Founded in 2013, by Ryan Petersen, Flexport is a growing, full-service international freight forwarder. The company offers not just practical logistical support for companies needing shipping services, they also are transforming the industry with their own online transport management system (TMS software platform). Like many freight forwarding services, they see going digital as the future for modern transport and logistics and brokerage supply chain teams to collaborate, increase transparency and efficiency and save costs across processes. They are part of a growing industry, not just in their supply chain services, but in digital infrastructure products that improve the operations side.
It isn’t just the benefits of real-time tracking, well-structured data storage and safe data transfer, or automated shipment-specific communications and compliance that are now oiling the wheels for the industry, it is the customer focus, enhanced by automation, backed up by a dedicated team of experts that instils confidence in clients, both for Flexport and their competitors. The interaction of man and machine led operations make supply chain management simpler, more reliable, highly accurate and give clients peace of mind that they benefit from the best of both worlds: specialist support and digital efficiency.
With 600 people and offices on three continents in 2017 and counting, Flexport’s vision to improve the reliability of international transport logistics businesses is a daily reality. Flexport supports over 10,000 clients and suppliers, helping to manage all aspects of their supply chain operations. Diversity is built into their DNA, given their global presence, which also makes them attractive to a potentially huge pool of talented employees, creating virtuous growth cycles.
With $26.9 million in funding, in 2016, Flexport grew the volume of goods it ships by 16 times. Forbes magazine described Flexport as doing for the T&L business what international courier companies do for the portable package shipping world.
According toPaul Graham of Y Combinator, a seed start-up company:
“Flexport is one of that small handful of startups that are going to change the world.” He is also quoted on the company’s website as saying:
“Flexport is one of those rare companies that will not merely satisfy its market, but grow it. There will be more international trade because of Flexport, and international trade is a very big thing for there to be more of.”
What Is So Exciting About Tech in T&L?
Graham is right to be excited about the transforming nature of the T&L industry. We all understand the application of modern tech to courier shipping services, where we can track the progress of our parcel, giving us peace of mind. However, the global transport and logistics industry is at another scale; it is what keeps global trade moving and our everyday life smoother.
Global transportation of goods and cross border service provision is highly complex, making operational management head-spinning. That vast array of variables associated with any single shipment or transaction can pose hold-ups at any time. This is where automation and machine collaboration and support services are giving transportation services the edge.
Those T&L tech founders who are able to bring their import and export experience to their digital offerings can really add value for companies needing shipping services. The $9 trillion global logistics industry is improving their business model to give greater power to end customers.
Traditionally, freight forwarders have relied on last century data, infrastructure and communications systems, such as confirming shipment details via time consuming faxes, or reporting on progress via numerous, now often redundant, phone calls. Coordinating the sophisticated delivery process in the past has been labour intensive, inefficient, more costly and potentially flawed.
TMS software providers now point the way in freight forwarding, leveraging software to automate repetitive, simple administrative processes for industry professionals. Simple to use platforms, apps and flexible modular systems integration allow greater customer control through increased transparency throughout supply chains. Customer confidence is enhanced through tracking and control of cargo and simpler rate comparison tools and easier negotiation.
TMS system investors include Google Ventures, PayPal Co-founder, Peter Thiel’s Founders Fund, Bloomberg Beta and other big names in the finance and technology industries. In July 2016, Flexport was valued at $365 million. In 2017, revenue was expected to reach $500 million. They show what is possible in the ever-growing international freight forwarding sector.
So What’s So Great About TMS Software?
TMS software providers recognise that T&Land the import and export business involve a complex chain of different companies and headaches for companies shipping products. Frustrations with delays in shipments could lead to many time-wasting phone calls, now superseded by real time SMS push notifications of key milestones, such as passing through customs, estimates of arrival time, or companies are able to download an app to see their shipment in real time on route.
While software is not a magic wand for reliability of receiving cargo in good condition or on time, for companies without a local presence overseas, tech helps planning, crisis management and customer service via automated reporting. Having advance information on fees and schedules with a few online clicks empowers shippers to choose between service providers, tailoring their particular requirements better and faster. Learning about the option of flexible, less-than-container-load shipping services can reduce transit times, or batching up with similar products of other shippers can save on costs.
As regular shippers understand, the freight forwarding industry is essentially still a relationship business, but one that can be improved with technical support. Being confident of the history of one’s tech partner is crucial to making the right investment decisions. Some businesses with limited shipping needs can benefit from one or two ready-made modules that simplify the whole service comparison, booking, payment, tracking and receipt process. A company with a background in freight forwarding understand the minutiae of documentation flow, scale requirements and can make a targeted assessment of business hardware and software needs. Knowing one’s software is backed up by a company with long-standing expertise and extensive T&L networks means you are covered for any specialist services needed along the way, or when the unexpected inevitably happens in such an unpredictable environment.
Those companies with their own software development team are able to automate more and more T&L data processing, in line with specific business needs, such as ensuring up-to-date compliance issues with tailored TMS software solutions that can automatically update permit and documentation requirements on the ground, around the world, at a moment’s notice, so that correct data is instantly accessible and relevant paperwork is flagged for amendment where required.
More than anything, it is the combined power of data harnessing and management, coupled with a digitally empowered workforce, supported by a smart transport management system (TMS)that is making the difference for the T&L success stories.
25 freight forwarding companies achieve revenues of more than $1 billion a year, but these businesses are mostly well-established, making digital transition for them harder, given reliance on sometimes outdated legacy systems. Nevertheless, increasingly, they are transforming their online presence to reflect changes happening at large.
“We are no longer a shipping line, but a mobile inventory management company,” says one industry leader executive, speaking for many other industry stalwarts as much as his own company.
However, there has also been some difficulty in established shipping companies being able to adapt to the emerging connected environment. An example of dramatic failure being parcel carriers, DHL, who, according to Ryan Petersen “bought three of the biggest freight forwarders for $15 billion, then spent $960 million with IBM for an IT backbone, and that failed.” DHL had to write off their losses on this venture.
Petersen believes that whereas his company may be ahead in the tech race, by contrast to established freight managers, they still have had to catch up in terms of matching in the field transport capacity given the capability of industry juggernauts with whom they compete, such as Maersk Group, UPS and similar long-standing brand names.
Service offerings vary across the industry. Some companies operate their own warehouses to consolidate cargo shipments into containers to help in making savings for both themselves and customers in turn. Together with software that helps improve decisions and achieve efficiencies, their freight costs can be highly competitive.
Having a range of facilities in strategic trading route locations is essential. Newer, more software focussed companies need to build their supply chain network, whereas established players have to add to their traditional freight services to a more digital operation. The combination of offering technology to partners and having in-house expertise is a key selling proposition for future-proofing of freight brokerage and T&L provision.
Interviewed by Susan Adams of Forbes, Petersen said “Today we still burn money. We’re using venture capital to go after scale… The losses are on investments in engineering and things like recruiting and infrastructure.”
Finding the formula to be more competitive on price and still offer a “high value” service compared to other players is not always easy; so for instance, whereas tech based T&L companies can be around 10% cheaper on shipping ocean cargo, for instance, reliability or speed of service may not be consistent, due to lack of capacity.
In terms of where Flexport are in capacity terms, in 2017, they shipped 7,000 containers. Larger operators are moving more than 100,000 containers; the biggest players move several million shipping containers each year. Sometimes, it is as much about the network capacity of a company that can lead to economies of scale for customers. Profiles of freight forwarders vary greatly in the industry.
However, it is worth shippers knowing that where there is more automation, regardless of size of capacity, with the right cloud operating systems coupled with strong industry partnerships, newcomers cannot only make the same profits as the larger players, they can compete on price because of their personnel and overhead saving.
The Future of the Online Model
Petersen describes their online freight management model as operating like “Facebook for trade”, where clients invite their supply chains to become part of a networked data system. This builds capacity, plus customers. System integration and connectivity allows companies needing shipments to make purchases through a unified system and the preferred freight forwarder who has a strong network of suppliers delivers their goods.
This is a dual revenue stream for freight brokerages and forwarders that also benefits end user trading partners by identifying shipping snags immediately, or even means they can anticipate and avoid unforeseen additional costs and penalties.
Josh Constine of TechCrunch calls Flexport “The Unsexist Trillion Dollar Start-Up”, which is recognition of any digitised freight company’s potential, given the right people behind it.
Data throughput to TMS systems allows for some powerful big data access and precision planning for freight handlers, as well as suggesting areas for strategic innovation. “By analysing all the routes, rates, speeds, and customs compliance data of shipments booked through its full-stack software and service, it can find the most efficient way to get goods from point A to points B, C, X, Y, and Z.” Not only does this build efficiency and robustness, reputation enhancement completes the injection of power. Computers can process data much faster than humans can and without human error risks. Couple this with strong customer service support on the front end, customers will become loyal return buyers.
Petersen describes TMS as “…bringing transparency to a black box industry”. He’s referring to some of the guess work that goes into management without access to real-time data and the fee negotiation that can feel like playing poker.
Process transparency and enhanced decision making efficiency has implications for national economies too, because of course our global economy is dependent upon the smooth movement of freight and business services. Emerging economies would do well to support investment in T&L tech, as this benefits whole populations ultimately.
The future of the industry is customer facing, competitive and convenient. Systems can be boosted with built in artificial intelligence (AI) to enhance human-computer interaction. Algorithms can monitor re-ordering cycles to help managers precisely plan future shipments. TMS software can support businesses to automatically manage their inventory for a variety of business cycles. Petersen calls this “…an operating system for global trade”
Shipping is a massive 15% of our global economy, “And it’s much of the back-pressure constraining the other 85%,” says Y Combinator President, Paul Graham. Because the international freight forwarding sector is largely still so backward in adopting tech, freight forwarder and brokerage companies can seriously steal a march in this industry from what Graham calls “schlep blindness”, i.e. innovators being unable to spot potentially big ideas because of the tedious journey of the learning curve involved.
For anyone wanting to develop a lucrative start-up in importing and exporting, or in T&L management, those companies offering the power of automation, backed-up by industry expertise are the ones to watch. With a wide range of software solutions available, from the modular, to end-to-end systems, talk to a tech partner who already talk your language, given a history of freight management expertise built up over a decade.