Can you please briefly introduce our readers to Transmetrics?
Asparuh Koev: Transmetrics is offering Augmented Intelligence products for cargo planners. So what is Augmented Intelligence? Unlike Artificial Intelligence which aim is to replace the planner, Augmented Intelligence aims to keep the planner in the planning seat and to give them extra data and powerful algorithms to be used in order for them to be better at their job and to achieve better results for the company. So it is the human and computer working together and using the best strengths of both. We have two different offerings to the cargo transport market – one is about optimizing road networks and the other one is about empty container repositioning, which is what we are going to talk about at the Digital Container Summit.
Why does the problem of empty container repositioning exist and how can Transmetrics help reduce the number of empty containers?
Asparuh Koev: There are three main reasons why the problem of empty container repositioning exists and Transmetrics can help with the 2nd and 3rd one. The first reason is that there are trade imbalances. For example, there are more shipments from China to Europe than from Europe to China, and because of that containers end up in the wrong place and they need to be repositioned. We cannot help with that because it is just a fundamental problem in the world.
The second problem is that to plan optimally the logistics of empty containers is a very challenging task. You have hundreds of locations where you need empty containers and you have thousands or millions of different scenarios of how you can move the containers from where they are to the location where they will be needed. For planners, who for obvious reasons cannot visualize in their heads the entire picture and the entire data of a transport company, it is very difficult to find what is the optimal solution globally for the problem. What the planners can do very well is local optimization, so they can plan how to optimally move the containers based on one shipping service or based on the demand within the local region, but all these local optimizations are not optimal on the global level. This is where we can help by offering software to help optimize globally which is inherently more optimal than everyone doing their local optimization independently from each other.
The third problem that exists and we can help with – it takes a long time to move the containers. Typically, it takes more time to move the containers than there is the visibility of bookings ahead. By the time you need to decide where to send the containers, you still don’t have the bookings and you don’t know how many containers will be needed at each location. That is why what we help with is to create a very accurate forecast of container demand which takes into account thousands of different variables and which tells us what to expect in terms of containers taken out and returned to stock at each location over the next 12 weeks, which can be used as a basis for optimal planning of the feeding of containers. The combination of these two things (optimization and forecast) would lead to about 10% optimization in both the size of the fleet needed to meet certain demand and also total logistics cost to move these containers around.
What is your personal background and why did you choose to tackle the empty container repositioning problem?
Asparuh Koev: My personal background is a software engineer turned entrepreneur. This is my 3rd startup, the first one was acquired by VMware, the second one was management buy-out by the management team which I created. Both of them had a very strong footprint in the logistics market, so I realized the challenges and the lack of optimization which exists and an enormous opportunity which is there. But also, very high barriers to entry. So, generally high barriers to entry mean that it’s very difficult to develop a solution that actually solves a problem, which is a good thing for a startup. If you manage to solve it, it is difficult to get copied. So, it looked like a very good idea to go into logistics.
Specifically, empty container repositioning is a very big industry-wide problem that needs to be solved. It is also a problem where the companies realize the necessity to do something, which is good. We know of many problems that exist in logistics that can be solved with data, however, at Transmetrics, we were always driven by what the customers actually asked for right now. The main reason is that we had a customer who came and asked about this problem and we knew that we can solve it, so we went and began solving it. Then we started to get approached by other customers who have the same problem and the rest is history.
Were there some major failures at the beginning of Transmetrics and if so, what did you learn from it?
Asparuh Koev: Every startup goes through multiple challenges through its existence. Those startups that cannot resolve them fail and the ones that resolve them like us have numerous stories of nearly failing. I recently read about a startup that was sold for $300 million and there were 10 times when they nearly failed. However, these are just the challenges that you need to resolve which are very difficult.
From our side, besides the normal challenges and difficulties, we had several failed projects – failed means we did a Proof of Concept which wasn’t successful, or we didn’t go into implementation after a good PoC. There were two main reasons – one reason was the data quality. We learned that the data quality in logistics is not good and you have to improve it a lot, so we invested very heavily into automated data quality improvement, into Artificial Intelligence, also into having a very good team of professionals who do amazing things with not very high-quality data that exists.
The second reason for failure is that early on we started working with some customers that were interested in learning rather than in solving a real problem. When you work in such industry as logistics, you have to learn to distinguish between them. However, there are many people in this industry that have a very small budget to try these things, but their main goal is to put these developments into their performance review at the end of the year, rather than to really go and try to fix something in the organization. These were the projects where we delivered the results that we were proud of, and then it got stuck and didn’t go anywhere, because our customers were not really interested to do something. This is something that enterprise startups need to learn – not everyone who pretends to be a customer is actually a customer, so yet another challenge is to figure who is real.
What are the top three digital trends in logistics that are shaping the future?
Asparuh Koev: Automated generation of data – anything which generates more data by sensors, by cameras, etc.. One example is having tracking devices and sensors on your containers so that you know where they are exactly, when they are coming back, and so on. Such insights can help greatly with preventive maintenance, real-time positioning of fleets, etc. It already affects the business and brings a lot of value in comparison to some buzzword trends like self-driving which may be or may not be a thing in 5-10 years. One more thing which is worth mentioning is the visual technology that automatically scans the shipments and determines their dimensions as they are moving.
Demand forecasting – logistics has been very reactive so far, so you wait for the customers to make the bookings and you try to make a plan for them but it’s very hard to be efficient in that. When you have a proper forecast, you can actually be much more efficient with resources. In the industry that has a 2-3% profit margin being 10% more efficient with resources is a major improvement.
Digital freight forwarders – at the moment there are some companies that are using quite a lot more technology to do freight forwarding. I am not going to name them as everyone knows who they are. They seem to be growing with 100-200% per year while the traditional freight forwarders are stagnant or struggling. This is still a micro trend – these companies are still very small compared to big freight forwarders. But in 2-3 years’ time, they will become serious challengers on the market.
Amazon is also a digital freight forwarder and even a digital network provider similar to DHL. The difference is not that they have a better operational process, the difference is that they have better data and better technology to do proper dispatching. Therefore, they have higher profit margins. Thus, everyone needs to become a digital freight forwarder at one point of time in order to survive.
Why is logistics slow to change and adopt digital solutions?
Asparuh Koev: This is the question that I ask myself every day and it is very frustrating, so maybe we should ask people who are logistics managers why do they let the innovation trends to pass them by?
Why did they at all leave the door open to the digital freight forwarders to get a foothold in the industry? It was easy to prevent this three years ago if the logistics managers had been doing the right things, and now the situation is quite the opposite, so they have to compete.
Why are they willing to pay a million to a program, which is matching them with startups, and then they are not willing to pay even EUR 50k to a startup that they are matched with? It’s a very frustrating market and I don’t have the answers. My only thought here is this is not the winning strategy and it has to change.
What can our attendees expect from Transmetrics at the Digital Container Summit?
Asparuh Koev: We are very down-to-earth guys. What you should not expect is that we will show you some sort of bright digital trend of the future. Instead, we want to discuss what we are doing at the moment. We want to talk about something that already works with bad data quality, with massive hurdles in operations, with lack of visibility and so on. We want to present, what you can do right now in order to be significantly more efficient in the container shipping space, and something which can be replicated live in every shipping company within 3-6 months, a very short timeframe by the industry standards.
Asparuh Koev is a successful serial entrepreneur and CEO of Transmetrics – a leading company offering data cleansing, demand forecasting, and predictive optimization for the cargo industry. He has 20 years of experience in creating complex IT solutions for the largest logistics companies.