Leaf Logistics, which develops AI-powered logistics software, secures $37M

The pandemic continues to impact logistics and transportation firms, causing a range of disruptions, including flight cancellations and buildups at ports of call. In a 2020 Statista survey, 41% of supply chain decision makers in the automotive and transportation industry alone said that they’d lost $50 to $100 million due to supply chain issues attributable to the pandemic. Another report from Statista — also from 2020 — found that 73% of buyers and users of freight transportation and logistics services experienced a pandemic-related impact on their logistics and supply chain operations.

New startups claim to have developed software that addresses various problems in the supply chain, from last-mile delivery to manufacturing and warehouse shipping and fulfillment. For example, Loadsmart offers software that aims to automate repetitive logistics processes, while 7bridges is creating an AI-powered platform for supply chain management. Other major players in the space include mapping and logistics company NextBillion, last-mile delivery startup Convey, Flock Freight, Altana, Verusen, and Flowspace. Combined, they — along with other supply chain software vendors — raised over $24 billion in venture funding in the first three quarters of 2021, according to PitchBook — underlining investors’ enthusiasm.

Another vendor in the space is Leaf Logistics, a New York-based startup founded in 2017 by a group of logistics industry veterans. Leaf’s AI-based technology takes shipping industry data and gives companies a forward-looking view of what a disruption — expected or unexpected — will do to their capacity, providing recommendations on how to accommodate those shifts by adjusting trucking routes. Leaf today announced that it raised $37 million in a series B round led by Sozo Ventures with participation from Madrona Venture Group, Playground Global, Floodgate, Schematic Ventures, Supply Chain Ventures, Flexport, and The Intercontinental Exchange.

AI-powered logistics

According to Anshu Prasad and Stefan Friederichs, the cofounders of Leaf, common annual transportation planning and contracting processes in the logistics industry are mired in inefficiencies. After identifying an opportunity to bring more precision and network coordination to the industry, they built the tools to do so in Leaf.

“We partner with other logistics companies, such as digital brokers, who tap into the Leaf network via our platform,” Prasad and Friederichs told VentureBeat via email. “The supply chain is incredibly constrained today from the continued strain of the pandemic, a continued truck driver shortage, and more frequent and intense weather events that disrupt business as usual. These disruptions have made just-in-time manufacturing difficult for businesses to continue when they have no visibility into some aspects of the supply chain. This is what has contributed to toilet paper and food shortages.”

Trained on historical freight data from 425 shippers, Leaf claims that its AI models determine configurations of freight volume with the “optimal plannability and predictability,” considering uncertainty in market capacity and pricing. The platform assembles these configurations into multiple graph models, allowing Leaf to simulate flows through its transportation and logistics.

In machine learning, a graph model is a probabilistic model in which a graph illustrates the relationship between random variables. A graph is a set of points, called nodes or vertices, which are interconnected by a set of lines called edges.

“For corporations, shipping transportation represents one of the largest cost centers in their organizations, yet there is no way to predict or hedge the exact costs each year as they do with other cost centers in the organization. During the past two years, many companies have blown past their annual transportation budgets in the first or second quarter of the year, while supply chains have become constrained and truck drivers are in short supply. This has elevated the transportation conversation to the C-suite, and Leaf provides this group a way to gain predictability and reliability in their transportation spend; they can now contract in a forward capacity,” Prasad and Friederichs continued. “For individuals in the transportation department, such as transportation managers and VPs of logistics, Leaf offers certainty around procuring drivers to cover truckloads so that goods can get on customers’ shelves.”

Market opportunity

Software won’t necessarily solve all of an organization’s logistics woes. According to a 2021 study commissioned by ToolsGroup, 42% of companies say that their goals are being stymied by skills deficits among staff, poor data quality, and a fear of change. Another report compiled by Harvard Business Review Analytic Services found that just 8% of businesses have achieved digital maturity across key components of logistics operations, including supply planning and inventory management.

Still, the pandemic is spurring many enterprises to investigate bolstering their infrastructure. Gartner reported last year that 87% of companies are planning investments in supply chain resiliency in the next two years.

“The pandemic has shown a spotlight on the challenges to the global supply chain and has made transportation a focal area for C-level executives as they’ve been unable to get their goods on store shelves and transportation costs have skyrocketed,” Prasad and Friederichs said. “The pandemic has [also] accelerated Leaf’s business as the need for a new, more reliable way of moving goods has become necessary. In the past year, we’ve seen ten times year-over-year revenue growth as our value proposition has resonated with shippers looking for a new way to navigate supply chain unpredictability.”

Prasad and Friederichs claims that Leaf, which has 40 employees, now works with 550 logistics service providers. The company’s total capital raised stands at $60.7 million.