It’s 2016, Do You Know Where Your Supply Chain Is?
Digitization is finally coming to an industry that has resisted technological improvement for decades. Flexport brings lower costs and higher transparency to freight forwarding
Can you remember the last time you sent a fax? Do you even know what a Telex is? If your business depends on moving freight between countries through freight forwarders, there’s a high likelihood you used both of these antiquated technologies on a regular basis. Unfortunately, with these outmoded communications standards comes other inefficiencies like documenting billions of dollars in inventory in an excel spreadsheet[1], or keeping track of thousands of customs documents in physical binders. Thankfully, with Flexport’s help, the freight forwarding industry is on the precipice of a digital revolution and its archaic way of quoting, documenting, and tracking shipments in this larger than $150 billion market[2] is on its way to the history books.
You can imagine that this inefficiency adds significant overhead to the process of processing freight and clearing customs. When a person physically needs to coordinate each step, handoff, and customs clearance with the responsible party and ensure that documentation and routing information follows the freight, there is significant expense. This is where traditional freight forwarders made their market – by relying heavily on personal connections and intuition in order to procure the most cost effective and efficient transportation of freight and constantly tracking a package and ensuring no exceptions had occurred. This ads complexity and unreliability to the system. If a customer wanted something as simple as a projected delivery day, he or she had to either pay a premium for such a forecast and cause his or her freight forwarder trace their freight through the system, or be content with delivery windows that could stretch upwards of a week.
Flexport is solving this problem. Their system allows a big data approach to freight forwarding[3]. Quotes can be submitted online to Flexport who can then build multiple logistics options, provide an expected delivery day, and quote a price. Because the system has a high level of automation, Flexport can more efficiently quote more possible options and pass the savings from removing the salesman from the quoting process and finding a more efficient supply chain. Flexport’s algorithm systematically builds the most efficient route across the companies thousands of partners rather than having a person need to submit multiple quote requests[4]. This has the benefit of both removing the need for the person to call in all those requests, but it also allows Flexport to massively increase the number of quotes they can practically request, receive, and deliver. This process is all handled through a single web portal, almost like a Facebook page for each freight shipment. Every detail about the shipment including documentation, method of shipping, logistics operators, customs status, shipping exceptions, and delivery date is available immediately, rather than through the trouble of calling a broker. The system allows companies to more accurately view their global freight operations and time their inventory.
Something that Flexport could be doing better going forward is improving its customer’s ability to route and deliver their product to end customers. When customers have perfect visibility into when their freight is going to arrive, and guaranteed delivery dates, they could use the freight they have in the water and in transit as a flexible warehouse. For example, if a company has 3000 units of product on the water, they could instruct Flexport to break apart that inventory and ship 1000 units to customer A, 1000 units to customer B and 1000 units to their warehouse thereby eliminating the cost of shipping the merchandise into and out of their warehouse and reducing their logistics time.
Flexport is revolutionizing the way that freight is handled and eliminating inefficiency in an industry desperately in need of disruption. By eliminating the need for extraneous labor as well as generating a larger number of options in the logistics quoting and processing they’re able to share the savings with their customers as well as take larger margins for themselves. As the company grows, the offering will continue to improve by adding more data points to the model as well as generating more buying power with their logistics suppliers.
[1] Woollaston, V, 2016. No more extortionate delivery fees: Flexport is helping drive down prices and shipping times. WIRED Retail, [Online]. November 2016, . Available at: http://www.wired.co.uk/article/jan-van-casteren-flexport-freight-baggage [Accessed 17 November 2016].
[2] Market Line, , 2016. Global Marine Freight. MarketLine Industry Profile, 0199-2101, 2.
[3] Benmeleh, Y, 2015. How Startups are Using Big Data to Manage the Holiday Cargo Rush. Bloomberg News, , 1.
[4] Flexport. 2016. Global Forwarding. [ONLINE] Available at: https://www.flexport.com/services/freight_forwarding. [Accessed 16 November 2016].
Max, thanks for this interesting post on the way in which Flexport is using digital technology to streamline freight forwarding. Reading your post, I was struck by how Flexport’s business complements ongoing efforts by global policymakers to implement the WTO Trade Facilitation Agreement (https://www.wto.org/english/tratop_e/tradfa_e/tradfa_e.htm), which aims to streamline customs processing and has the potential to increase merchandise trade by up to $1 trillion per year (https://www.wto.org/english/news_e/news16_e/fac_04mar16_e.htm). In many countries, this effort entails greater reliance on digital technology by customs authorities (for more info on U.S. efforts, see: https://www.cbp.gov/document/guidance/ace-single-window-info-graphic). I imagine that Flexport might have some unique insights into how to streamline customs processing and would encourage them to collaborate with policymakers at the WTO, if they are not already.
Does Flexport need big data to track shipments or a simpler solution? What do you think of RFID tags as a low cost and easily implementable solution to the tracking problem? It could be used to track individual times from manufacturer to freigh shipper to local delivery company to the end business/consumer.
http://www.rfidjournal.com/articles/view?3870
http://www.commenco.com/wp-content/uploads/2014/11/WhitePaper_Logistics_Motorola_RFID_Transportation_Logistics_White_Paper.pdf