Flexport – Bringing Sexy Back…Not
How to reduce supply chain inefficiencies by bringing the internet to freights
Most people associate digital transformation with hot, fast-growing companies like Google, Uber, or even Airbnb. However, this post takes a different approach and focuses on a company that TechCrunch labeled the “the unsexiest trillion-dollar startup”. Introducing FLEXPORT!
Flexport is creating value by acting as a “full-service air and ocean freight forwarder”. Using cloud-based software, this company provides its customers (both exporters/manufacturers and importers/final consumers) with complete visibility and control over their entire supply chain. But what does this really mean?
Let’s start with the basics: What is freight forwarding?
A freight forwarder (like Flexport) is a person or company that organizes for the shipment of goods from a manufacturer to a final point of distribution. This transfer often requires multiple carriers and various modes of transportation – as such, the logistics have the potential to get very complicated, very quickly. A route could look as simple as the following:
Or something more complicated like:
** remember all of these transfers could be through different carriers
It is important to note that freight forwarders do not physically move the goods, but instead they act as logistics network experts. This includes taking care of tasks like: planning the appropriate route, negotiating lower costs, consolidating the various modes of transportation, arranging for documentation/insurance, tracking the goods, etc. These forwarders play an important role in allowing both manufacturers and importers to focus on their core competencies while also potentially reducing the cost of goods sold.
Problems with the current shipping mechanisms
In a nutshell, most existing freight forwarders were established prior to the development of much technology and unfortunately have chosen to maintain their outdated procedures. A few issues include:
- Lack of transparency: There is a lack of real-time insight regarding where a specific shipment is in the transit process. This is particularly painful for all parties involved when there is an issue/delay with the shipment
- Costs: Freight forwarders need to charge their clients higher prices to compensate for the logistical complexities they deal with manually
- More costs: Several freight forwarders still rely heavily on paper, fax, etc. which leads to additional internal costs
- Mistakes: With so many moving pieces (e.g. various international policies) the potential for errors are high, which lead to client dissatisfaction
- More generally, it feels like you’re operating in a stone age market – “I can track almost everything in my life, but have no idea where my business-critical goods are located in the world.”
The existence of these inefficiencies is shocking given freight forwarding is a trillion-dollar industry.
Flexport’s business and operating model
Flexport’s business model and customer offering is centered around providing an improved, hassle free shipping experience, at a lower cost than what is currently available in the market.
Flexport harnesses the power of technology to deliver on this promise – it is the first such freight forwarding service to be built entirely around a web service. The company takes what was previously driven by people and creates process efficiency using data, cloud-based software, and transparency. Value creation!
CEO, Ryan Peterson, has over 7 years of shipping experience.
- Process optimization / user dashboard: Flexport is able to use the data coming in from customers (through their free software) to optimize routes and eventually save customers money. For example, “A web-based dashboard lets a U.S. importer comparison-shop by typing in variables — Port A on this day or Port B on this one, railcar versus tractor-trailer — and displays price-quotes from transport companies.”
- Infrastructure for reduced costs: Flexport customers are able to log in from anywhere and see documentation all in one place, thus cutting down on the need for physical paperwork/storage systems
- Improved efficiency: Several ships / planes move around the world without cargo. Flexport’s use of technology helps reduce these inefficiencies and creates improved pricing for its customers
- Promoting more trade: Flexport can drive more revenue generation for its customers and thus potentially foster more international trade. The company also helps smaller manufacturers and startups enter the market, when traditional freight forwarding (or attempting to do it in-house) may have been too expensive
The future of international trade and freight forwarders may be questionable in the U.S. given the recent presidential results, but the need for internet use among freight forwarders is unquestionable and Flexport is positioned to be a leader in this space.
Student comments on Flexport – Bringing Sexy Back…Not
Thanks for the informative post! Flexport makes a lot of sense now given they ability to track everything everywhere in real-time. I’m curious how much the company’s business model is self-service vs. full-service, and how the operating model impacts that. Given the power of the software platform it seems like a great candidate to have clients self-select into the best-value routes for their needs, but I could also see clients wanting to outsource the entire functionality and Flexport, by virtue of their software system, being best placed to provide that outsourced supply chain management functionality at the lowest cost. This certainly seems like the type of internet-based disruption that Li & Fung were concerned about, bought to fruition.
As King mentions above, this sounds a lot like what Li & Fung was hoping to implement for the retail world! Clearly the advancement of the internet and cloud technology has helped bring the value of the digital intermediary to life. Is Flexport focusing on any specific industries? How much information does a customer need to share with Flexport in order to achieve the best route? Does Flexport split and batch orders like Li & Fung was proposing – especially considering the fact that they are helping smaller manufacturers and start ups enter the market?