TL;DR: In this Deep Dive, David Renne and Andrew Reed take a hard look at why supply chain tech hasn’t yet reached its potential. They examine the critical gaps between investment and real-world application, the challenges of integrating AI and automation, and the crucial need for practical, user-focused solutions that inspire trust and deliver clear return on investment (ROI)
Introduction
Supply chains – the systems behind everything from your morning coffee to global trade – are at a very interesting juncture. On the one hand, they are on the brink of transformational innovation but on the other, they are mired in outdated practices, fragmented data, and tools that don’t always deliver on their promises. Despite billions invested in the latest technologies, true adoption remains limited, often hindered by legacy workflows and a workforce accustomed to traditional methods.
This paper takes a hard look at why supply chain tech hasn’t yet reached its potential. We examine the critical gaps between investment and real-world application, the challenges of integrating AI and automation, and the crucial need for practical, user-focused solutions that inspire trust and deliver clear return on investment (ROI).
Sentinel Global is uniquely equipped to address this topic. Our team members have decades of experience in the supply chain ecosystem, having made significant investments across the sector. To stay ahead of industry trends, we conduct regular surveys with founders and operators across various stages, gaining valuable insights into adoption patterns. By focusing on tactical learning curves, we have honed our ability to guide successful adoption strategies. Additionally, we maintain a relentless commitment to staying informed about emerging developments and groundbreaking technologies, ensuring our approach remains innovative and impactful.
While we’ve seen steady advancements in supply chain technology, we believe substantial opportunities remain as the industry works to reduce cyclicality and build resilience against Black Swan events.
Supply Chain in the Early 2020s
The COVID-19 pandemic exposed critical weaknesses in outdated and fragile supply chain processes, as country-wide shutdowns and severe labor shortages brought entire industries to a halt. The obstruction of the Suez Canal - a key waterway enabling global trade since the late 1800s - meaningfully disrupted ocean trade in early 2021. More recently, geopolitical conflicts, like the Red Sea crisis and an ongoing strife between Russia and Ukraine, have suffocated important trade routes.
Venture money poured into the supply chain technology space hoping to solve the problems, with ~$42 billion invested into the ecosystem in 2021 alone, up 75% from the year prior, per PitchBook Data (link to 2023 Supply Chain Tech report). Investors placed bets on companies and ideas to transform outdated processes and reduce, if not eliminate, the cyclical gyrations that have long been synonymous with the industry. Based on a 2024 survey by HERE Technologies, less than 25% of companies across the US, UK, and Germany felt they had made significant progress toward supply chain digitization, despite billions invested in this space and substantial customer spending. In our view, this suggests a major gap between purchase and adoption – a gap that needs to be addressed in the coming era of supply chain technology.
While there was a short period of high deal activity, investment pace has slowed as interest rates have risen and the industry corrected itself from the peak. Despite the influx of capital, the core issues of supply chain resiliency, durability, and interoperability remain unsolved.
In our view, one of the key challenges to a tech-driven supply chain revolution is achieving tactical, user-led adoption. This, in turn, limits the progression toward full interoperability in supply chains. The question is: how do we convert begrudging users into supply chain technology evangelists? More importantly, how can we support the industry’s sharpened focus on the end-user experience?
User Base and Workforce Complications
Given the complexities inherent in transportation and logistics, the industry tends to rightly value years of experience and knowledge acquisition. Trucking, rail, ocean shipping, and air freight networks are complex, fragile organisms that need to be nurtured, which means experience matters.
Let's take the $1 trillion US trucking industry as our first proof point. Based on the United States Bureau of Labor Statistics data, 52% of the trucking industry is aged 45 or older compared with ~30% for software developers. Indeed, the practical realities of training a more-tenured workforce to adapt to new technologies, while certainly not impossible, has proven challenging. In our view, this has created key hurdles for the industry, adding critical re-education requirements alongside the need to demonstrate the value of these emerging technologies.
While high level statistics are directionally useful, we like to supplement these views with perspectives from industry practitioners. Conversations with operators reflect the pains felt by entrenched workforces. As one of our contacts in the freight tech space noted,
“… our customers have no use for partial solutions. A customer of ours is using some of what we offer to put it into their own spreadsheets to support workflows, through the use of macros and formulas. No one has yet cracked the code of replacing dated working styles, and until that happens, there will be insurmountable headwinds to adoption.”
Think about this for a minute. While industries everywhere are starting to utilize autonomous agents to create workflow solutions with minimal human intervention, the US freight industry is stuck in the 1900s. Transportation analysts across the industry, regardless of their position in the value chain, trust only what they have been doing and seeing for 50+ years. They were trained in spreadsheets, putting the onus on technology providers to prove tangible value.
Due to data silos and data continuity issues – exacerbated by transportation analysts and data scientists moving data out of technology platforms and into brittle spreadsheets – there remains a major trust gap between data consumers and data providers.
For many transportation analysts, efficiency (or inertia) often leads them back to familiar, if outdated, tools that allow them to maximize productivity within their time constraints. We believe many of the challenges facing freight technology adoption are borne out of a highly frictional relationship with its core user base. Clear winners in the ecosystem will only emerge when technology can immediately demonstrate ROI to front-line workers, both at a personal level and to the organization as a whole.
All of this is not to ignore one of the bigger elephants in the room: AI. We would expect headcount in the industry to trend lower over time but mass layoffs are unlikely. Bots and “service as a software” will unfold slowly, at a pace directly tied to the accuracy and reliability of these models themselves. As this happens, revenue per employee will rise and businesses will be more profitable. Budgets could come from software spend, could be net new, or could come from existing labor buckets.
For a workforce reticent to adopting new technology, we are interested to watch dynamics between new advancements and the people they could replace. For decision makers, the key consideration, as ever, is ROI. The rise of “service as a software” creates a delicate balance for operators in the space in the coming years. As we consider this dynamic, we are reminded of this chart from Coatue:
Inundated with Tech, not Solutions
As noted earlier the fundraising opportunities for supply chain technology were abundant during the early 2020s. The result is that supply chain workers and participants have more tools than ever at their fingertips to mitigate the risks of port disruptions, natural disasters, and pandemics. Shippers, flush with cash during COVID-19, chose vendors with little diligence in an effort to spend up to elevated budget thresholds. Resultantly, employees of large shippers were left with an abundance of new tools with little training or understanding of how to implement or properly leverage them.
While software products geared toward solving all issues in the supply chain have struggled, we companies focused on solving a single, specific challenge have achieved notable success. This targeted approach allows them to go deep in pursuit of effective solutions.
Take Gnosis Freight, an ocean freight visibility and execution platform, which raised money from Vista in 2024. Serving one of the most global and interconnected portions of the supply chain, Gnosis has developed a low-code, customized visibility and container management solution for the ocean industry. Gnosis built deep expertise in the ocean industry and allowed customers to approach the platform in unique ways – allowing for custom solutioning and eliminating the need for additional tools throughout the lifecycle of an ocean shipment “…from booking until returned empty.”
The importance of simple but resilient solutions cannot be overstated. One of the key themes we’ll be watching over the coming years in supply chain will be companies that don’t try to be all things to all people, but be a simple, effective solution for real issues that users experience on a day-to-day basis.
Data Complementarity and Trust
Additional key considerations in building the supply chain of the future include data complementarity, interoperability, and breaking down silos.
Consistent with our core values at Sentinel, we believe that open computing and interoperable commerce are critical for the supply chains. The industry, while global, has struggled to conform to consistent data standards (e.g. EDI) and what matters most to one customer may not matter at all to another customer. This is not unique to cross-industry relationships, as customers in the same industry may hold different data needs as well.
Our work in the space suggests shareability of data remains an issue as well. Take, for instance, a customer in an industry shipping high-value goods. This customer may not want to share data about shipments and orders outside of just a few people in their organization. While frontier technology implementations like zero knowledge proofs could help alleviate this issue, the technology stacks in most supply chain enterprises are not ready to apply such solutions.
Contrast this with a customer in a different industry who needs this data to flow to all participants in their supply chain. To us, it is clear that customers’ data needs and requirements have placed additional constraints on supply chain technology companies’ resources and platform scalability.
Lastly, as we noted before, users and consumers must have confidence in the data they rely on for decision-making. Building this trust is essential, as upcoming advancements depend heavily on data integrity and reliability. Founders who can prove to the market that users trust their data, and provide that data in near real time, will be positioned for long-term success.
Building the Future
Despite some of the complexities we’ve surfaced (and more likely, because of them), we remain excited about venture scale opportunities in supply chain technology. Operators in this industry continue to innovate, building upon the foundation of those who laid the groundwork for technological ingenuity. Supply chains remain high-touch in nature, and the human component cannot be ignored. For this reason, customer- and, more importantly, user-obsessed founders are well-positioned to drive the next decade-plus of supply chain disruption.
Here are few key themes we see emerging in the coming years:
Breaking down data silos to allow Interoperability of supply chains and the expansion of collaboration between nodes
LLM systems / GenAI tools for data/document ingestion and classifications to standardize data
AI agents for workflow autonomization built on top of existing systems to decrease stubbornly manual activities (e.g. end to end AI procurement tools)
Enhanced computer vision technology that will provide immense safety and productivity gains
Increased automation in warehouses from a fully connected suite of IoT devices to packing and picking automation
Focus on the developer experience and opening the landscape to non technical adopters (e.g. Low-/no-code applications to bridge the talent gap and improve ROI for companies and their employees)
Development of tools that allow shippers, carriers, and 3PLs to take direct (or AI-assisted) action inside of tech platforms, instead of acting on insights through legacy manual processes
Sub-sector-specific supply chain technology or technologies
Risk mitigation tools such as next-generation technology for aiding in the detection of supply chain fraud
Further standardization of supply chain processes
In a subsequent blog post, we will be sharing stories that bring many of these examples to life.
Conclusion
Supply chains are far too important for founders, investors, and industry participants to ignore. We see a bright future for supply chains, both from an investment perspective and for positive global impact. Previous supply chain revolutions have spurred underdeveloped areas around the world, and we anticipate that continued innovation will bring even greater advancements.
The next phase of growth depends upon the areas of development we’ve outlined, and we are lucky enough to be in a position to help accelerate this growth. The total addressable market for these problems is vast – finding demand is not the challenge. The real challenge is developing solutions that move the industry closer to a future of more resilient, more adaptable, more adoptable, and more efficient operations across the globe.
At Sentinel, we look to support founders who recognize the very tactical realities and issues that supply chain participants face. We are invigorated by the notion that we will partner with those founders who can supercharge the expert, motivated workforce across our global, interconnected supply chain. If you’re a founder, an industry adopter, or a leader in the space, our team would love to hear from you.
Reach out and let’s chat:
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