{"id":10252,"date":"2020-02-09T11:58:37","date_gmt":"2020-02-09T16:58:37","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/flexport-disrupting-international-freight-shipment\/"},"modified":"2020-02-09T11:58:37","modified_gmt":"2020-02-09T16:58:37","slug":"flexport-disrupting-international-freight-shipment","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/flexport-disrupting-international-freight-shipment\/","title":{"rendered":"Flexport: Disrupting international freight shipment"},"content":{"rendered":"

Industry is large and complex<\/strong>. The freight shipment industry is the backbone of the modern economy and is estimated to be a $1 trillion + industry, presenting a huge addressable market for any company to tackle. It is a highly complex industry, requiring a number of stakeholders such as manufacturers, truckers, warehouses, shippers, brokers, retailers etc. to coordinate and communicate amongst each other. It also requires the collection of various unstructured data points, which is predominantly done through manual labor and via pen and paper. The freight shipment industry\u2019s size and complexity leave a lot of room for technology to disrupt and improve upon existing processes.<\/p>\n

Archaic competitors leveraging arcane methods<\/strong>. Freight forwarders play a critical role to ensure proper delivery across land, air and sea. Companies such as DHL act as the intermediary between the shippers and numerous transportation services and take care of all the intermediate coordination, communication and data collection. Unfortunately, none of the existing freight forwarders at relevant scale are digital first. As Flexport CEO Ryan Peterson likes to point out: \u201c\u201cThere are 25 freight forwarders that each do more than $1 billion in revenue a year . . . none of them [were] founded after Netscape (1994).\u201d The majority of steps along this highly complex supply chain are still completed with pen and paper, creating no visibility or control for the shipper. This information discrepancy between the shipper and the freight forwarder leads to an inferior service to the shipper, who has to solely rely on the freight forward to help them navigate the black box that is freight shipment.<\/p>\n

Enter Flexport. \u00a0<\/strong>Flexport is digitizing freight forwarding, creating more visibility and control for the shippers in the process. It provides one end to end platform to streamline communication between the various parties involved in a shipping process, and also allows for cargo owners to track their shipments real time. The main product includes a competitive pricing tool for each shipment, a dashboard to track and monitor global shipments in real-time and data analytics and reporting to gain a better understanding of the shipper\u2019s supply chain. All of these services are supported by a dedicated point of contact at Flexport. In a nutshell, Flexport is able to offer more transparent shipping with more data generation, thus offering a far superior service to incumbents. And even though they still lack the scale of some of the leading freight forwarders, they are able to offer competitive pricing due to their data analytics capabilities, which can cut travel time for cargo up to five days on certain global routes.<\/p>\n

Significant Barriers To Entry and Competitive Edge. <\/strong>Flexport clearly has a competitive edge against existing freight forwarders given its ability to not only offer a digital first product, but more importantly its digital first company culture of radical innovation, something that is very difficult to replicate for incumbents that have at best been innovating incrementally for years. There are also significant barriers to entry for new startups that might be more digitally minded. The shipping industry has been ripe for disruption for a while, but it required someone who understood both the industry\u2019s complexity and the digital world to disrupt it. More importantly, Flexport has a massive first mover advantage because it is critical as a freight forwarder to get to relevant scale. Without scale, i.e. without the ability to ship large quantities of cargo, you get squeezed on the customer side where certain companies are not able to ship with you, and on the supplier side where transportation services will charge you more per cargo because you\u2019re not offering as much volume. As the first digital freight forwarder with a clearly superior product, Flexport was able to convince customers who were yearning for a better service to take a chance and ship with them at smaller than usual quantities, allowing them to build momentum quickly and reach scale over time. For any new start-up in the space, it will be a lot harder to reach scale because a digital first product already exists in Flexport, which could explain why recent new entrants have all been niche players who are partnering with incumbent freight forwarders. In addition, Flexport is now also investing into more capital intensive offline capabilities such as warehousing and trade financing, which will further protect it from emerging startups.<\/p>\n

Flexport\u2019s track record speaks for itself. Since its founding seven years ago in 2013, it has amassed over 1,800 customers including companies like Bridgestone, Casper, Allbirds and Warby Parker. In 2019, it secured $1bn in funding from SoftBank at a $3.2bn valuation.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Flexport is a freight forwarder based out of San Francisco that is digitizing the international freight shipment market. 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