases allows Nidec to expand manufacturing and go-to-market efforts as it capitalizes on the rise of industrial robotics and establishing a strong hold in actuators. On the IoT front, Munich Re’s purchase of Berlin-based Relayr allows it to better leverage data coming off devices to drive benefits to it’s core insurance business. Insurance is one of the largest beneficiaries of IoT as IoT is a gateway to improved data, the lifeblood of pricing protection and associated cost of risk.

Some Things Every Founder Should Know. I found myself digging this up from my Notion journal to share with a founder. I thought it made sense to share more broadly. I particularly agree that founders should focus on margins, CAC payback (be cognizant of developing healthy LTV/CAC relationship), advising other startups, and spend limited time at conferences.

Instant Quoting a Threat to Carrier Lines’ Control on Prices. Transparency is uncommon in maritime freight with only 2/12 carriers providing instant quotes. In a relationship-driven business with no substitutes (is Walmart using something other than a container ship for it’s goods?) and margins more impacted by fuel and customer/container yield (think about how 20% of customers usually account for 80% of margin) such tools aren’t necessarily a priority. That said, carriers are trying to build relationships more directly with SMBs and that requires automating functions such as quoting, implementing cost-optimization efforts like consolidation, and upholding service levels to efficiently capture/retain demand. This dynamic around opaque pricing isn’t just common to maritime freight but also other areas supply chain. I would note that DAT’s rate and capacity information helps alleviate some of the concerns in trucking and provides a check/balance on the system. That said, it’s by no means a guarantee of what freight costs might be when dealing with a trucking company. This model could be an interesting starting point for maritime freight stakeholders as we get to a world of instant/digital quoting on the way to true digital freight forwarder experience.

Tesla, Software, and Disruption. Evaluating Tesla and how they are disrupting the auto industry. I particularly like the framework Evans uses to analyze Tesla and their business — it can be modified to be useful on a broader basis. The discussion on Tesla’s head start and advantage around autonomy is particularly interesting (especially as we reference Evans’ four part framework). Technology (namely machine learning) advances have allowed everyone to work on autonomy but Tesla’s data could allow it to capture share and drive a better product vs competitors. On a related note, McKinsey Expects AI to Add $13T to Global Economy By 2030. A good one for executives to peruse — The McKinsey Global Institute looked at five broad categories of AI: computer vision, natural language, virtual assistants, robotic process automation, and advanced machine learning. Simulating various levels of adoption across industry, it’s believed that $13T will be added to the global economy by 2030 but cited that gains will be distributed unevenly across countries, companies, and populations.

What We’re Listening To 🎧

a16z Podcast: When Organic Growth Goes Enterprise. From a great friend of Dynamo and Dispatch reader, Ty. This episode covers the dynamic of “bottoms up” growth in enterprise (something that’s usually common in consumer companies) and implications it has for go-to-market/sales strategy, company building, and how investors perceive growth.

Joe Rogan Experience: Elon Musk. Ideologies aside, this conversation is filled with great perspective from the controversial innovator, founder, and thinker.

Who's Hiring? 👩‍💻

Data Engineer at SKUPOS in San Francisco, CA.

Head of Sales and more at Gatik AI in Sunnyvale, CA.

Product Designer at Zeelo in London, UK.

Check out other jobs at Dynamo portfolio companies.