FourKites CEO Mathew Elinjickal on where the supply chain visibility market is headed (part 2)
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Supply chain visibility provider FourKites has maintained its position as a leader in the latest Gartner Magic Quadrant for Real-Time Transportation Visibility Platforms. The company also recently announced it had outpaced its EMEA growth targets, achieving 148% growth in shipments over the last 12 months.
Key to this has been the FourKites’ expansion in Europe, which has seen the recruitment of industry veterans, the opening of new offices, and the acquisition of German supply chain visibility provider NIC-place.
Europe continues to be a key area for the supply chain visibility provider, and during a recent trip across the Atlantic, CEO Mathew Elenjickal took the time to talk to Trans.INFO about FourKites’ origins, the state of the play in the supply chain visibility market, the huge potential of visibility tech, and how the company intends to foster more growth.
The first segment of the interview can be found on our website here.
In this second part, read on to find out:
- Why FourKites intends to be careful with acquisitions
- The huge potential for more supply chain visibility use cases
- If FourKites could one day venture into hardware
- What FourKites’ future priorities are
Gartner’s recent supply chain visibility quadrant research concluded that the leading players in the market, including FourKites, have yet to fully take advantage of doing business with the public sector. Is this something that you are looking to address, and if so, how do you intend to make progress in this area?
Given how fast things are moving, there is increasing opportunity in the public sector, though it’s a very different market. They have different business and security requirements, for instance. They want a separate cloud.
We have made an investment to really serve that community as well, and in fact in Q1 of this year, we won one of the biggest deals in the history of FourKites with a public-sector company. Gartner’s research was completed in the autumn of last year, so it doesn’t reflect our latest activity in that space.
Looking at Gartner’s Magic Quadrant and the supply chain visibility market at the moment, one could presume that the Leaders, including FourKites, will continue to dominate, attract investment and make acquisitions – perhaps even leading to a duopoly. Is this a rather naive hypothesis? Are we likely to see more or less players in this space in the coming years?
In a market worth tens of billions of dollars, there will be multiple players, and I think that’s good for the customers and spurs innovation.
Now, in terms of the market becoming a duopoly? There are two players in the Leaders’ quadrant, but it is far too premature in this market to declare victory.
The key factor here is how one builds their business. Are they doing so in a sustainable fashion? Or are they taking shortcuts with the aim of doing an IPO or selling the company to make money quickly?
There’s also a lot of talk about the amount of money raised by ourselves and other companies. We’ve raised only $200 million, which is much less compared to some of our competitors.
Given the new market conditions – tumbling valuations of publicly traded companies, the start of a bear market, inflation and more, it’s not the money raised that will be key. It is capital efficiency – how are you building your business? Is it pursuing high growth at any cost? That burns a lot of money.
What’s becoming more critical now is building a business in a capital-efficient manner, looking at things like efficiency score and how much money you are burning. This is especially important for companies that want to be really successful in this market.
Even though it looks like there are two leaders right now, I think companies that adjust to the new normal and run in a capital efficient manner will be here to last. Some companies might still be in a high growth, high burn mode, while others might take a different approach and become leaders. Given how large the market is, we are still in the early innings, and things are changing very quickly amid the current market conditions.
I can see among the leading players in the sector, there is a real determination to keep pushing in order to secure the position of outright market leader. I suppose that in such a competitive environment, some business leaders could be tempted to gain ground by making some large acquisitions. Making rash decisions here can nonetheless be costly in the long run. How important is it therefore to remain grounded when deciding on investments? Every acquisition presents its own risks and rewards.
I think it’s a fine balance. You have to continue to make acquisitions. That’s very important to keep your customers happy and to grow in a market that’s growing itself. If you’re not making those investments, you’ll be left behind.
How many acquisitions you make and how much you focus on them is also super important. You may chase something new every week or every month, but then your product offering becomes diluted. You’re just making noise in the markets, rather than really delivering customer value. So I think carefully selecting and really focusing on how we integrate our acquisitions, as well as maintaining an unwavering focus on disciplined growth, is especially important.
When we are looking at acquisition opportunities, we really are looking for the “one plus one equals three” equation. To make that a reality, not only from a company standpoint, but also from a product standpoint, the new company will have to be seamlessly integrated so you can deliver that value to customers.
Acquisitions are inherently tough and can dilute focus when not executed properly and when the synergies are not there. For this reason, we continue to be highly selective when making acquisitions, and only move forward if an acquisition can be a real game changer for the company.
Moveover, we really have to measure ROI for every dollar that we put into the market. That’s what investors expect. What investors are really looking for is a path to profitability. They’re not looking at how much it should grow year over year. Yes, it’s great if you’re growing. But if you don’t have a path to profitability in the next 24 months, then you’re not going to be rewarded in public markets.
FourKites was founded as a real-time supply chain visibility provider and now works with over 1,000 of the world’s best known brands. While carriers and shippers alike benefit from knowing exactly where goods are while in-transit, the data FourKites collects could also help mitigate or prevent supply chain disruptions. To what extent does FourKites leverage AI and provide supply chain intelligence? What additional value can FourKites provide beyond track-and-trace?
FourKites’ ultimate mission is to build the largest supply chain orchestration platform. To get there, we started with real-time transportation visibility and expanded to every mode, node and signal to create end-to-end supply chain visibility. Layered on top of real-time visibility data, we have created dashboards and analytics. As we expand our network of data and AI capabilities, we will be able to help our customers prevent or mitigate disruptions before they occur — that’s a big prize that we are chasing, but it cannot be done overnight.
It will require a very sequential expansion. If you expand the demand without expanding inventory, it’s not going to work because demand is useless without knowing how much inventory you have on hand. Sequential expansion is the way we look at the world when it comes to achieving supply chain intelligence.
It is more than a case of just knowing where my truck, train or ship is, or even the ETA. It is all about downstream and upstream applications using that data. For example, how can I plan my labour better based on when products are coming? If I know when they’re coming, I can have my loading or unloading crew ready rather than waiting for the order. Can I impact my warehouse operations better based on real time transportation visibility data? If I know the ETA of a truck that is coming to load, can I sequence my warehouse picking, packing and staging accordingly? Can I sequence it better?
The application of visibility data into different operations within the supply chain requires a very different way of thinking about building software. The investments that you make in the software are not just about building a network and putting a dot on a map; you have to translate that into a use case for customers. Otherwise, the visibility is useless.
Imagine a customer of a visibility provider, going from having no data to having tons of data. It’s going to be data overload, and they should know exactly what to do with it. I think that’s where very specific use cases for solving a client’s problems become important.
To sum all that up, the topic is bigger than visibility, it is about end-to-end supply chain intelligence. Transportation visibility is nonetheless still going to play a key role as a foundation. Then, vendors will have to focus on solving use cases using the visibility data and artificial intelligence. That’s where a lot of investment needs to be put in. Otherwise, it becomes another shiny tool customers have that provides no ROI.
In recent years, there have been a number of cases in other market sectors of companies primarily focused on software and digital tools extending their business model by moving into hardware. If we think back for example, there was a time when we never imagined Google or Amazon would be making their own phones or tablets. Is hardware something you may be tempted to do at some stage? Could we see FourKites devices providing visibility on your platform in the future?
Hardware is a tough business. You have to really scale to succeed in hardware. The examples you mentioned, like Google and Amazon, they started as software companies, but after getting significant scale and money, they ventured into hardware.
The problem, at least in the startup world, is that investors care about unit economics. This is tied to hardware, so you have to look closer at customer acquisition costs, margins and other considerations that are very different from the world of software. Additionally, it’s difficult to do hardware and software at the same time at our scale.
Our approach is to be neutral, agnostic and work with any hardware provider out there to collect data. So if you’re a provider, generating GPS signals or whatever, we want to integrate with you. That’s our approach at the moment when it comes to hardware.
Will it change in the future? There might be applications where a hardware provider doesn’t exist. In that case, maybe we might do something by entering into a partnership or via a possible acquisition. But I don’t see that happening in the foreseeable future. We are focused on being a software platform that is hardware-agnostic. We want to build that intelligence layer without getting into the hardware business.
Finally, what are the key areas FourKites will be focusing on in the coming years in order to fulfil your future ambitions?
I’m a big believer in doing a lesser number of things and really focus on doing them well. The key priority really comes down to data quality and automation.
At the end of the day, you have to deliver customer value. If customers are not getting the data quality from their visibility platforms, or if it is too cumbersome for them to deploy visibility platforms, it’s not going to scale. So focusing on generating customer value from solutions by providing high-quality, actionable data in an automated fashion is a top priority for us, company-wide.
The second one would be the focused investment in the future to bring end-to-end visibility at an order level. Those are the two key things that we are working on at this point.