Why the SCM Software Market is an Enormous Opportunity to Innovate & Create Value

One of my favorite pieces of those written by the Y combinator legend, Paul Graham, is Schlep Blindness. Graham says that opportunities to disrupt and create value are plenty around us. In fact, the biggest opportunities are staring us in the face, but most people unconsciously assume building solutions to these problems will be very tough because of the excruciating execution risks involved. Schlep blindness causes us to leave these great ideas unexplored though they are right under our noses. Graham takes the example of Stripe – even though payments were an issue for every online site, and solving the problem could address a market need, unconscious fear of the tough schlep involved prevented people from writing code to create a payment gateway until Stripe solved the problem.

Reinventing and connecting the supply chain technology stack is one such tough schlep, and the area is still largely ignored because of schlep blindness. To tackle the problem of digitizing the supply chain and creating a single version of the truth, one must tackle a long list of risks and execution issues:

  1. Massive variance in the type and number of users across the value chain, including corporate users, factories, raw material suppliers, freight forwarders, designers, and more.
  2. Defining the right user interface and user experience that can appeal to each group of users.
  3. Convincing all players to move from analog mode to digital assets and identities; culturally changing the working and interacting method, especially amongst factories and manufacturers. 
  4. Unifying and integrating with the various data sets and systems already in use.
  5. Managing and storing the enormous amount of data and transactions that flow through the supply chain.
  6. The entrenched oligopoly of older incumbents and convincing enterprise players that complex and siloed is not good.

Where the execution risk is high, the opportunity tends to be massive:

  1. A supply chain powers every physical product company across fashion, electronics, automobiles, perishables, heavy metals, other consumer products, and more. The total supply chain transaction value across these industries adds up to tens of trillions of dollars a year.
  2. There is an opportunity to go wide or deep. There is a significant need for SSOT (single source of truth) providers to connect old behavior and old technology across the value chain. There is also a considerable need to go deep into individual parts of the value chain. This would include supplier and spend management, last-mile delivery tech, warehousing software, visibility software, risk management, inventory management, freight management, trucking logistics, wholesale marketplaces, supply chain finance, etc.
  3. Supply chain technology is being recognized as a hot space by investors. It is not as crowded, yet, as sales or marketing technology, for example. According to Pitchbook, in 2020 alone, over $5B was invested by VCs in supply chain technology startups across the US and Europe. The average check size per investment is growing, and multiple is higher on revenue and ARR metrics.

To paraphrase Graham, tough problems or schleps should be dealt with the same way you would deal with a cold swimming pool: just jump in. 

Read more about SCM technology innovations through the other blogs on the site.