1 Startups, corporates, and technologies poised to have the greatest impact on maritime shipping in 2018 and beyond Digitizing the First Mile: Technology & Shipping 2 The presentation will also be sent to you. Feel free to share with colleagues. The resolution of some slides may be suboptimal due to the webinar software. Those slides will look fine in the presentation that we send you. Briefing recording will be distributed http://support.citrixonline.com/en_US/Webinar W I T H I N 2 4 H O U R S 3 @cbinsights @Natan_Reddy #shippingtech J O I N T H E C O N V E R S A T I O N O N T W I T T E R 4 W H O W E A R E The technology market intelligence platform. CB Insights software lets you predict, discuss, and communicate emerging technology trends using data in ways that are beyond human cognition. We are a leader in the Expert Automation & Augmentation Software (EAAS) space. 5 T R U S T E D B Y T H E W O R L D ' S L E A D I N G C O M P A N I E S "We use CB Insights to find emerging trends and interesting companies that might signal a shift in technology or require us to reallocate resources." Beti Cung, Corporate Strategy, Microsoft 6 I N D U S T R Y - S C A L E S U M M I T S C L I E N T - O N L Y E V E N T S P E E R - T O - P E E R N E T W O R K The CBI Community Membership Has Benefits DEMO DAY 7 Natan Reddy Natan Reddy is an intelligence analyst at CB Insights. He currently produces data- driven analysis and reports on the areas of retail, supply chain & logistics, and e- commerce, among others. His research has been cited in TechCrunch, CNN, Forbes, the Los Angeles Times, and more. Before CB Insights, Natan worked as a business valuation senior associate at Andersen Tax in San Francisco, where he valued dozens of startups and public companies. Natan is a graduate of the University of California, Berkeley with a major in economics and a focus in French. Most popular analyses by Natan: Amazon And Alibaba Have Already Conquered Online Retail. Now They're Coming For Offline. Major Links In The Global Trade Supply Chain That Blockchain Could Transform @natan_reddy | nreddy@cbinsights.com Intelligence Analyst A B O U T T H E A N A L Y S T 8 Contents 9 18 42 Introduction Innovation across the shipping journey Booking & management Transportation The port Who does this affect? 9 Over 90% of the world's trade is carried by sea, the most cost-effective way to move goods en masse around the globe. Source: The United Nations T H E O C E A N S C O N T I N U E T O D O M I N A T E 10 The global trade supply chain is complex The global trade supply chain contains a large number of disparate players, many of whom must coordinate to transport goods across the globe successfully. Maritime shipping sits squarely at the center of this chain. Source: Transporteca T H E F I R S T M I L E I S C O M P L E X freight forwarder customs broker shipper manufacturer port carrier warehouse trucker 11 How one cargo ship delay sends ripples through Alaska's food supply chain February 12, 2018 | Unfortunately, operations do not always go as planned Sources: JOC, Ship Technology, CNBC, KTOO, WSJ 12 Coverage of supply chain innovation is rising Sources : VentureBeat, Supply Chain Dive, Forbes, Supply Chain Dive Technology is permeating the supply chain specifically maritime shipping After decades of disparate phone calls, faxes, and paper trails, many players along the global trade supply chain are digitizing. Simultaneously, many shippers (including retailers and CPG companies) are demanding higher visibility in an effort to combat against delays, fraud, and lost shipments. Startups and corporates specifically bringing technology to maritime shipping are gaining traction in the media. Shipping carrier Hanjin collapses, late 2016 13 Maritime shipping tech funding significantly increased Annual global disclosed funding 2014 2018 Funding to maritime shipping startups increases While we have seen a slight pull back in 2018, overall funding to startups catering to the maritime shipping industry has significantly increased over the past several years. This is due in part to large deals to startups like Flexport, which most recently raised $100M as part of a Series D round of funding from First Round Capital, among others. $84 $163 $286 $511 $217 $411 2014 2015 2016 2017 2018 14 Tech innovation is spreading across the shipping journey The port Transportation Booking & management 15 The port Transportation Booking & management Tech innovation is spreading across the shipping journey 16 The port Transportation Booking & management Tech innovation is spreading across the shipping journey 17 What are the key trends we are seeing in shipping innovation? Visibility Automation Connectivity Startups and corporates are leveraging data, IoT, and blockchain-related technology to gain greater oversight and control of supply chains. Online freight rate and shipping contract exchanges are enhancing communication between global supply chain participants. Newly developed maritime supply chain focused-incubators are bringing together rising industry players. From autonomous ships to port robotics, maritime supply chain players are looking to automate their operations on and offshore. Key Players Key Players Key Players 18 F R E I G H T F O R W A R D I N G G O E S D I G I T A L Booking & management 19 While some freight booking startups are leveraging technology to connect existing supply chain players Israel-based startup Freightos, which has raised over $50M in funding, has created a centralized freight booking marketplace where customers can receive a quote and book a shipment in minutes. Centralized marketplaces Startup CoLoadX helps freight forwarders find shipment rates, while helping to also match them with NVOCCs looking to fill available container space. Freight contracting Matching containers with available space New York Shipping Exchange (NYSHEX) offers a freight contract platform to help make agreements between shippers and carriers more reliable, reducing contract cancellation by requiring both parties to offer upfront collateral. Connectivity 20 Digital freight forwarding startups are looking to displace existing players. What is freight forwarding? BUT . . . 21 Total Funding: $23M Select Investor: Rocket Internet FreightHub acts as a full service freight forwarder that leverages data analytics and software to help minimize disruptions along the freight supply chain. The startup's platform also provides live location date on various shipments. Total Funding: $14M Select Investors: UPS, Lufthansa Fleet recently pivoted from acting as freight rate marketplace to becoming a digital freight forwarder. It will now offer freight booking, shipment tracking, and customs clearance services, among other services. Startups bring freight forwarding online Visibility 22 San Francisco-based Flexport is the most well-funded startup in the digital freight forwarding space. The company provides real-time freight and logistics capabilities to hundreds of clients, including many small- to-medium e-commerce firms, giving them an opportunity to compete against giants like Amazon. D I G I T I Z I N G F R E I G H T F O R W A R D I N G Funding $301M Visibility 23 The Flexport model directly serves retailers and brands Many of its clients are e-commerce and consumer startups Flexport has partnered with Wells Fargo to provide speedier trade financing, an advantage for SMEs Flexport positions itself as an alternative to using Amazon for freight forwarding A C C O R D I N G T O C N B C : "Amazon has pushed further into its own private label clothing, groceries, advertising and devices, among other businesses daunting for up-and-coming brands thinking about handing over sensitive data to Amazon in the international shipping process." Trade financing rejection rate: 50% 7% Multinational businesses SMEs 24 The Flexport model directly serves retailers and brands Many of its clients are e-commerce and consumer startups Flexport has partnered with Wells Fargo to provide speedier trade financing, an advantage for SMEs Flexport positions itself as an alternative to using Amazon for freight forwarding A C C O R D I N G T O C N B C : "Amazon has pushed further into its own private label clothing, groceries, advertising and devices, among other businesses daunting for up-and-coming brands thinking about handing over sensitive data to Amazon in the international shipping process." Trade financing rejection rate: 50% 7% Multinational businesses SMEs 25 The Flexport model directly serves retailers and brands Many of its clients are e-commerce and consumer startups Flexport has partnered with Wells Fargo to provide speedier trade financing, an advantage for SMEs Flexport positions itself as an alternative to using Amazon for freight forwarding A C C O R D I N G T O C N B C : "Amazon has pushed further into its own private label clothing, groceries, advertising and devices, among other businesses daunting for up-and-coming brands thinking about handing over sensitive data to Amazon in the international shipping process." Trade financing rejection rate: 50% 7% Multinational businesses SMEs 26 Incumbents grab ahold of technology In response to a rising trend in technology, incumbent supply chain players are developing in-house technology to enhance supply chain visibility to compete against the rise of freight forwarding startups. Maersk's freight-forwarding arm Damco developed a digital freight forwarding platform dubbed "Twill" in April 2017. The platform provides shippers with instant quotes, shipment tracking, and digital document management. It has since expanded to trade operations in China, the UK, India, and France, among others. Freight forwarder DHL released its newest digital supply chain visibility technology "MySupplyChain" in May 2018. MySupplyChain offers unified end-to-end supply chain management software that provides shipment visibility and data analytics to help streamline supply chain operations. Visibility 27 Freight forwarding incumbents battle digitally native startups W H O W I L L W I N O U T ? Incumbents Startups (+) Scale (+) Established relationships (-) Tech innovation (-) Scale (-) Established relationships (+) Tech innovation Freight Forwarding Freight Forwarding 28 Amazon enters ocean freight forwarding A threat to all? Amazon entered the freight space in 2017, offering services to help organize ocean freight shipments between China and the US for its merchants. The e-commerce giant remains a threat to startups and incumbents alike given its vast sums of money, physical resources (such as existing warehouses), and digital infrastructure. Amazon's entrance into ocean freight coincides with its greater entrance into the third-party logistics (3PL) space. 29 B L O C K C H A I N , A U T O N O M O U S S H I P P I N G , A N D M O R E Transportation 30 ClearMetal provides AI-powered insights into the shipment transportation process for retailers and logistics providers, such as Panalpina. ClearMetal helps clients predict which carriers will provide the most reliable service and estimates the risks of delays. Funding $12M Select Investors NEA, PSA unboXed Select Clients Panalpina, Nile Dutch Leveraging AI for transportation management 31 IMO to ban many vessels carrying high sulphur fuel from 2020 official 2/22/2018 | Fuel efficiency startups gain extra relevance Nautilus Labs offers a software platform that leverages AI to measure vessel operation, specifically helping users manage fuel efficiency. Select Investors: Trail Mix Ventures, Homebrew We4Sea is a SaaS platform designed to help cargo ships increase fuel efficiency and reduce emissions. The company's platform uses big data analytics and considers factors such as wind, currents, and waves when measuring the operational efficiency of a ship or fleet. Select Investor: Mainport Innovation Fund Sources: WSJ, Reuters, YaleEnvironment360 32 Public health experts estimate that once the 2020 sulphur cap takes effect, it will prevent roughly 150,000 premature deaths and 7.6 million childhood asthma cases globally each year. I M O I N S T I T U T E S S U L P H U R F U E L C A P S Source: Yale School of Forestry and Environmental Studies 33 Blockchain shipping initiatives explode in number Date Summary Select Players Consortium that tested a blockchain solution on 12 separate shipments to eliminate the need for printed shipping documents. Mar'18 Jan'18 After previous collaboration, Maersk and IBM formed a new blockchain company to commercialize blockchain use. So far, dozens of companies have been onboarded. Sep'17 Partnership to launch a blockchain platform that helps to simplify marine insurance, an area commonly plagued by excessive paperwork. The platform, dubbed "Insurwave," went live in May 2018. Aug'17 Official partnership to improve shipping security and efficiency through blockchain. Completed successful blockchain trial tracing cargo from Chongqing to Singapore in February 2018. Sep'17 Carrier HMM (Hyundai Merchant Marine) completed its first blockchain pilot voyage, as part of a larger consortium, tracking cargo with blockchain and IoT technology from booking through delivery. Select blockchain shipping initiatives (2017 2018) Visibility 34 "The way I see it, there are two ways this could evolve. The first way is one of these blockchain initiatives will gather a lot of momentum and become the standard for the industry that everyone must follow The alternative way might be that different blockchain initiatives become interoperable " B L O C K C H A I N ' S V I A B I L I T Y I N S H I P P I N G R E S T S O N S T A N D A R D I Z A T I O N Gordon Downes, CEO New York Shipping Exchange 35 Blockchain's successful implementation and standardization could mean Recent blockchain initiatives have focused on improving cybersecurity and marine insurance for maritime supply chain players. Increased trade efficiency Higher security Improved transparency The World Economic forum estimates that improving communications via blockchain could generate an additional $1T in global trade. A standardized blockchain for all supply chain players would enable better visibility and flexibility on shipments. Problems or delays can be more quickly avoided, modified, or resolved. 36 Rolls-Royce sells marine division to Kongsberg Autonomous shipping corporates consolidate Rolls-Royce sold its autonomous marine division to maritime equipment supplier Kongsberg for $664M in June 2018. Rolls-Royce Commerce Marine has been a powerhouse in developing autonomous marine technology. The acquisition will be a welcome addition for Kongsberg, as it also seeks to become a leader in autonomous shipping. The company partnered with Wilhelmson to start a new autonomous shipping venture dubbed Massterly in Spring 2018. 37 San Francisco-based Shone seeks to retrofit existing ships with autonomous technologies to aid existing on-board crews. The company's technology uses AI and existing ship sensors to help detect and predict the movement of other vessels nearby 24/7. Funding $4M Select Investor Alven Capital Partners with: Autonomous, but not unmanned Automation 38 I N C R E A S E I N O P E R A T I O N A L S A F E T Y O F S H I P S R E D U C T I O N I N C R E W S I Z E A N D S A L A R Y C O S T S I N C R E A S E I N E N E R G Y E F F I C I E N C Y R E D U C T I O N I N S P A C E N E E D E D F O R C R E W , I N C R E A S E I N C A R G O C A P A C I T Y The greater impact of autonomous shipping 39 P O R T - D R I V E N I N N O V A T I O N The port 40 Ports turn to automation to handle larger ships and increasing cargo Ports demonstrating the future of automation today Over the past several years, the Port of Rotterdam has become a flag- bearer for port automation from installing automated electric cranes to using self-driving trucks. Most recently, the port partnered with IBM to incorporate AI and IoT technology into its operations to help increase efficiency. Both partners estimate the project will help save shippers one hour of berthing time, which runs up to $80,000 per hour. Other ports embracing automation: Antwerp Singapore Shanghai 41 Ports support maritime and supply chain startup innovation The Ports of Singapore, Rotterdam, and Hamburg have all helped start or support port-, supply chain-, and maritime-related incubators and accelerators. Connectivity 42 E X T E N D E D E F F E C T S Who does this affect? 43 EXISTING SUPPLY CHAIN PLAYERS AFFECTEDP O R T A U T O M A T I O N F U E L E F F I C I E N C Y T E C H N O L O G Y B L O C K C H A I N S H I P P I N G INNOVATORS TO WATCHF R E I G H T B O O K I N G D I G I T I Z A T I O N A U T O N O M O U S S H I P P I N G Carriers: Gives carriers flexibility in scheduling as terminals operate 24/7. Will stay on schedule more often due to less port congestion. Retail/CPG: Can save money from less time at terminal; goods are more likely to get to customers on time. Truckers: Port efficiency helps cut down on delays for truckers. Effects of maritime shipping and supply chain innovation N E A R - T E R M M I D - T E R M L O N G - T E R M Incumbent freight forwarders: While incumbents benefit from freight booking startups that connect existing supply chain players, they are threatened by digital freight forwarders seeking to displace them. Retail/CPG: Freight booking visibility allows greater supply chain flexibility, an important factor when navigating new global tariffs. Carriers / ship owners: Carriers and other ship owners will directly benefit from fuel efficiency savings as they will be able to comply with the International Maritime Organization's (IMO) impending 2020 sulphur fuel cap. Entire supply chain: If blockchain standardization among the global supply chain is achieved, all players involved in shipping goods will save money on paperwork, decrease shipment delays, and avoid fraud. Retail/CPG: Will allow retailers/CPGs to more easily track product history in the case of contamination. Carriers: Carriers may save money on future ship operations due to decreased crew size, increased operational safety, and increased cargo space onboard ships that the crew used to occupy. 44 Questions? Twitter: @Natan_Reddy nreddy@cbinsights.com 45 The CB Insights platform has the underlying data included in this report W H E R E I S A L L T H I S D A T A F R O M ? CLICK HERE TO SIGN UP FOR FREE 46 cbinsights.com @cbinsights nreddy@cbinsights.com @Natan_Reddy