Flexport as a catalyst for change
Lars Jensen
Leading expert in the container shipping industry. Click "Follow Me" here on LinkedIn to stay updated
(Edit: Following posting my article below, Mr. Petersen, CEO of Flexport, seems to have deleted most of his entries in the debate I am referring to. Especially one of his entries was very interesting in this context, as it showed the development in TEU shipped by Flexport from 2015-2018. I have placed a copy of this graph in the comments section below.)
Last week Flexport announced they had successfully received another 100M USD of external funding. This further solidifies the fact that they are by far the freight-tech company which has received the largest amount of venture capital in recent years within the market space of shipping/forwarding.
The spurred on a lively debate in LinkedIn between people who are sceptical as to Flexport’s model and Flexport’s CEO Ryan Petersen. Click here to see the full debate.
However, what I feel many are missing is that from an industry perspective, Flexport’s ability to attract funding as well as their ability to stir the pot and create debate pertaining to the future of freight forwarding may well prove to be an important catalyst for change in the industry.
It puts the pressure on all forwarders to apply real thought and effort into contemplating how they are going to become digital.
It puts pressure on the cargo owners to put real thought into which new technology – and more importantly – which new processes will deliver value into their supply chains.
Given the extremely large variety in customers, and hence also in their needs, there is no single solution that fits all and hence the field is wide open for new approaches. And these new approaches are indeed gaining momentum. Both from the incumbents – look at for example the recent digital tools from Kuehne & Nagel – as well as from the digitally born companies such as NYSHEX, Kontainers, iContainers, Freighthub, FreightOS, ZenCargo and many others.
In this context, the success or failure of any single one of these is not what the industry should be concerned about (I will leave that worry to the investors of the individual companies).
What is important is that the sheer visibility of the momentum of these companies helps drive ever more companies – forwarders and cargo owners alike – to seriously look at how to become digital and how to create value when doing so.
A forwarder that does not yet know both how and why they are going to use new digital tools, and how they will get to that point, will soon find themselves out of time. Note that this does not imply they all have to use the same tools – nor that it is the same processes they need to digitize – but they must get to a clear view of where digital tools can add value to their particular models, and how to get to that point. If they don’t, and there is value in doing it, someone else will most certainly be doing it.
And in this context Flexport is a significant catalyst for change – simply because they more than any other right now grab the headlines and force all other players in the industry to take a long hard look at what digital means to them and how to use it to create more value in the supply chain. Irrespective of whether Flexport’s model is successful or not (and clearly opinions on this differ judging by the aforementioned debate), their impact as a catalyst for change should not be underestimated.
Collaborative Green Supply Chain Solutions Architect chez Green Squadron
6 年But could be that the time of VC is behind us and that we better have to consider to design a POC locally with very small funding and local port eco system , then to duplicate all around ports , which will have shown their interest trough local individual or SME network. This is the X project I am working on follow it trough my news such as below https://www.dhirubhai.net/pulse/outcome-automatisation-could-congestion-factor-ports-lamblin/ thank you for your attention and see you on board
Collaborative Green Supply Chain Solutions Architect chez Green Squadron
6 年sorry to Lars Jensen and my regular readers who like this article , I did not read it , why ? I found it just today undirectly and I decided already that I will not waste my time any more to read any article regarding Flexport especially one's post by TEC or newspapers who show them as player of technology change in the supply chain , while they apply 19th century freight forwarder theory on buying and sell margin , hey guys VC and writers awake up , we are in 21th century and enter in 4.0 supply chain with IOT, BIG DATA, AI and BLOKCHAIN process , and do not use any more fax and mail to trace and track shipment , monitore and optimise inventories , thousands start up around the world are working hard and fast ..very fast indead due daily change in technologies on this topics . I humbly do it the same trough my news on digitalisation of supply chain trough ports communities, parties who are involved to "catalyst for change " in 110 main ports who handled 600 millions Teus yearly , how many additionnal billions of funds do flexport need to handle 1% , 0.5%, 0.2% , 0.1 % or less than that of this volume ? By the way my news on Amazon has been viewed by 600 peoples and like by 80 without any support from newspaper or mentor .
Always Curious
6 年Thank you for lending the perspective of impending change. Indeed, the debate should not be weather a model will succeed or not, it should be 'in what dimensions is my business susceptible to disruption due to digitization.'
Pivot, starting a new adventure with as little anger and fear as possible. Building off an old but solid foundation in the Simcoe Foothills
6 年Lars, your article is a nice overview of what is occurring and what might likely occur. I have my own theory about digitization and its difficulties based on my experience and studying these activities within the top 20 over the past 5 years. I joined a discussion that became the debate that you reference. More curious about the model of how VC funding can create value as compared to the type of roll-ups to gain scale in the industry and why I happen to jump in. I don't think we are yet at an inflection point where technology alone is going to create a disruption driving substantial value for just cash input. I did believe that at one time but it was several years ago. The interesting fact is that Ryan Petersen stated their gross revenues for 2017 in the posts that were deleted, $226M GAAP as audited (his statement). This paints a much more realistic picture. Taking that to net revenue and estimating (Guessing) EBIT is interesting. In that modeling it looks a bit sketchy if building a forwarder on VC cash is going to create enough value for return, who knows it might.
Founder of Let's Talk Supply Chain & Award Winning podcaster?? Inventor ?? Founder and Host of Blended Podcast | The Blended Pledge ?? Author "Fundamentals of Sustainable Supply Chains" and Trendsetter
6 年Great article, I agree that they have been successful with funding...we are also seeing some really large numbers in this industry in some recent ICO’s as well (shipchain, cargox). I talk about this topic on my podcast Let’s Talk Supply Chain and I have also spoken to a lot of industry experts and there are many different opinions about Flexport, it will be interesting to see where everything lies as we move into new innovation