Uncertainty favours spot rates, not long-term contracts, says CEO of logistics marketplace operator Adnavem
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The economic situation left behind by the coronavirus crisis has resulted in changes to the way business is conducted in the shipping and logistics sector, says Andreas Wramsmyr, CEO and founder of the logistics marketplace and collaboration platform Adnavem. Companies are stepping away from long-term contracts and looking for marketplace-like solutions instead. Uncertainty is one of the reasons while skyrocketing sea freight prices is another.
Trans.INFO: Adnavem is a fairly young company that was established just 3 years ago. Could you tell us a little about the story behind the business?
Andreas Wramsmyr, CEO and founder of Adnavem: The idea of Adnavem came up about three and a half years ago. At that time I already had a fair background in the transport and logistics sector from both sides – the supplier and the transport side. I had been doing global supply chain management for the automation company ABB, was the logistics director for Gunnebo, a company that provides safe storage facilities for airports and public buildings; then the managing director of Scan Global Logistics Sweden, a full-service logistics provider company.
I saw all the manual processes of the logistics companies, as well as suppliers, that are still used in the 21st century – all the sticky notes, the Excel files, all the documents that were created manually. Being interested in IT and digitalisation a lot, I thought this could be and must be digitalised. Either we were going to do it or someone else would – because it will happen in the industry, that’s for sure.
The whole idea of Adnavem is very much to connect the very best companies working in or for the logistics sector. Our aim is to find the world’s best local logistics providers, those who actually do the job, and connect them directly with the importers and exporters. When I say directly, I mean without the middleman. This way, we’re reducing that traditional nominal amount which is involved in buying and selling services with a traditional freight forwarder, and instead, we offer a solution to really reach out to the parties doing the job.
So, three years ago we had this idea, we started developing our product and got the first customer a year later, and finally, we gradually started to evolve into an organisation. We have offices in Gothenburg, but we also are adding salespeople outside of Sweden and we have an office in Singapore and one in Shanghai, as we mainly focus on multimodal transportation between Asia and Northern Europe.
Trans.INFO: What have been the biggest ups and downs you’ve experienced on this three-year-long journey so far?
Andreas: As a business scaling up , balancing everything from the start was definitely a challenge. We needed to have a product, of course, which is at the heart of our business.
In order to have the marketplace really functioning, we needed to have suppliers who required our service and also shippers who could do the job. The biggest challenge was to make all of this happen at the same time, and then to grow faster and faster and faster.
Linda Gardlov, co-founder and CCO: And we also needed to initialize a behavioural change in our customers and partners, as what we do is something totally new. While we were building the company and had our internal struggles with balancing everything we needed to do, we also had to educate and help our importers and exporters to transform into this digital world.
That’s because logistics often seems to be a very manual and very traditional, conservative world. And the epidemic, I mean, bless all the people that are suffering, helped digitalization to step forward. And this has helped us to drive change.
Trans.INFO: Who was harder to convince about the benefits of digitisation: hauliers or suppliers?
Both of them were working manually, so both parties needed a paradigm shift. To be honest, I couldn’t say if it was harder for one party than the other. Logistics is stuck in a way of sending emails, doing Excel files and those kinds of things, and so we had the same challenge everywhere.
The real difficulty was time – especially when speaking about multinational companies. Moving from accepting the idea to actually testing it could take a lot of time. Also, many companies have a fragmented supplier base: 10 suppliers in China, 10 suppliers in Vietnam, 10 suppliers in Taiwan, and they’ve not been able to learn how to handle moving everything at the same time and in the same way.
But in these three years, a lot has happened. When we started three years ago, we had to convince clients that this is the way to go. Today, we don’t need to explain things, people have already got the basic concept of the marketplace method, and they think this is how they want to work. And nobody who has gone from the old way of working to the new wants to go back.
Trans.INFO: This kind of business model requires transparency from shippers. They need to provide data on their services and they need to stick to that. Are transportation companies happy to provide such transparency?
Andreas: If you are capable of finding the companies who actually carry out the transportation services, they are happy to be transparent. They are proud of the job they make and they want to sell their services, therefore, they are normally very pleased to be transparent with you.
Transparency is more of a challenge for middle-sized companies, in our experience, especially for those who employ some kind of freight forwarders or middlemen in their business quotes.
— ADNAVEM (@ADNAVEM) November 17, 2020
Trans.INFO: Volvo announced its investment into Adnavem a couple of days ago. In the press release about the funding, you say that Adnavem is set to change the multimodal transport industry. How?
Andreas: It very much goes back to the unique business model we use and what we call unbounding. Choosing the best of the best all the time for every single step and working with those parties without intermediaries.
We just sell their services. And of course, in order to do that, we need to have a fully automatic process from pickup to delivery with clear handover, and all of that is done automatically because that’s the way it needs to be done in order to be effective.
Trans.INFO: Talking of the Volvo announcement, what does this investment mean to you?
Andreas: It means two things. First of all, I think, it gives a lot of credibility in the business model and idea of Adnavem. We have one of the largest actors in the logistics sector by our side, who sees our benefits and who works with both sides. We will be there to help their customers, and they could be here for us to help with their customer base.
Trans.INFO: When Uber Freight announced it was entering Europe, it stirred things up a lot. Freight forwarders predicted the end of the world, carriers were happy to be able to enter this marketplace, but then they were alarmed that prices would decrease severely and they would have to wait a lot for their money. Over time, the Uber Freight storm calmed down, what’s more, Uber Freight has since sold its European business to sennder. Is there anything you could learn from these developments?
Andreas: I’m not an expert on Uber Freight or trucking, but in my perspective, Uber Freight could have very well been a complement to us. If you had wished to do trucking haulage in the UK, for example, there may have been ways we could have connected to Uber freight as the last leg of the inter multimodal transport.
What’s more, we can even be grateful for Uber Freight entering Europe. It might seem like it was a competitor for us, but it helped a lot in spreading the news about digitalisation, waking up all parties saying it’s time to change, and even the fears it evoked was helpful because those fears were expressed then answered, parties were educated.
It’s good to be unique in a way, but it can end up being isolated. So having more initiatives in the sector means there are more voices speaking about the benefits of digitisation, providing some kind of insight into how a marketplace works, what their benefits are, and so it is speeding up utilisation in the industry.
Trans.INFO: As we speak, there is considerable uncertainty in the economy whether it be the outlook in the short term or long term. Are you experiencing any changes in the behaviour of your clients?
Andreas: The uncertainty is definitely here on many levels: on the business’ own level: what’s going to happen to us? But on a wider level, too: what’s happening to the global freight market? And currently, we are seeing record highs in shipping rates, that is a fact.
We have seen customers lose 80% of their business volumes due to the pandemic. And of course, that is hurting our volumes, too. And such businesses would be happy to get long-term contracts again.
But there’s something that’s more important, in my opinion. This uncertainty is changing the way businesses plan. The more uncertainty you have, the harder it will be to make a long-term contract and therefore the marketplace model is more applicable than anytime before.
With a marketplace, you will always have all the different options available to pick and choose from. You can filter options based on cost, availability, time, or whatever your priority is – like when you choose a flight for your own travel.
Trans.INFO: As you have mentioned before, the sea freight industry is seeing record high shipping rates and container shortages of many ports. How has it affected Adnavem?
Andreas: A lot of our customers are frustrated, but also that’s the reason why they come to us, because we have a solution that might work for them. As we are digital, we have the advantage of being faster than Excel-based freight forwarders who need to contact their shippers before giving a quote to a client. Then the client either accepts it or asks for details or a lower price, so the freight forwarder gets back to the shipper and so on.
With Adnavem, daily increases are visible, of course, but this is what helps customers choose a shipper and equipment before the prices change again. So, actually, this sudden change in sea shipping rates is genuinely good for us.
Trans.INFO: when speaking about choosing the best service, what about the ‘greenest choice’, which is one of your services? Some businesses use green logistics as a marketing tool to improve their brand. But we all know that when it’s about business, money can be the be-all and end-all. In your experience, do businesses choose green transportation?
Andreas: Honestly speaking, most of the customers are sorting based on price first. Being green might be the second or third factor on their list. If greener means more expensive, there’s no wonder they act like so.
However, we are calculating greenness on all of the vessels we have in the marketplace and we know exactly what their co2 emissions are. And knowing that data, I must say, a green choice doesn’t have to cost more. So that’s what we are looking for proactively: a green way of transportation without significant additional cost.
The customer is always balancing and if they have two options where one has lower co2 emissions, they will tend to choose that offer [the latter one] if the price is the same. But even if greener transportation isn’t cheaper, greenness is becoming a more and more important parameter.
Trans.INFO: What extent do you think mini bids have a key role to play in the freight market at the moment? One school of thought is that they could be a solution for companies who seek a competitive price, but don’t like the risk presented by the spot market.
Andreas: Well, If by minibids you mean shorter-term contracts or smaller volumes like when a company says it has 50 containers waiting for shipping, then yes, make bids on it. I can say that’s a preferable way for us. We are including more or less all the different kinds of contracts; we have long-term, short-term contracts, spot rates, and sometimes they overlap each other. We have the algorithms to pick the best of the best deal for the customers.
When it comes to mini-bids, I think the way business is made recently is going more and more in this direction. Looking back in history you can observe this change pretty easily: the whole industry has gone from the three-year contract to the one-year contract, and then to the half-year contract, a three-month contract and now there are monthly contracts. What’s more, weekly contracts are emerging. Finally, some kind of businesses will stick to spot rates sooner or later. It is not for all but for many.
Trans.INFO: as a scale-up, where do you think you are in your life cycle? What are your plans for the next, let’s say, three years?
Andreas: We have plans going forward, scaling and growing, as we are still in an early phase, I would say.
Volvo’s funding will be used to enhance growth in Asia and in Northern Europe including the UK. We just need to speed up as soon as possible and then, of course, with time, we would like to be a global marketplace. That’s the plan.
Photo credit @ Adnavem