I am very excited to bring FreightWaves readers a profile of Wolfgang Lehmacher. I have never met Wolfgang, but I discovered him while I was making the transition from a generalist early-stage venture capitalist (VC) at KEC Ventures, to becoming a VC specializing in early-stage tech startups in supply chain across various industries. I often refer to my copy of his 2017 book, The Global Supply Chain: How Technology and Circular Thinking Transform Our Future. He graciously agreed to connect with me in June 2017, when I sent him a note through LinkedIn. An article providing Wolfgang’s thoughts about Brexit and how it will reshape Europe’s logistics, ran on October 11 in American Shipper, FreightWaves sister publication.
As you will see, he has an enthusiasm for supply chain, innovation and technology. One could even say he’s obsessively enthusiastic about supply chain, innovation and technology – which is my way of saying, I know he’s someone I’ll instantly like when we hopefully meet in real life one day.
I hope you enjoy the interview as much as I have. If his name sounds a bit familiar, perhaps it is because you may have read: Explained: How and why Brexit will reshape Europe’s logistics landscape, published on FreightWaves on October 11.
Brian: Let’s start with a bit of biographical background. Tell us a bit about yourself. How did you come to be working in the areas of supply chain and innovation?
Wolfgang: Sure. I was born in Bonn, the German capital at the time. Since then, I have lived in Paris, New York, Hong Kong and Geneva. It was a friend of mine who worked at Schenker that inspired me with his stories about global connectivity and the movement of goods. Hence, I joined Kuehne + Nagel and ASG, before I studied business administration. After my studies, I joined TNT, now a subsidiary of FedEx, where I headed among others, Switzerland and the Eastern European and Mediterranean regions. Then, I drove the global expansion of French La Poste for more than 10 years. Since then, I have been working as a strategy consultant, engaged with corporations and startups, and led the supply chain and transport industries group at the World Economic Forum (WEF).
My mission is to promote the supply chain industry. I partner with companies to help them grow. I have published numerous books and papers, and over 100 articles. I have spoken at more than 100 events in more than 30 countries, including the Annual Meeting in Davos, the Boao Forum and at MIT. I am a judge of the IATA Air Cargo Innovation Awards and member of the Logistikweisen, a think tank under the patronage of the German Federal Ministry BMVI.
Brian: I found you through your work for the WEF, as Head of Supply Chain and Transport Industries from 2014-2018. Please explain what you did at the WEF. Why does that work matter? Will that work continue now that you are no longer at WEF?
Wolfgang: In 2014, I was responsible for finalizing the ‘Beyond Supply Chains’ report. The report identified 31 supply chain cases and showed that companies applying sustainable practices can increase brand value by 15 to 30%, revenue for responsible products by up to 20%, reduce carbon footprints by up to 22% and decrease supply chain costs by 9 to 16%.
In 2015, we delivered ‘Enabling Trade: Unlocking the Potential of Mexico and Vietnam.’ Working closely with the governments on jointly agreed sectors, we developed proposals to improve policies and increase competitiveness. One of the selected sectors was the medical devices industry. The study showed that by removing specific non-tariff barriers throughout the value chain, Mexico could generate up to $1.5 billion in economic growth per year. In the same year, we worked with the electronics industry community on the impact of the digital era. The study predicted that analytics services will become the new standard in logistics with the potential to save up to 10% of distribution costs and up to 30% of vehicle maintenance costs.
In 2016, we worked on outlining the digital dimension of the Belt and Road Initiative. The study showed that making the new Silk Road ‘smart’ can boost a region’s GDP by 4 to 7%. We also facilitated an open communication to reboot trade for the Annual Meeting in Davos in 2018, signed by 10 supply chain CEOs, including Søren Skou, chief executive officer of A.P. Moller Maersk, and David Abney, chairman and chief executive officer of UPS. Today’s trade situation shows the importance of such initiatives.
The work continues in the various teams.
Personally, I support the Forum as a member of the Expert Network. This year, I facilitated a concept note on new innovative models in production and contributed to several blockchain papers.
Brian: That’s amazing. It dovetails with the studying I have done, which led me to conclude that innovation in supply chain is a source of sustainable competitive advantage for companies, and an economic multiplier for countries and economic regions of the world. Here’s a related question – what three or four technologies do you see that will most transform supply chains and transportation over the next decade or two? Why?
Wolfgang: Key technologies in supply chain are robotics, robotic process automation, the internet of things and artificial intelligence. The technologies are all at different stages of maturity and come in bundles. According to a Gartner report, at least 50% of large global companies will be using artificial intelligence, advanced analytics and internet of things in supply chain operations by 2023.
The automotive industry has been using robots in manufacturing for decades. In 2012, Amazon was the first to introduce robots in its warehouses and others have been following its lead. Last year, Mujin, a Tokyo-based startup, equipped a warehouse operated by Chinese e-commerce giant JD.com with 20 industrial robots that pick, transfer and pack packages using cameras, crates on conveyor belts, as well as Mujin robot controllers. Other robots cart merchandise around to loading docks and trucks. JD.com calls this 40,000-square meter facility in Shanghai the world’s first fully automated warehouse.
Recently, robotic process automation has moved into the spotlight. It’s artificial intelligence that works with computer software to perform repetitive, detailed administrative tasks ranging from data cleansing to preparation of documents to digital interactions with customers. According to another Gartner report, 73% of corporate controllers will be using some form of robotic automation by 2020.
In search of end-to-end supply chain visibility, Maersk has equipped 300,000 reefer containers with internet of things devices and shipping line CMA CGM announced that it is ordering 50,000 devices to increase its offer of connected containers.
The company that knows in advance what will be bought, when and where can streamline its supply chain. Artificial intelligence is the key to achieve this goal. Otto, a German e-commerce merchant, has created a system that analyses around three billion transactions and 200 variables, including sales data, website searches and weather information. With 90% accuracy, it can predict sales behavior in the next 30 days. Now, the company says it can purchase around 200,000 items a month without human intervention.
Brian: Wow. We were fortunate to have JD Logistics participate in an Urban Distribution event sponsored by DHL, and organized and hosted by The New York Supply Chain Meetup in May. On another related note, at my prior fund, I sourced our investment in Ayehu Software Technologies in 2013 precisely because I believed that robotic process automation would become more critical for enterprises seeking ways to more effectively cope with various IT challenges. It’s heartwarming for me, personally, to see the increased focus and excitement around what seemed like an arcane and rather boring business at that time.
You recently joined a think-tank that is part of Reefknot Investments. Tell us a bit about Reefknot Investments, and the role that the think-tank will play. Why did Temasek and Kuehne + Nagel decide to team up to launch a venture fund?
Wolfgang: Singapore-based Reefknot Investments is a capital fund backed by Singapore investment firm Temasek and Swiss logistics group Kuehne + Nagel. Portfolio companies will leverage insights from Temasek, Kuehne + Nagel, and Reefknot’s partners, such as EDBI, SGInnovate, Vertex Ventures, Unilever Foundry, and NUS Enterprise, among others. Kuehne + Nagel is most interested in tech applications that can help solve real-world problems.
The Reefknot think tank, called the Centre of Excellence for Global Emerging Supply Chain Technologies, aims to drive new business models and transformations in the supply chain and logistics industry. Some key themes we will focus on are disruptions that result from changing consumer behavior and the challenges resulting from climate change.
Besides contributing expert opinions through forums, panels and thought leadership papers, the think tank will work with start-ups, established companies and scholars to promote the sharing of knowledge.
Brian: That is very exciting. So, it sounds to me that the Centre of Excellence for Global Emerging Supply Chain Technologies will serve as a bridge between people building tech innovations for supply chain and people who want to buy tech innovations for implementation in real-world commercial supply chains. That’s precisely why we started the The New York Supply Chain Meetup, and it’s the motivation behind our effort to grow into a global network of grassroots-driven communities focused on supply chain, innovation and technology. I love that.
Based on your experience, what advice would you offer startup founders who are in the very early stages of attempting to develop new innovations to solve problems in supply chain and to bring those innovations to market?
Wolfgang: It is critical is to focus on innovations that address real-world challenges, such as the lack of end-to-end visibility and the carbon footprint. Also, the seamless delivery of online orders is still not the standard. Everything that helps the industry to better understand the value of data is helpful too.
Solutions need to be scalable. Supply chains are global and require interoperability with many different systems and practices and need to comply with a broad range of laws and regulations.
By nature, supply chains can’t be fully digital, and the physical layer needs to be considered.
Startups need to be lean. But certain functions are critical. A founder and chief executive officer that is tied-up with raising capital doesn’t use time wisely. A professional fundraiser or an advisor that supports this activity is critical.
Brian: I couldn’t agree more. You’re basically paraphrasing our rationale for building a specialist supply chain technology fund. Which brings me to my next question. My partner and I are in the early stages of building a venture fund, REFASHIOND Ventures, to invest in technology startups that are developing innovations to refashion industrial supply chains. What advice would you offer people like us?
Wolfgang: Start with a thesis of the market. What are the key developments and how will they impact the supply chain? Then, select target areas based on potential and find use cases that eliminate specific pain points to map out the space. Scoring models will help you to narrow the search and a proper due diligence will guide you to the most promising players in the respective fields. Involve industry experts to confirm your assumptions and findings. They can also help to grow and scale the portfolio companies.
Brian: I am chuckling because I know my partner and co-founder, Lisa, is silently pumping her fists. We’ve debated the use of scoring models in the past. Initially, I wasn’t totally invested in the idea, but I have since persuaded myself that we should use some internal scoring model to help us develop time-series analyses as we build the fund. Now we just need to raise our first fund and create a model that works. (This is my attempt at cracking a joke.)
Wolfgang, this has been an amazing conversation. I say that with all sincerity. What should readers of FreightWaves expect to see from you in the future?
Wolfgang: The continuation of the past. I enjoy what I am doing, and the feedback received confirms the relevance of my work. But who knows? Life is full of opportunities and I am open to expand or move beyond my scope.
Brian: Thank you for spending this time with us. I look forward to being able to share your work with FreightWaves readers in the future.