Amazon launched AWS in 2006; Microsoft launched Azure in 2010. The cloud is old news.
We’ve digitized all the things; the digital west has been won. ✅
Yet there are large pockets of huge companies in gigantic industries that still operate on notepads and <gasp> fax machines.
Today we look at one of those not-small pockets within the ag industry and one company’s quest to simplify the ecosystem and create outsized impact.
It is a story about a seemingly invisible problem with a seemingly simple solution….until you dig below the surface.
It’s one of my favorite kinds of tech stories, where real magic gets made for customers by solving the ignored, invisible, and/or ‘boring’ problems. The ones that Silicon Valley is unlikely to find and, even if they did, unlikely to find interesting. The problems that customers don’t even realize they have until a better way is presented, like a fish unaware of the water around them.
This is a sponsored deep dive by M2X Group, the transportation management system for livestock and agriculture, and today we’re digging into the dynamics around the oft-ignored livestock transportation ecosystem & the problems M2X is tackling.
Let’s get a move on…so to speak.
Prime Future Sponsored Deep Dives explore the dynamics around a specific company, the problems they are solving and the world they are creating. As always, here are my personal commitments to Prime Future readers:
- I will only deep dive into companies I find intellectually interesting and relevant to the Prime Future audience.
- I won’t shill. My goal is for Prime Future readers to always expect, and receive, practical candor and intellectual honesty.
- Sponsored Deep Dives will be few and far between.
How the transportation ecosystem works
In the US cattle value chain, a calf can easily be shipped 3+ times before it is processed by the packer. Whether a weaned calf shipped from an auction barn to a stocker, or to a feedyard or to the packer, cattle can rack up a lot of miles over their lifetime.
For napkin math, let’s say the ~25 million head of beef cattle finished in feedyards every year travel 150 miles over their lifetime, a super conservative estimate but that would mean 3,750,000,000 bovine miles! Of course, these are assembled into truck loads so there are fewer actual miles driven but the point is – there’s a lot of cattle moving up and down the road.
Which means someone has to coordinate that movement. There’s a someone at the buying organization, say at the feedyard, who is coordinating transportation with a carrier, who’s going to arrange the truck and trucker to pick up the cattle from a seller, say a stocker.
In that coordination there are times for pick up and delivery, there is a price, and there is some sort of contract locking in prices and approximate times.
And today, the vast majority of that coordination happens via phone and a notepad and fax machine. CAN YOU EVEN?
So there’s administrative staff on all sides involved in the process (buyer, seller, carrier). And a lot of room for human error. And a lot of paper shuffling.
You see where this is headed, don’t you?
M2X provides a Transportation Management System. Their software platform digitizes the processes around coordinating livestock transportation and allows all the players involved to visualize one source of truth for all things related to managing livestock transportation: prices, arrivals, etc.
Some reasons that’s interesting…
(1)You can’t run an algorithm on a legal pad.
Optimization follows digitization.
As M2X customers transfer their workflows related to transportation onto the software platform, the next step is for M2X to work with the customer to start optimizing transportation. In New Zealand, M2X’s home country, this means identifying the most efficient routes to pick up animals in order to fill the truck on its way to the processor. For example, Silver Fern Farms has 14 processing plants, 90+ buyers, 14,000 suppliers, and works with over 160 trucking companies. M2X helps them optimize farm-to-plant flows, meaning that for the same amount of animals delivered to the plants, Silver Fern Farms is removing 1,000,000 kilometers from their network.
At current fuel prices that impact shows up quickly in the financials. Energy cost savings aside, the optimized farm-to-plant flows means animals are on trucks for 14% less time. All of this means 11% reduction in emissions per animal. Check, check, check.
In New Zealand, a big part of the issue is trucks picking up animals from farms in less than truckload lots so those improvements are created both by optimizing which truck is selected for animal pick up, and what route the truck takes in their multiple stops.
But these optimizations are only possible because the workflows have been moved to the software where better data is captured, and then optimizations can be layered on top.
In the US the sale barn often serves as the point of aggregation for cattle, so most truckloads are full truckloads already. But even in the US, route optimization still suggests the shortest, fastest, and safest route for a loaded truck which reduces energy costs, animal time in the truck, GHG emissions, etc.
And there’s another optimization superpower, and that’s to reduce truck congestion at plants. If you have spent much time around meat processing plants, you know this can be a massive issue in 100* summer heat but even more so for dairy processors where time is <literally> money.
I love these examples where what’s good for the income statement is good for animal welfare is good for GHG emissions. Magic.
One reason I'm so bullish on the future impact of tech in animal ag is that there's still so much happening on legal pads or the producer's pocket notebook, and as those workflows are digitized, it will create opportunities to optimize decision-making and outcomes.
For example, Caviness Beef Packers began working with M2X to streamline their transportation-related activities. They set out to pick up some efficiencies but as Regan Caviness put it, “we realized just how inefficient we had been once we had a better way to do the work. We’ve gotten way, way more accurate in everything from scheduling pickup through to billing, but especially in calculating freight costs for each truckload. Now we have an accurate headcount, accurate mileage, accurate owner data (name and address), and the freight costs are calculated in the software rather than across Google Maps tabs and paper.”
Regan also pointed out that every M2X customer will think about their flows differently, from livestock pick-up and scheduling all the way to billing. Working with software that was flexible to fit their business processes, instead of the other way around, made a big difference in the outcome and being able to easily digitize processes.
Because that is the step 1 that enables all subsequent, higher-value steps.
Optimization follows digitization.
(2) There are 4 timely tailwinds propelling M2X’s journey:
- Many companies have a weird dynamic where they cannot bill a customer until they have the invoice from the carrier for shipping costs. Take a grain merchant who’s selling feed ingredients to a feedyard or dairy. If the processes surrounding the carrier are managed via fax machine, you can imagine it can take many days or even weeks to settle costs with the carrier which delays when the grain merchant can invoice the feedyard or dairy. That was all fine and well when interest rates were low and money was cheap. But it’s a whole new world now, with high-interest rates where every incremental day of receivables outstanding costs real money.
Think of it this way – if I’m borrowing money at 8% interest for my operating line of credit, and I cannot invoice a customer for 14 days because I’m waiting for an invoice from the carrier to know the precise shipping costs, there is a quantifiable cost to those 14 days. By simplifying the system for all parties, M2X software allows companies to reduce their Days Receivables Outstanding by shortening the time to invoice customers. Like all numbers in high-volume businesses where small differences can make a big impact, except this impact is amplified in a high-interest-rate environment.
- We all know, it’s still a tight labor market. So freeing up administrative staff to focus on higher priority tasks than shuffling papers can be a huge win. Not to mention, many folks in these roles have been in these roles for years, sometimes decades. So there’s an element of succession planning and capturing process knowledge to transfer to the next person that’s also relevant.
- Almost anything in livestock that creates an increase in efficiency, creates a corresponding improvement in sustainability. It’s math. But that dynamic becomes very real when you’re talking about the carbon footprint of thousands of diesel trucks running up and down the highway moving millions of cattle. There is real, tangible, low-hanging sustainability fruit to optimizing transportation routing and planning. As companies get closer to their self-declared deadlines for reducing Scope 3 emissions, these types of improvement opportunities have to be attractive.
- As consumers, Amazon & others have conditioned us to expect visibility into where a package is until it arrives at our doorstep. That expectation for visibility is mostly a curiosity for our collective neuroses but for a company buying or selling a truckload of livestock, the expectation for visibility is a critical business need.
One of the primary benefits of digitizing allll the processes around transportation is that it creates real-time visibility for everyone involved. That visibility isn’t nice to have, it’s a need to have…but you can’t have one digital ecosystem with one source of truth when the whole process is managed on legal pads and fax machines.
(3) Why now?
Usually, this question is asked in the context of why the market or tech is at a point of readiness, but in this case, the question is more of, why hasn’t this been done before?
Coordinating shipping for livestock is, umm, not exactly the sexiest thing. Nor is it visible to those who aren’t working in it day in and day out. It’s one of those pockets of the industry that you only know how terrible it is if you’ve directly interacted with it. And you only have an appreciation for how to solve the problem if you’ve directly interacted with it.
Yes, there are plenty of Transportation Management Systems (TMS) out in the world, servicing manufacturers of all types who are bringing in one kind of widget and sending out other widgets. And those TMS work great for companies who bring goods in and out of their facilities in standard boxes. But they fall short for everyone in the value chain dealing with live animals, meat, even grain and fertilizer.
As we know, agricultural supply chains can be s-u-p-e-r complex which both creates the need for a purpose-built system for agriculture and makes it costly to build such a system.
(4) In the spirit of learning out loud, here are my takeaways as I’ve learned about M2X and the category they play in:
- Some of the most interesting businesses in agtech are simply competing with a notepad and pen. You can’t earn the right to fix the supply chain or any other lofty aspiration until you solve a one thing for a one customer, ideally a repeatable thing for a repeatable customer. Then layer in more value for that existing customer base.
- The role of sector knowledge in ag can be a mega differentiator, both in the product you design and in the customer experience. A CRM is a CRM whether you’re storing a customer name and notes about your interactions for a cattle feeder or a battery smelter or shoe stores, a TMS is not a TMS. The M2X team is from the industry so they have an understanding of the many nuances that a generalist TMS just can’t have.
- High-growth bootstrapped businesses are fascinating because they are outside the norm. M2X has funded most of its growth from revenues rather than venture capital, so their validation has been in the form of paying customers….the strongest possible validation signal.
- Substantial businesses can be built off what seem like niche spaces. Every livestock category navigates the same challenges around transportation management, as do players in grain and feed and fertilizer. The problem is repeatable with many adjacent markets within agriculture. 🤌🏼
Look, farming on Mars, chickens with 4 wings, steers that yield 80% ribeye, and self-processing pigs are all interesting moonshots for agtech to tackle.
But in the meantime, there’s so much value to be created in improving workflows and laying the foundation to optimize business operations and outcomes, like M2X is doing in the transportation space.
