The shenanigans of Ever Given at the Suez Canal is now part of shipping folklore and recently brought the freight industry under intense spotlight. In reality though, the industry has been in focus for quite a while.
For those who have not been following, there is an unprecedented container shortage driven by the Covid-19 pandemic. Freight costs have been sky-rocketing as a result. According to Drewry Shipping, Transporting a 40-foot steel container of cargo by sea from Shanghai to Rotterdam now costs a whopping 547% higher than the seasonal average over the last five years.
The freight industry is among the most traditional industries with remote digitisation. Processes run on pen / paper / phone calls & WhatsApp. As a result of all this, the current macros have a multi-folded impact here – lack of container availability, intermediaries getting squeezed on margins, delayed freight, lack of visibility and untenable prices.
The macros will eventually settle. However, the impact has been profound and we will see a large-scale shift in the way the freight industry operates (remember, in an industry like this, supply will rarely outstrip demand).
In an industry with wafer thin margins, the only way cost savings can be achieved is through a digital first approach and by eliminating the layering in between (more on that below).
This is exactly what Wiz has set out to do and we are delighted to be leading their seed round.
We first met Ram G & Ram R, just as the pandemic had set in last year. They constitute what we refer to as a ‘winning team’ with strong domain expertise. Ram R has built and managed large scale freight businesses over the past 2 decades, first as part of Ms Seahourse Group and then his next venture which he built and sold to a global logistics company based in Switzerland. Ram G was part of the core team at Lynk Logistics, where he built and scaled the product function and helped them scale from scratch to a customer base of 100k+. Prior to this, he spent time at Rocket Internet in Singapore.
They had seen the inefficiencies first hand and set out with one mission – Organize the severely broken freight booking process for enterprises & SMB’s (Ocean, Air, Road & First / Last Mile). The current problems are multi fold led by 2 inherent issues that plague the Freight booking process –
- Layers – Freight is among the most fragmented industries in the world. Take India for instance – the country has over 80k offline freight forwards, typically homegrown family businesses who act as intermediaries between other forwarders, shipping lines & end customers. They run on relationships, are highly unorganized in terms of demand & supply and rank low on technology, predictability & transparency (imagine if hidden charges kept adding, without any predictability?) These intermediaries help find containers, but do not own the process or take responsibility apart from price discovery.
- Broken Processes – Freight forwarders are as offline as you can get. Booking processes happen over calls, pen, paper & Whatsapp. Enterprises face a T+10 day cycle to get a quote and book a container (Let alone the post booking processes). They have 20-25 member teams just to handle forwarder relationships & manage broken booking processes. The inefficiencies include offline haggling, limited price transparency and manual paperwork around the booking & post booking processes (Customs, etc).
What if all of this could be digitized and a T+10 process could be brought down to a T + 0 or T +1 process? It’s a win-win for all parties.
Wiz has built out a full stack digital freight forwarding platform to solve for just that. Through this, they enable businesses to discover, book, digitize, finance and manage end to end cross border shipments on their platform.
They work directly with most of the leading asset based carriers to control end to end shipment operations. This enables businesses to save a significant time and costs on international logistics to focus more on value creation. Direct relationships also means, no undercutting, no price wars, direct quotes and the best in class prices. Wiz’s prices are upto 30%-50% lower than traditional forwarder rates as a result.
They currently work with Enterprise and Mid Market customers in India, Middle East & SE-Asia, a segment that represents a significant portion of EMEA’s EXIM market.
The pandemic itself acted as a tailwind for Wiz, with global freight rates skyrocketing. This led to an increased need for full stack solutions, digitization and to remove all possible intermediaries (Do note that even a 5%-10% increase in price adds to several millions of dollars for an Enterprise’s annual shipping budgets).
The customer strength has been demonstrated, with a roster of 200+ customers spanning India, SE-Asia & Middle East, and a 2x+ Q-o-Q revenue growth over the last 12 months since launching. These customers on an average have an annual export volume of $ 25m +.
Globally, companies such as Flexport (US), Freightos (Asia), Forto (Europe) have built out platforms to streamline freight supply chains. In India, we have seen marketplaces attempting to solve for this. However, inherent risks of becoming ‘Price Discovery’ platforms and having transaction leakages have played out and there is a need for a full stack approach with direct linkages to shipping lines.
At Axilor, our supply chain thesis has revolved around one key question – How do you eliminate layering, using a digital first approach?
Wiz has clearly hit the brief and we are delighted to welcome them to the ever growing Supply Chain & Logistics portfolio at Axilor. We are joined by Arali Ventures & Foundamental on this exciting journey with the Wiz team.
Building something disrupting supply chains? Hit me up on email@example.com