Make logistics sexy again.
That's the unstated mission of Flexport, a San Francisco-based startup helmed by 35-year-old Ryan Petersen. Coming fresh off a $65M Series B, the Y Combinator alum has no intentions of slowing down and kicking up its feet.
Instead, the customs brokerage and freight forwarder aims to leverage its API to deliver custom-fit solutions to a growing client base around the world and across transportation verticals, be it ocean, trucking, air, or rail.
Flexport emerged from Petersen's grey matter as a result of his experience working in China - as a customer of the same freight forwarding companies he competes with today. He found that much of the market operated without integrity, without transparency, and nearly no technology more advanced than the radio. A business that would likely benefit most from the advent of the internet had shunned the opportunity to advance in favor of an archaic modality.
While working to move products from China to the US, Petersen grew increasingly disenchanted with the process and, in his own words, fell victim to "schlep blindness," the concept laid out by Y Combinator co-founder Paul Graham that tedium and difficulty cause us to block out the challenges involved.
Essentially, the grind of dealing with freight and shipping was so irksome that innovating the process and moving the mountains (and ships) necessary never really occurred to the parties involved. The friction was so immediate that progress was blocked before it ever began.
A market in disarray
The freight forwarding industry is extremely fragmented, says Petersen. The US alone has more than 3,500 freight forwarders and thousands more abound globally. Ocean transport is less divided, with approximately twenty firms operating on the high seas, at four or five per trade lane. Trucking, however, is much more like a hydra, with many heads and constantly moving about, countless companies vying against each other on the highways.
Given such disparities between modes and companies, a one-size-fits-all approach simply doesn't fly. What works for an ocean freight forwarder won't necessarily work for another, much less an air or trucking company. On top of that, these firms don't typically have assets on their balance sheets, such as trucks and ships; they act as facilitators, middlemen in the shipping ecosystem.
Beyond the industry-wide disparities, there are systematic losses baked into the process. As an example, cargo ships often carry 80% of their capacity on average, but they book for 120%. A full third of cargo bookings end up being canceled, an untenably high proportion.
After three and a half years, Petersen and his team have worked to convince their customers and prospects that, all along, they've been paying money for a bad service, one that's inefficient and stands to be improved. The nascent freight forwarder's value proposition lies within its API and it power to offer bespoke shipping solutions for their customers.
Petersen's goal is to ensure that his customers on both sides of the equation win, that the process is optimized to ensure maximum mutual benefit. In the freight game, it's a long haul, so cheating other players doesn't offer any advantages. In order to keep up ongoing relationships, shippers and receivers need to cooperate perfectly as a hedge for future transactions.
Flexport's API enables them to power shipping transactions more enhanced than ever before. The old standard not only ships inefficient loads, but they have also been shrouded in mystery. For more than a century, freight has operated on paper (some have advanced to Excel these days) and there was virtually no tracking. Cargo status was only updated once it was unloaded and duly recorded at the port of call.
Not so with Flexport. The shipping startup works to provide real-time status information on cargo, even when it's mid-ocean, and offers the opportunity reroute the goods. As well, their solution assists with inventory management, helping the bottom lines of the shipping firms.
These partners have high fixed costs for operation, but the marginal costs are quite low; adding another container costs virtually nothing, but serves to greatly increase revenue. When Flexport assists with this, the customers end up loving them.
On top of managing the inventory, the Flexport system digs deep into the timetables, making orders more predictable for shippers and their budgets more flexible.
"Anything to make freight programmatic," said Petersen. "Flexport operates almost like... a meta-marketplace."
Whatever it takes to match supply with demand, Flexport's software is there to facilitate the freight's movement, so long as the company is willing to follow the standards. Ordinarily, the market has featured a race to the bottom on prices, but that doesn't help the suppliers. The added value arises from the quality and convenience of the transaction, giving the consumers something worth buying.
When Flexport's competitors adopted any semblance of modern technology, they developed their own proprietary intranet solutions, rather than building something that could advance the industry as a whole. Had any firm created such a platform and leveraged the network effects, licensing it out to competitors could have been a lucrative boon and moved the world's goods in a faster, more reliable and transparent way.
So, what's next?
"I want the software making all of the decisions," Petersen answers.
As more and more shipping data gets collected and regular orders are streamlined, automating the transactions would be idyllic for Petersen. Replicating the process is impossible with pencil and papers, so automating and enabling reorders with software adds significant appeal to Flexport's offerings.
As well, cargo often makes use of multiple channels during its journey, spending time on some combination of boats, planes, trains, and automobiles, which makes freight forwarding more complicated than it once was.
"I want Flexport to become the checkout system... of the world," declared Petersen. "Anytime someone makes a shipping order, I want it to come through Flexport."
Looking at the future of cargo transport, trucking specifically, the pentalingual CEO said he'd love to work with Otto and other companies deploying autonomous vehicles. In fact, Otto recently made its first delivery (it was beer) and Petersen sees a bright future for this sea change in vehicles, especially where it concerns freight.
A win-win-win proposition for all involved. That's Petersen's vision for the industry. Buyers, sellers, shippers, regulators, each entity receiving the optimal outcome, all thanks to carefully conducted transactions. Keep shipping, Flexport.