Paul Asel, managing partner with NGP Capital, offers a venture capital perspective on the current state and long-term promise of the logistics industry.
It’s been a “chaotic year” for logistics companies, notes Asel. Many had to alter plans with the advent of the coronavirus pandemic, then pivot once more as the crisis deepened. Activity was down sharply in the second quarter of this year, but the industry as a whole has since experienced “a very significant resurgence.”
In a sense, logistics represents one of the most traditional businesses in existence, relying as it does on physical assets such as trucks, planes and warehouses to move product to market. At the same time, the industry possesses a streak of innovation and has embraced new technologies in line with the changing nature of demand. As an investor, Asel is drawn to the industry’s potential to create “the connected world” — one that takes a “data-first” approach and draws on the internet of things to transform the way in which product is managed and tracked.
In 2013, when NGP first displayed an interest in logistics, the industry was viewed as an “overlooked space” by investors. Since then, it has drawn “tremendous interest” from capital providers, receiving $34 billion in venture funding between 2014 and 2019.
Asel traces the evolution of logistics providers in response to huge changes in its customer base, such as the food industry’s shift from servicing restaurants to delivering directly to consumers. It’s in response to a shift of the consumer space from physical stores to e-commerce, resulting in significant “disruption and dislocation.”
Asel is bullish on the logistics industry’s long-term prospects, as it evolves from fragmentation to integration, driven by a growing reliance on data to solve discrete problems in supply networks.
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