This post is part of our new Future of Logistics series which interviews the leading founders and executives who are on the front lines of the industry to get a better understanding of what problems the industry is facing, what trends are taking place, and what the future looks like.
The following is an interview we recently had with Asparuh Koev, CEO of Transmetrics.
1. What’s the history of Transmetrics? Where and how did you begin?
AK: Anna Shaposhnikova and I started working together at my previous company IntelliCo Solutions, an IT consulting firm for the logistics sector. During our projects with industry market leaders, we learned from them that one of the biggest problems, which is very difficult to solve, is matching supply and demand in a timely and efficient manner. It happens due to the “visibility paradox” as we call it in Transmetrics. Transporters are getting their orders “just-in-time” while coming up with an optimal transport plan takes days or even weeks. This is why we had an idea of applying predictive analytics to logistics. Based on the historical data of the company and the external factors that influence the shipping demand, we can predict the shipping volumes weeks in advance, which gives transporters enough time to optimize their network. We validated the idea by doing a consulting project for the international leader in courier, parcel and express services market and then decided to spin the idea into an independent product – that’s how Transmetrics started. Since 2013, we have fully developed our product for the road freight sector, implemented it within several clients including DPDgroup (in several countries), introduced a new product for asset optimization and started to work on a warehouse optimization product. To achieve our goals we have raised about EUR 2 million of investment and grew our team to 23 employees. Transmetrics is currently working with leading global logistics companies, including three companies from Fortune 500, and our product was featured in DHL’s Logistics Trend Radar for 2014 and 2016.
2. What specific problem does Transmetrics solve? How do you solve it?
AK: We offer an end-to-end SaaS solution based on modern technologies such as Artificial Intelligence, Machine Learning, Big Data and Predictive algorithms to help logistics service providers and asset providers save a significant portion of their operational costs by allowing them to make better data-driven decisions.
In order to do that, our tool first cleanses and enriches the data of the logistics companies. Then it generates highly accurate demand forecasts based on the customer's improved historical data and external factors that influence shipping demand (e.g. public holidays, industrial seasonality, customer-specific shipments fluctuations, etc.), after which the predictive planning module provides the most optimal plan for linehaul network, assets movements and warehouse workflows weeks in advance.
To be more specific, we are working on 3 products that are tackling 3 different problems in the industry:
– NetMetrics is a cargo vehicle capacity utilization tool (mainly for groupage business when operating on its own network) which provides high-accuracy forecasts of upcoming shipments and a daily predictive planning of the linehaul network;
– The second one is called AssetMetrics which helps assets owners and providers of trailers and containers to forecast upcoming peaks in demand and optimize the reallocation of assets;
– The third solution is WareMetrics which improves staff efficiency within warehouses by forecasting upcoming shipments to a warehouse and better planning labor shifts and shipments handling in advance.
For example, while working with DPD Bulgaria, our NetMetrics product helped them to reduce total costs by 7-9%. Also, we recently announced our project with the large container shipping company, NileDutch, where AssetMetrics is expected to reduce the cost of empty container logistics by 10-15%.
3. What’s the future of logistics?
AK: I have three interesting predictions, apart from the e-commerce growth, which everyone knows about.
Prediction #1: The first one is that Amazon and Alibaba will accelerate insourcing logistics. They are threatening to do everything and for everyone, so unless something dramatic happens in the industry, my prediction is that these tech giants will get to a tipping point in less than 10 years, where they will be completely unstoppable. Then logistics as we know it will disappear and will become a department of these companies. Amazon and Alibaba will cover the whole supply chain from the point of production to the point of consumption. This is certainly their plan and it looks like they have the resources to achieve this in less than a decade. Both companies are doing quite a lot right now, like establishing their own logistics air operations, getting sea freight licenses, launching end-to-end shipping services to compete with big logistics players, building massively huge warehouses, experimenting with drones and so on.
Prediction #2: The second prediction is that logistics is going to be completely disrupted by the technology, such as electric and self-driving vehicles, drones, data analytics, AI, capital-intensive technologies, Physical Internet and so on. These technologies are still emerging in logistics, but in the next five years, most of them will become really critical. I would like to highlight the ideas of standardization and Physical Internet, because it is really interesting and people do not think about it.
Prediction #3: The third prediction is that there will be a significant trend of consolidation and sharing of excess capacity. There is so much excess capacity in the industry, and if you look at it, 50% of the overall capacity is simply wasted. The largest logistics companies will probably adapt, some of them will even merge, but they will have to become more efficient. However, a lot of the small players are just going to be squeezed out of the business on a massive scale. And one of the reasons for it is exactly the technological disruption. For example, because of the ecological concerns, logistics companies will be forced to move to electric vehicles. That means that even small players will have to invest in the new technologies, which they are unlikely to afford it because they are already on a survival level.
4. What are the top 3 technological trends you’re seeing in logistics?
AK:: In my opinion, the top three trends are:
Trend #1: Self-driving and electric vehicles.
Trend #2: Data-Driven Logistics (opening up of the data and much greater availability of the logistics data).
Trend #3: The use of Artificial Intelligence to manage logistics.
Nowadays, we are already not getting surprised when we hear about yet another company building an autonomous or an electric vehicle or truck – this trend will continue even more with countries planning to ban the usage of internal combustion engine vehicles. Regarding the data-driven logistics, more focus has been placed on the importance of effective data capturing and management in recent years. However, many leading transport and logistics companies still fail to enforce unified data standards when recording data, which leaves gaps and makes it very difficult to use or potentially share. And once you have the data available, even if it’s still not clean enough, software solutions powered by the AI technologies can help make better operational decisions, which would significantly improve the efficiency of the logistics companies.
5. Why is the logistics industry ripe for disruption?
AK: This is an easy question – because this industry is so inefficient! It has been operating for decades at less than 50% efficiency. For example, from what we observed, even in large companies trucks have been operating on 75% of capacity, which is still 25% inefficiency. Furthermore, they are driving 24% of the kilometers completely empty, and on average trucks/assets are used only 33% of their lifetime. So you have a huge inefficiency in terms of assets or in terms of capacity utilization.
The second reason is that the logistics industry is very slow. Airfreight industry says that it takes 6 days so the shipment can be loaded on a flight which takes 12 hours. That means that it takes 6 days of waiting to achieve 12 hours of movement and this is ridiculous. At the same time, the demand for logistics services is completely different now with the emergence of e-commerce and the emergence of different business models. Therefore, logistics has to become much faster, much more efficient and much cheaper than it is now. The reserves for that to happen are there, and if the existing players won’t do it, the new players like Amazon and Alibaba are going to do it and they will just obliterate the industry.
About Asparuh Koev
Asparuh Koev is a founder of Transmetrics and a successful serial entrepreneur with over 18 years of experience servicing the transport & logistics sector. Previously, Asparuh successfully founded several companies including IntelliCo Solutions, which focused on cargo transport industry. Among its customers, IntelliCo Solutions has Fortune 500 clients delivering IT projects within $1-20 million range. Asparuh has a combination of technical and business background. He holds a Bachelor’s Degree in Computer Science from the American University in Bulgaria (AUBG) and an MBA degree from the Vlerick Business School in Belgium (with Great Distinction).