Cutting the middlemen from the delivery business

Nate Cochrane
September 9, 2013

Carl Hartmann, founder of Temando, accepts the 2013 IBM SmartCamp winner award from Andrew Stevens, managing director, IBM Australia and NZ. Photo: Supplied
Two Australian start-ups have courier companies and supermarkets in their sights, writesNate Cochrane.

Next time your online purchase arrives at the door, pause to consider the shipping label. There’s a good chance it was facilitated by Temando, winner of this year’s IBM SmartCamp for Australian technology start-ups.

By cutting out the middlemen of global logistics and transportation networks, the company – whose name translates to ‘I send you’ in Spanish – cuts the cost to ship a 500 gram parcel from the US to Australia from $40 to $7, according to co-founder and chief executive officer, Carl Hartmann.

Hartmann had the insight that led to the company while working at JB Hi-Fi in his university days. The electronics retailer survives on slim margins and risked losing money on a sale if it incorrectly estimated shipping charges. Hartmann says that Temando, which counts Harvey Norman, Bing Lee and Deals Direct among its 40,000 clients, now integrates with 400 shipping systems around the world enabling it to send parcels by the best and cheapest routes.

It has also enabled the famous three-hour local delivery popular with The Iconic’s fashionistas.

Shipping cost and choice are key considerations for online shoppers and the reason why half of them abandon purchases at the shipping phase of the checkout. More than two-thirds rank delivery choices among their top priorities [PDF], according to a 2010 survey by Australia Post.

“The only thing (a store) needs to do is print the shipping label and our system will tell the courier to come and get it,” Hartmann says.

“We’re enabling new models of cross-border trade, trying to make it as seamless as possible. We’re trying to make same-hour, same-day delivery possible and this is creating better logistics models.”

Hartmann says Temando could be shipping $1 billion of freight within three years. It makes money selling its software as a service. It has recently started optimising Myer’s delivery system, working with IBM’s Websphere implementation.

Hartmann’s winning pitch before about 200 SmartCamp delegates emphasised Temando’s transparency and seamlessness. While at the event, another start-up Food Orbit was exploring how to integrate its systems with Temando’s. Food Orbit aims to cut out Australia’s supermarkets and facilitate sales straight from the farm gate to restaurants, cafes, hospitals and school canteens. It taps into a global ‘locavore’ trend, where restaurants and foodies seek to buy and eat local produce.

“The chef wants to know where their food is coming from and so does the person who’s eating in their restaurant,” says Food Orbit founder James Nathan.

He says the business-to-business food marketplace will also greatly lift the average 15 cents in the dollar currently spent on food that goes into farmers’ pockets.

“The food system is inefficient, out of date and it’s rotting quite literally,” says Nathan, who cut his teeth in the restaurant trade in Britain while interning for Gordon Ramsay.

“There’s thousands of tons sitting on hectares of land all over Australia. It’s rotting because of the price of the dollar, competition from imports and the fact that (farmers) don’t have any other sales channels.”

Food Orbit has signed 50 of Australia’s estimated 40,000 restaurants and is looking to expand overseas while raising capital at home. Nathan projects the business to grow from $1.5 million in spending on its network to $25 million by 2016 while expanding to 650 chefs.

IBM managing director Andrew Stevens says the disruptive influences of broadband, data and analytics, social and mobile is removing barriers to entry for start-ups. Business success is no longer about technology, it comes down to “leadership and imagination”, Stevens says.

“Stable market shares are nothing to bank on any more.”

SmartCamp is an annual IBM program in which entrepreneurs pitch their business ideas before venture capitalists, IBM executives and industry in return for coaching and a chance to compete with the best and brightest start-ups elsewhere in the world.

Last year’s Australian winners, QuintessenceLabs and Crop Logic, used their accolades to open doors in the US. Information security vendor QuintessenceLabs has moved into NASA headquarters and is expanding its defence and government business while Crop Logic, which optimises potato crops, has signed Frito Lay, McDonald’s, McCain and Simplot as customers.