Episode Transcript
[00:00:03] Speaker A: Hello and welcome once more to the Freight Buyers Club. This episode is brought to you by the Merko Express Group, your forwarding partner for any sort of transport from Asia to the rest of the world.
Now today we're here in Shanghai in air cargo China and I'm delighted to say I'm joined by C. Cedric Milea. Have I said that correct?
[00:00:29] Speaker B: I absolutely, perfectly practiced this. We practiced this.
[00:00:33] Speaker A: Not very well, I possibly think.
And he's the president of CargoTech and a stalwart of the ECS Group. Welcome to the Freight Buyers Club.
[00:00:42] Speaker B: Thank you. Thank you for inviting me and thanks for your time today.
[00:00:45] Speaker A: Can we start? Can you just give me the overview of exactly who owns CargoTech, what's included in CargoTech and what the concept is?
We'll start there.
[00:00:56] Speaker B: All right. Okay. Interesting question, and I think that's a good start, actually.
So CargoTech is owned by the same owner as ECS, the ECS Group, the GSA. There's a holding company called Quito that owns both groups, basically. And we have the same. We are owned by the same private equity firm. So that's what cargodex is.
It's a tech holding company that has done many investments in different either technology companies that were already existing or that has founded new startups. And today we have four different companies that are part of Cargo Cargo AI. We have Rotates. We also have Wyoming Cargo, and then the latest acquisition was aios in the charter market.
[00:01:38] Speaker A: Okay, and what's the value in bringing these companies together? What are you going to sell to airlines that other vendors aren't at the moment?
[00:01:46] Speaker B: So basically the concept behind CargoTech is that we want to bring together companies that are experts in their own domain.
You cannot be good at everything.
So when you're a technology company, you cannot develop softwares that cover the entire spectrum of the entire air cargo space.
You have specialists in their own domain. So for example, you have Wyoming Cargo, which is specialist in revenue management system for cargo or a cargo management system as well. You have Rotates, they have a consulting practice, they are having data products.
[00:02:20] Speaker A: We love Rotate. We've done some good interviews with Rotate, with Ray Zedov, and we love their data.
[00:02:25] Speaker B: Happy to hear that. So they have data products and they also have softwares. They develop softwares for commercial decision making. You have Cargo AI that has a marketplace. So it's a marketplace that distributes capacity, that automates the transactions related to booking, rate management system connectivity between the different stakeholders of the industry and aios that specializes in the marketplace. So they are really Experts in their own domain. And we want them to remain experts in their own domain and develop solutions that they are good at developing. The second concept behind cargo tech is that we know cargo. So all the CEOs of these companies basically are cargo experts. They used to work in airlines, in forwarders before. So they have the cargo knowledge, they know the, the pain points that today the customers are facing. And therefore they are developing solutions that do work for cargo because they were from the cargo worlds. So we bring together experts in their own domain that are developing in parallel solutions that they know of are needed by the industry because they face these issues that the airlines or the forwarders or the GHAs have faced before.
[00:03:33] Speaker A: Can I just maybe give me an example. You say that they're good at addressing pain points.
What are those pain points? And how does having everyone under one roof, how does that help address that pain point? If I'm an airline.
[00:03:45] Speaker B: When you're an airline you need to do many, many things to at the end of the day carry a shipment from point A to point B. You need to deploy the capacity where the market is. So you have freighters. Some of the airlines don't, but some of the airlines do have freighters. They need to decide where they will deploy them freight first pain point. They need a tool that tells them where they should deploy their capacity.
[00:04:08] Speaker A: So this might have come up with the closure of the Middle east or the war in the Middle East. This would have been a prime example of that pain point coming up on how you might address it.
[00:04:17] Speaker B: So rotates has a solution for that. That's the fleet and network software.
Once you have your network and once you deploy your network, or if you're just a passenger airline with no freighters and you have your passenger network, you need to understand what different origin, destination mix you should have on your capacity that maximizes your network revenue. You have a solution for that as well, which is rotate self steering. When you have flights that are coming live and bookings starting to come up, you need to optimize the capacity through a revenue management system where within cargo, I mean, it's always more complicated than within the passenger business. Because in the passenger business, once it's, I mean one passenger would take one seat. The cargo capacities is like dynamic. So on a passenger flight, depending on the weather, the fuel uptake, the number of customers on board, and therefore the number of luggage that they would be taking, you have more or less capacity to sell. You need a system to be able to give you or indicate what kind of capacity would be available.
So you need a solution to predict that capacity or capacity forecasting system. Wyoming Cargo has that. Then once you have that capacity that you need to sell, you have your shipments coming in, the bookings are coming, what's the show up rates, how much do you need to overbook your flight so that there's no empty space when the flight takes off? You need to have an overbooking forecast. Wyoming is doing that.
So you have different kind of pieces of software that address strategic decision making. Where do I deploy my capacity, how do I optimize my capacity? Tactical decision making. And then you have the operational day to day, meaning that you need to have a booking system that allows customers to take a booking. You need to distribute your offer and your rates via an online platform like Cargo AI is doing today. You need to be able to identify sales opportunities so that your salespeople go and see the forwarders and try to identify flows that they're having so that we can offer them a service that sells the sales copy by rotate.
Then when you have idle capacity as an airline, your aircraft are sitting on the ground, you need to be able to offer charters. That's what we are doing with aio. So we are basically covering the entire scope of the pain points that the airline are doing. And instead of doing that through one company only, which cannot be specialized in everything, we do that with the best experts in the market, which are those four companies working together to bring solutions that are addressing each and every issue and every pain points.
[00:06:44] Speaker A: But as a user, do I have one point of contact or do I have four?
[00:06:48] Speaker B: They can have one, two cargodeck and then we customize the entire solution so we listen to our customers, we see where their pain points are. If they are only in the scope of revenue management, then Wyoming Cargo will take over. If they really need like solutions from each that address each and every, that cover each and every company, then we will just bring all the companies together and make a joint offer.
So to answer your question, they can have four different point of contact by contacting directly the different companies or one that will customize a global offer based on consulting, data products or softwares.
[00:07:25] Speaker A: Now you've got a hub, I believe in Kuala Lumpur. What's the thinking there? I mean is that to physically bring these things together.
[00:07:35] Speaker B: So I mean today we have already an existing company called Rotate Malaysia.
So Rotate who's a company based in the Netherlands, they have a subsidiary in Malaysia that do customer support, software development, customer success as well. And we want to replicate that for the entire CargoTech ecosystem, meaning that we will have in Kuala Lumpur, CargoTech Kuala Lumpur, that covers the back office functions for all the companies, hr, finance, legal, marketing and a pool of staff as well that will be doing software developments, data engineering that will serve the different companies of the CargoTech group.
[00:08:20] Speaker A: Yeah, you said yesterday in a presentation, and forgive me if I might have missed the Q and A section because I had to leave for a meeting and you may have answered this if I remember, you said that you've got 75% of the needs of airlines covered.
Does that mean four companies is going to become five because you're about to announce the purchase of another company to bring them in? Or are you going to expand into that vacuum that you see already?
[00:08:45] Speaker B: So we are going to expand into that vacuum. I mean there's a vacuum that is the cargo operations domain. So we are mainly covering strategic, tactical and operational processes that are related to commercial decision making.
But we are not tapping into the cargo operations like compliance checks, purely warehousing or cargo operation systems. And that's a domain that we want to start tapping into. We wanted to acquire a company, but at the end of the day we didn't do it. But we bought the IP of that company that went into administration. That is called Pandora Intelligence and it's about compliance and sanctions checks. When you make a booking or when you accept a shipment on your network, you want to make sure that it's compliant with all regulations in the world. There's no sanctions based, I mean, on that exporter, shipper, on the consignee, or on these goods from that origin to these destinations. So that's something that airlines all need and we are going to develop a solution that tap into that domain.
[00:09:45] Speaker A: Actually, can you tell me how do forward. You've got 105 airlines and what, over 20,000 forwarders all connected within your group. How do the forwarders or how do their end customers, shippers, how can they benefit from this or are they just sort of the ones who pay the bills at the end of the day?
[00:10:01] Speaker B: Well, I mean the majority of the software that we are developing wire, mine, cargo or rotate is for commercial decision making for airlines.
[00:10:09] Speaker A: Yeah.
[00:10:10] Speaker B: What cargo AI or iOS do can even be for shippers and for forwarders, that's for sure. Shippers always benefit because forwarders, thanks to cargo AI, for example, they will have the different options to route a shipment from point A to point B with the different pricing options.
So shippers would benefit from that because the forwarder can select the cheapest option they can enjoy as well the track and trace functionalities because cargo AI offered automatic track and trace for the shipments. So they have visibility like 24, seven of where their shipments are. For example, forwarders and shippers can also benefit from a new product that cargo AI has been developing, which is related to cargo quality. So cargo AI can determine based on all the data, historical data that they have, what are the quality groundland agents or what is the likelihood of a shipment to be delayed. They are forecasting the delivery time of certain goods. So shippers and forwarders benefit from that because it's anticipation of things that can go wrong. And because they have proactively the information of what may go wrong, they can take proactive actions to make sure that these things do not go wrong.
[00:11:17] Speaker A: Actually with AI, is the timing of you bringing this company together or this umbrella, is that linked to the speed of technological progress, particularly around AI, which I think you gave it a 3 out of 10 at one point for some of the elements of AI in our industry. But does that make it expedient on you to get this product up and running and out to market? Because if you don't, someone else will.
[00:11:44] Speaker B: Well, so if we don't, someone else will.
I'm not sure and I'm pretty sure of the opposite. You could argue that with AI, any newcomer in the market could develop solutions for the air cargo industry.
There is a fundamental difference between these companies and cargo tech is we know cargo. We know cargo because we have been in management positions within the cargo business. We know the cargo business, we know the pain points and we are developing solutions that address the pain points that we have been experiencing in the past or in, in our positions within, within airlines or ground handling agents or, or forwarders, the newcomers, the tech companies. And that's what, that's what I'm, I'm hearing all the time. There are a lot of cargo I,
[00:12:26] Speaker A: I hear about agentic AI. I get so many press releases about it. You know, we'll come to that and
[00:12:32] Speaker B: that can, that can develop like things. Yes, they can develop softwares, but they will not be meant for cargo or they, I'm not sure they will be very relevant.
However, are we leveraging AI and the progress of AI for speed to market? Are we developing solutions faster? Are we bringing new solutions to the market? Yes, we do. So we have some proprietary AI within the CargoTech group. WireMind, for example, have developed their own proprietary machine learning that allows their software to do forecasting and those kind of things. But we're also leveraging the different technology that we embed into our internal processes for coding and that we also embedding into our solutions. Let's assume that you know these MCP connectors that use like clothes or chatgpt to connect them to like other data sources. We are doing that as well. So it means that as a user, as a forwarder, you decide to use clothes and you want to know, you ask clothes, okay, what's the capacity available from Paris or Singapore? And connect to cargo AI for that. Cargo AI will bring all the intelligence, but then the normal AI like cloud will be giving that information directly to the forwarder. So the forwarder can decide to use Cloud ChatGPT, Copilot for example.
They will not replace the tool that we have developed or the AI that we have embedded into our tool, but they will make life easier for the end user.
[00:13:54] Speaker A: Right? I mean I just sort of reference it there. I mean I get a lot of press information about agentic AI solutions. I also hear from more traditional say freight forwarders and they're like this. All of these things are great, but you still need redundancy, still involves a human at some point. That is the nature of our business. Is there a sweet spot somewhere in between those things?
[00:14:16] Speaker B: Of course. I mean the software that we are developing are. You look at, you need to look at them as co pilots.
They will not replace the user, they will help the users to gain, I like to say that 50 points of IQ. So there are copilots for the users to take better decisions, more informed decisions.
However, there are certain areas where agentic AI will replace some of the transactions, manual transactions, time consuming transactions that users are performing today, are doing today. And it's not a problem at all because I am sure these users hate it, hate these transactions. The new generation will not come to a company to do manual work. They want to do work that adds value and not just process things like transactionally from A to Z. So agentic AI for example could take a booking from an email, fill in another information system automatically without the need for a user to do so.
That's what agentic AI will do. It will automate the manual transactions. It is actually doing that and it is a good thing. And it frees up time for these users to use the other softwares of CargoTech, for example to take better decisions on how to optimize flights, where to deploy the cradle capacity, how to set the prices, how to overbook a flight.
[00:15:37] Speaker A: Any regular listeners to this podcast will know that it's a common stated sort of phrase that AI is brilliant, but not if you haven't got the data, as the foundation has to be foundational.
This is true whether you're talking about the forwarders, airlines, obviously there's lots of patchwork legacies in airlines. It's also true about container shipping.
How does us as an industry get beyond that? Or how might a company, whether it's a forward or an airline, have you got any advice about how they might get their data in order so they can make the most of AI?
[00:16:09] Speaker B: I mean, thank you for asking that question. I didn't pay you for that, so thank you for doing that.
[00:16:13] Speaker A: Well, is your answer going to be give me a call?
[00:16:16] Speaker B: No, we have a solution? Absolutely.
So data quality, data availability has always been an issue for the industry and for the cargodeck companies as well, because you fuel our softwares with data and a great part of the implementation of our software is related to cleaning the data or compensating the fact that they are incomplete or incorrect.
Recently, last month, Rotates bought a company called DBC Databuild Company that addresses that specific issue.
So we have spent so much time cleaning the data, compensating the fact that they were incomplete or incorrect, that Rotate has decided to launch that data services consultancy practice that will help customers structure the data, build the data bricks that will host the data that will be useful to fuel all these softwares. So give me a call.
[00:17:16] Speaker A: That was like a softball then, wasn't it? Can I. Let's give it. Let's look at it slightly on a macro level maybe for our industry.
So a few months back there was a new version of Claude called Claude Mythos that was released and then withdrawn almost because it was too dangerous for general release and it was released on license.
Now, would there be a point in time where, say, some companies that didn't have access to the latest AI technologies were at a big competitive disadvantage against those that did? And I ask that particularly in reference to most of the AI companies are American or we're here in China, China's got its own AI companies, but we're both Europeans and we haven't. Is that a possible disadvantage for. For certain companies or certain regions in our industry?
[00:18:05] Speaker B: Well, I mean, it's a fair question and I think the answer could be yes. But then you can't be in a situation in our worldwide market today where one company gets a competitive advantage because they are the only one in that country or that country is only allowing the local companies to use their own technology then like a certain president did recently, the Other countries in the world will impose restrictions on the purchase of these softwares from these companies.
The regulators will come into play to try to regulate the competitive advantages that are unfairly given to some local companies. That would be my take, I think.
[00:18:46] Speaker A: Okay, but we'll just pivot slightly. I just want to give you an example about. Well, maybe you can give me an example about how this might work in your world. People who've been listening to our podcast, they'll, they'll know that there's been a certain few trades that have really been taking, taking off in this year in air cargo. One of those is tablets and hyperscaler export out of Asia into Europe and the U.S. there's been some reverse traffic as well. How would I, as an airline or as a forwarder, how would I benefit by having access to your services?
[00:19:16] Speaker B: You mean on the data side? Yeah, well, with the Rotate data, basically, I mean, it really grabs the, the latest market trends and forecast the new trend that are going to come. So when you subscribe to, you know, rotate demand data, for example, you see the trends, you see the latest trends that are happening. And Rotate is building currently the forecast on how the different traffic loads and the different trades between different countries will look like. So we, we spot that and at least it gives visibility on, on what's happening currently into the markets with knowing the regulatory aspects of it or even when the regulatory aspects are really unspotted.
[00:19:55] Speaker A: Just another question on your investment strategy, you've been heavily investing in AI this year.
Are we going to see more of that? Where does that end for you?
[00:20:05] Speaker B: So we've been already, I mean, we don't really invest in AI, actually, we invest into the companies that are developing software and some of them are leveraging AI. Right. So the way CargoTech is investing is that we give equity to our members
[00:20:21] Speaker A: when we say we. So it's cargo tech, where does the money come from?
[00:20:26] Speaker B: There's a private equity fund that owns Quito, and that private equity fund gave equity to CargoTech to invest into some tech companies or into some startups.
So when we did initial funding, we put equity into the various cargo tech companies that would correspond to the cost needed to develop their softwares until they become cash positive.
So we are investing, but our companies are also generating a lot of cash. So we don't need to have like series A, series B, series D funding, because with the success, the commercial successes that they have, they generate money that they can reinvest into their development and into the investment into AI, for example.
[00:21:10] Speaker A: And just to finish, Cedric, you've got this great suite of products. Presumably this goes out to market, but presumably one of the prime reasons that this works is it's also going to help your own existing GCSes get a GSA, sorry, get a step up in the competitive market, is that. You seen that already.
[00:21:29] Speaker B: That's not how it started. Actually, it started the other way around. Meaning that when I joined ecs, the ECS Group, basically we wanted to. I mean, we created the cargo digital factory of ECS that did a digital transformation of how we were working as a gsa, developing solutions or taking solutions that were existing in the markets to really become the best GSA in the world in terms of service offering to our airline customers. Our benchmark was the airlines that were the most advanced, digitally speaking, and all what they were doing in terms of process or digital innovation, we wanted to do as well. So we did that internally first and then with the things that we had developed internally and with our knowledge of what were the pain points of 150 airlines that we have as customers, we were like, let's build solutions for them that address the pain points that they're having. And that's why we started acquiring and investing into Wire, Mine, Cargo, AI, Rotate and aios. So we invested into companies that are developing software for the airlines. We're using some of them as a gsa, but we're not using all of their solutions because their solutions are really for forwarders, for airlines, for ground handlers, for airports. We are benefiting from some of them that meet our needs and our pain points, but not for all of them.
[00:22:42] Speaker A: You don't get any pushback from people who might be worried about where. Who gets their data. Then that's not.
[00:22:47] Speaker B: Absolutely not, because cargotech is not part of ecs. Cargotech is a sister company of ECS with the same investor and we are a service provider to ecs. We are not part of it.
[00:22:58] Speaker A: Right, I've got it. Cedric Millet, thank you for joining me today on the Freight Buyers Club. That's it from the Freight Buyers Club. Big thanks to demeco Express Group for supporting independent journalism. Catch you all soon.
