Navigating the Crossroads

A 2023 Retrospective on the Economy, Venture Capital, Supply Chain, and Climate Tech Landscape

Let us look back at the year that will soon be ending and zoom in on global supply chains. At the beginning of this year, we asked ourselves and a line of prominent colleagues to look into the crystal ball to predict the upcoming year. As a result, we published the article ‘Maersk Growth’s Outlook for 2023 ’, listing our expectations and predictions for the year. Now, it is time to dust off the article again to reflect on our forecasts as the year draws to a close.????

“In retrospect, the supply chain industry has navigated significant challenges in recent years – from the supply chain disruptions during the COVID-19 pandemic to increased inflation, rising interest rates, and geopolitical tensions. Last-mile delivery peaked in venture funding to support the e-commerce boom during the pandemic. Our industry faced more complex supply chains, thanks to the need for omnichannel fulfilment and efficient transportation. The big lesson? We need better visibility and traceability to build resilient supply chains that can swiftly bounce back from potential disruptions,” said Ida Christine Brun , Head of External Innovation & Ecosystem Engagement at Maersk Growth.?

Significant market fluctuations and high uncertainty have characterised the past few years, and 2023 turned out to be no exception. To understand and navigate the recent development in the supply chain industry, we have sought insights from our Group Chief Economist and technology leaders, alongside the leadership of Maersk Growth, to get their reflections on 2023.?

Following this retrospective article highlighting the defining curves of 2023, we will share our perspective on the year ahead of us as we peek into the outlook and predictions for 2024 from an economic, venture capital, and supply chain & climate tech perspective.?

Starting with the Big Picture??

To reflect on the most impactful economic trends and their implications on global supply chains, we invited Graham Slack , Group Chief Economist at A.P. Moller Holding, to share his thoughts and perspectives on 2023.??

“It’s been a year of two halves. During the first half of 2023, the rebalancing of inventories weighed heavily on global trade despite consumer demand remaining quite robust, especially in the US. Trade volumes started to come back during the second half of 2023 as the inventory drag began to fade. At the same time, fading congestion across the supply chain has led to a normalization of pricing, albeit at different speeds depending on the specific market. That is not to say that logistics and supply chains are going to be normal — they are not going back to their pre-pandemic ways of working,” - Graham Slack, Group Chief Economist at A.P. Moller Holding.???

In January , Graham Slack underscored (1) the significance of volatile markets, (2) the need for resilience, (3) the emphasis on regionalisation, and (4) the importance of circularity as the key economic theme impacting supply chains. Almost a year later, Graham maintains that these four factors continue to be the most influential. To back this up, he highlights a few examples:???

• The physical effects of climate change, exacerbated by El Ni?o, will continue to test supply chain resilience in 2024 and beyond. Water levels in the Rhine and Panama Canal are two clear examples of how climate change is impacting supply chains.??
• Industrial action in US Ports on the East Coast, uncertainty about the path of consumer demand, and the inventory cycle could add volatility to supply chains next year.??
• Regarding regionalisation, evidence is accumulating that supply chains are being reshuffled, especially for those goods subject to tariffs and other restrictions — China's share of US containerized imports, for example, has declined quite sharply for certain categories of goods.?
• The interest in circular supply chains continues to build as it becomes increasingly clear that more needs to be done to reduce GHG emissions if we are to keep temperature increases to 1.5 degrees.?

“Another key theme that can be added to the list for 2023 and beyond is the raft of policy initiatives and regulations coming out of Europe that will impact trade flows over the coming years,” - Graham Slack, Group Chief Economist at A.P. Moller Holding.??

Looking ahead, forecasting 2024 proves to be particularly challenging due to the unusual economic circumstances. The forthcoming article will shape Graham Slack’s best estimate, which explores the outlook and predictions for next year in global supply chains.?

Reflections on the Venture Landscape in 2023

In Maersk Growth, we anticipated a shift in the venture landscape in 2023 following some exceptional years during the pandemic. More specifically, we expected VCs to prioritise liquidity in their existing portfolios to a more significant extent while seeking opportunities in early-stage startups by capitalising on lower valuations amid the economic downturn. As the year unfolded, it became evident that venture funding in the supply chain tech industry (2023Q1-3) lagged significantly behind pre-pandemic levels, and by ending the year with a total venture funding YTD that is less than one-fifth of the raised funding during the same period in 2022 (Pitchbook), our predictions have been in line with market developments. In terms of both venture funding levels and deal counts, 2023 is poised to be the least funded year for supply chain tech startups in recent years. To get a deeper understanding of the funding trends in the supply chain tech startup ecosystem, go exploring these two articles: What to Expect in 2024 – 5 Megatrends for Digitalisation in supply chains and Supply Chain Tech Startup Trends ?

Following a surge in demand for e-commerce deliveries during COVID-19, this year has shown declines in venture funding that coincide with a broader trend of decreasing prices in the global freight industry, turning it into a challenging environment for supply chain tech startups.???

“In the ever-evolving venture scene, the venture funding downturn in supply chain tech in 2023 reflects a shift where resilience is tested, and adaptability becomes vital. VCs are navigating new waters, prioritising portfolio liquidity while opportunistically investing in early-stage startups. As the funding flows remain below the 'normal' level of the last five years, supply chain startups find themselves in a challenging tide. Yet, innovation remains the anchor to weather the storm and redefine the future of global supply chains.” – Ida Christine Brun, Head of External Innovation & Ecosystem Engagement at Maersk Growth.??

2023 the Year of ClimateTech Acceleration?

“We expected and hoped that 2023 would mark the acceleration of tech innovations to decarbonise supply chains, with numerous remarkable solutions, investments, and initiatives underway. Despite a decrease in venture funding in ClimateTech compared to 2021 and 2022 linked to a broader market slowdown, the raised venture funding in the ClimateTech startup ecosystem has outpaced the overall VC market in 2023, and climate-focused funds have as well continued to accumulate funds steadily. All this indicates a growing industry and continuing investor appetite,” – Malene Hartung , Ecosystem Insights Manager at Maersk Growth.??

The funding patterns show a high interdependency between the ClimateTech areas to enable the decarbonisation of the entire supply chain. Most of the climate technologies are only viable if other climate technologies are also implemented, e.g., green methanol requiring green hydrogen with biogenic CO2 which again requires renewables to power electrolyzes, and CCUS, which again requires innovation in grids and energy management. In 2023, this interconnectivity showed decarbonising supply chains requires startups, scaleups, corporates, and policymakers to work together on building new value chains and industrial ecosystems. As an example, Maersk engages in several strategic partnerships across the globe to scale green methanol production.??

Going forward, companies will need to engage in partnerships and participate in ecosystems to plan, execute, and de-risk the net-zero carbon journey. Joint by a common net-zero ambition, this can lead to a more collaborative model than most companies are used to, thereby transforming existing or creating new networks of potential customers or suppliers.?

Our Maersk Technology Leader's Perspectives on Emerging Trends?

“In the tech world, everyone's talking about going digital. AI is stepping up to help us forecast demands and plan for different scenarios. This means we're not just building strong supply chains; we're building smart ones too - which also have the benefit of enhancing customer experience by providing faster, more personalised, and transparent services. And in 2023 it was not just about going high-tech, it was also about going green. Sustainability is a major focus for us at Maersk. The logistics industry is on a journey to achieve net zero, involving the shift to green fuels, improved energy efficiency, and the move from linear to circular supply chains. So, alongside all the tech talk, we saw even more green initiatives taking root during 2023 and we expect that trend to catch even more speed in 2024. At Maersk, we're on board with this journey, working to strengthen both our digital and green efforts, recognizing that partnerships are crucial for success on this path,” – Alexa Ríos, Head of Strategic Business Innovation at Maersk Growth.?

To further understand the year within supply chain tech, we spoke with Ashish Saxena , Senior VP of Supply Chain, Transportation, and E-commerce, and Scott Horn , Senior VP of Fulfilled by Maersk Platforms.??

Ashish Saxena highlights, that 2023 was a turning point for global supply chains as the pandemic economy dried up, consumers had to face inflationary pressures moving to non-discretionary spending, and customers faced declining volumes, excess inventory, and supply exceeded demand. The 3PL industry was not immune to this, and almost everyone saw the impact of pricing and volume declines across logistics services, ocean, air, etc. As the business environment became challenging, the key customer trends shifted to:??

• Rebalancing inventory and working capital?
• Tighter cost controls?
• Improving service level agreements (SLA) in their supply chains (beyond visibility)?
• Shifting supply/sourcing base from the struggling China market?
• Digitisation of the supply chain (end-to-end integration, AI advancement, automation, and more).??

In the 3PL industry, the key trends were:??

• Customer retention through better pricing and even better customer experience (SLAs, predictability, and reliability)?
• Rationalization of capacity & assets?
• Cost and margin discipline?
• Accelerating technology and automation (tech M&As).??

Ashish Saxena continues, that most LSPs ran a tight ship and did not venture into risky moves. The growth of generative AI was the highlight of the year in general, and it impacted supply chains, particularly in forecasting, complex supply chain optimisations, and improving productivity. Ashish Saxena stresses the following on unforeseen events during 2023 that impacted global supply chains.??

“The significant implications based on the above key trends are (a) we can’t use 2020-22 as a baseline anymore. 2023 defined the new baseline and the next 2-3 years in this supply chain cycle. (b) E-commerce came out on top of the retail sector, which struggled despite a good start in early 2023. The holiday shopping season clearly showed us that. (c) Shifts in global sourcing impacted the flows and logistics decisions as companies reduced dependency on China and invested in Southeast Asia and the Indian subcontinent. (d) The wars in Europe and the Middle East tensions were unexpected and will continue to impact in 2024,” - Ashish Saxena, Senior VP of Supply Chain, Transportation and E-commerce.??

Scott Horn, Senior VP of Fulfilled by Maersk Platforms, states that the key highlight of 2023 was the shift from international supply chain volumes to destocking those accumulating domestic volumes. For global supply chains, that historically have seen several ups and downs, it became more essential to move capabilities to where the demand is. From the perspective of Maersk, this covered fulfilment, middle mile, and last mile during 2023 while we also saw a need to reduce our cost footprint to match the demand.??

Further, Scott highlights a few unforeseen events which unfolded during the year.??

“As an integrator of end-to-end logistics, we are rapidly learning how to apply the decades of knowledge from our Ocean business to a different environment in outbound/domestic logistics. This means learning how to flex up and down quickly to meet our customer's needs. It also means adjusting legacy thinking to leverage global-scale technology and cost-effective teams instead of old concepts of off-the-shelf back-office software. Inflationary pressures were not matched in all countries in 2023 and this caught some of us by surprise, accelerating the need to move more towards zero touch and ensure our valuable employees focus on the valuable work and automate as much as possible,” - Scott Horn, Senior VP of Fulfilled by Maersk Platforms.??

Strategic Partnerships to Boost Transformation??

Another significant development continues to grow in 2023, the opportunity for strategic collaboration between startups and corporates, with a shared focus on propelling the digitalisation of the supply chain and contributing to the broader decarbonisation goal.??

Alexa Ríos , Head of Strategic Business Innovation at Maersk Growth, emphasises that the continued need for strategic partnerships between startups and corporates to boost digitalisation and sustainability in the supply chain industry has become increasingly evident in 2023. Startups bring fresh ideas, innovative technologies, and a willingness to experiment, while corporations possess established expertise, market reach, and financial resources. When these two forces combine, they can create powerful synergies that drive significant progress in both digital transformation and sustainability initiatives.??

A collaborative approach between startups and corporations enables the rapid adoption and implementation of these technologies, minimising the risk of disruption and maximising the potential benefits. Startups are often at the forefront of developing cutting-edge technologies that can revolutionise supply chain operations. From AI-powered predictive analytics to blockchain-based traceability solutions, these innovations have the potential to optimise efficiency, enhance visibility, and improve decision-making across the supply chain ecosystem. Corporations, with their deep understanding of industry-specific challenges and data insights, can provide valuable guidance and support to startups in refining and scaling their digital solutions.??

“Reflecting on 2023, it is clear that global supply chains are progressing towards being better integrated and net-zero. Innovations to support Maersk’s digitalisation and decarbonising journey will be essential, and Maersk Growth, is on a mission to bring meaningful external innovation in to support this journey,” – Alexa Ríos, Head of Strategic Business Innovation at Maersk Growth.?

?

Stay Tuned for our Maersk Growth Outlook for 2024 – To be Launched in January 2024??

?

Let Us Talk about Supply Chain and Decarbonisation??

Are you an agenda-setting startup, a visionary founder, or do you know someone who figured out exactly where supply chain tech is heading next? Let's talk!?

You’ll find us at [email protected] or on?LinkedIn .?

?

?

?