A VC in Vacationland

In a post last week, we reviewed the emergence of the newest type of supply chain innovators– LARTE’s–Location Aware Real Time Enterprises. This week, we will look in depth at two emerging players in this field–eCourier and Pizza Pilot.

Logispring, one of my investing partners, has just completed funding the international expansion plans of eCourier, a two year old London-based express parcel and post delivery company. The firm’s founder’s have put the whole customer-courier interaction process on line, so that the courier can use his or her PDA to find the next pickup or delivery, using route optimization software powered by GPS location to best route the numerous couriers running around a city.

Why is this such a big innovation?  Anyone who has witnessed the chaotic process of moving documents by van, bicycle or on foot in any big city across the globe knows how inefficient the process is from a supply chain perspective.  Gaggles of couriers sit around drinking bad coffee waiting for a call on their cell phone, then arguing with the dispatcher that they need to take a lunch break and why not give some less than desirable delivery to another guy. Customers are left wondering when someone is going to show up and whether the person will delivery the documents on time, since the dispatcher does not know the location of the courier unless he calls the courier’s cell phone to find out the status of the delivery.

The eCourier technology eliminates the uncertainty associated with inefficient communications and poor routing decisions. Using PDA based tracking lets the dispatcher know exactly where the couriers are and what they are doing, e.g., not moving because they may be chatting with friends. In addition the technology provides lots of data on transit times by time of day, letting the software give more accurate delivery times to customers.  Courier performance can also be tracked and compared, allowing better management of a difficult work force. Customer can also track the progress of their delivery on the eCourier web site.

International expansion is an obvious next step for eCourier.  My take is that their technology can also be used in a variety of related businesses, such as scheduling vans for agencies working with the elderly and schoolchildren, as well as critical blood and drug delivery operations.  It is great to see product-focused supply chain management technologies be increasingly adopted by services industries to improve operations efficiency.

Pizza Pilot is a GPS and web service solution with a goal of transforming the economics of managing delivery fleets.  It tracks driver locations and its proprietary route optimization software eliminates the dispatcher, improving overall delivery productivity by 20 percent, the company estimates. Pizza is a $35 billion market in the U.S. alone, with pizza delivery representing over $10 billion.  About $3 billion per year is spent on delivery fleets, labor, management and fuel.  As anyone who has ordered out pizza lately knows, it is a poorly managed service, with low wages, over 100% driver turnover in a month at times, and slow deliveries.  All the same comments detailed above regarding courier bad behavior also apply to this business.

There are competitors, such as Pi Star Communications and QStar.net  ( I especially like the picture on the Qstar web site of the driver eating your pizza as he leaves to store for a delivery–gotta change that one) who have launched related products.  This will be a hot space in the next few years(excuse the pun, but I have yet to get a hot pizza delivery).

Pizza Pilot is privately held–they discontinued an angel round last week–and is likely to be an industry leader in this brand new space very shortly.  They are reportedly in final negotiations on a major contract with Domino’s Pizza, the leader in pizza delivery in the U.S. market.

One of my supply chain innovation predictions for 2007 is that LARTE’s will be a fast growth area as many service supply chain can benefit from enhanced, GPS based management tools.