How San Francisco tech companies are addressing the global supply chain crisis

Startups bring data solutions to broken shipping industry

In the 1880s, San Francisco’s supply chain was in chaos. “Cargoes might be sold and resold several times while the ship was enroute,” records from the San Francisco Maritime Museum say, while ships had “little or no contact with the outside world during the months at sea.” Sailors who signed on for a journey to Ireland might end up in Belgium, or Africa.

So the sailors hacked the process. They paid boys to eavesdrop in San Francisco saloons and brothels and report back with shipping news. Armed with that information, the sailors would jump ship in a dockside gig economy.

Today, 130 years later, supply chains are once more chaotic, and shipping data has never been more valuable. Two miles from the Mission Rock port where entrepreneurial sailors gathered data, a tech boomlet in shipping data is taking place that could be a silver lining on the dark cloud of the supply-chain economy.

The Bay Area is still waiting for cars, microchips, and holiday decorations, like everywhere else. But new companies, new jobs and new ways to use data are uniquely positioning San Francisco at a time of economic uncertainty.

“If you were going to pick a place that has uniquely benefited during this tough period, it would have to be the Bay Area,” Phil Levy, the chief economist for the supply-chain company Flexport, told The Examiner. “For us, this is a moment of opportunity.”

That is certainly true for Flexport, a 2,000-person supply-chain company with headquarters on mid-Market that doubled revenue last year to around $1.7 billion and hired hundreds of new employees this year. Next week, Flexport hosts a virtual conference, Forward 21, where experts from the Journal of Commerce, Lululemon, Western Digital Corp. and the trucking firm Convoy will speak about the shortage of goods that COVID-19 has brought by crippling global freight shipping.

And Flexport is far from the only tech company booming during the crisis. Samsara, a San Francisco company of nearly 1,500, manages fleets and operations with a cloud-based platform. Uber Freight in San Francisco, valued at $3.3 billion, matches truck drivers with freight. Orbital Insight in Palo Alto tracks shipments with satellite photography and other means. Elementum in San Mateo provides real-time insights on supply-chain issues.

The supply-chain crisis can’t be solved by innovation alone, San Francisco chief economist Ted Egan says, and serious challenges await San Francisco. Tech is responding to challenges, and “that’s good for the people who solve the problem, but not good for the Bay Area as a whole. We’re still paying more for products.”

But Egan agrees there could be lasting value from the Bay Area’s response to the supply-chain struggles.

For one, companies like Flexport are bringing jobs, and many established companies are hiring supply-chain experts as a new category of tech jobs emerges. There are more than 1,000 supply chain-related job openings in the Bay Area posted on LinkedIn, at companies including Square, Google, Amazon and Apple.

To go along with all of that activity in software, some of the biggest hardware in the world is helping the Bay Area get a grip on the supply-chain crisis. Four giant cranes added to the Port of Oakland have helped the shipping center open a fourth new global shipping line just this year, as it continues to pick up traffic that other ports such as Long Beach and Los Angeles cannot handle.

That represents an empowering set of opportunities for the Bay Area in an economic period of helplessness for many cities.

The supply-chain crisis was a result of COVID-19, Levy said.

Phil Levy is the chief economist for Flexport. (Courtesy Flexport)

Phil Levy is the chief economist for Flexport. (Courtesy Flexport)

“Everyone got a little wrong-footed at the beginning of the pandemic,” Levy said. “People thought they had the playbook for a sharp recession.” Car makers downsized chip orders, retailers reduced inventory, and economists prepared for a slowdown that never happened.

“Incomes went up, and so did people’s demand for goods,” Levy said. An economy normally based on 70% services and 30% goods suddenly flipped as demand for restaurants, travel, concerts and gyms plummeted, but people bought exercise equipment, big-screen TVs and more groceries.

That increased demand for products happened as COVID-19 closed first one, then another, then another key part of the global trade economy, Levy said. “There are a lot of links in a supply chain, and in this case, they all broke down in succession,” Levy said.

“It happened in waves. The initial shock hit Asia, and it radiated out from there,” he said. When factories in China closed, ships didn’t receive goods, the trucks sent to meet the ships didn’t get their goods, and neither did the intended recipients. All those plans were scuttled, and the system broke down. But then the goods came later, creating chaos.

When Chinese factories had recovered from COVID-19’s first wave and began to produce goods again, the shipping industry was being hit by the virus, and couldn’t rearrange shipping plans to carry the delayed goods. Finally a huge surge of goods arrived at ports like Long Beach and Los Angeles, where dock workers were struggling with the virus. Shipping containers could not be returned to be refilled, and the entire supply chain struggled to get back on track.

Data can make sense of where the system broke down, Levy believes. Flexport’s software and data dashboards helped to move $10 billion of merchandise across 112 countries last year, the company says. Its data updates provide insight into shipping timing from Asia to North America, and for many other routes to organizations including the World Bank.

Companies like Flexport work to find where shipments are, and give companies the information they need to manage and adjust plans. Levy said data missing from shipping for centuries can provide insights. “Can you see your stuff, and do you know where it is? And what do you do with that information?”

Flexport records show some shipments pass between more than a dozen companies before they reach their final destination, and many of those companies aren’t communicating. This is how the supply-chain broke down during COVID-19, but it doesn’t have to happen again.

“People are really paying attention to this now,” Levy said. “When everything is working great, you don’t think about it.” Americans got used to ordering products on and getting them, cheap, in a day or two. Now data may be able to show the many places where the system broke down – but that could take fiscal quarters, or even years.

“Freight-hauling is a really old industry not built around data,” Levy said. “That doesn’t lend itself to quick fixes.”

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