Freight start-up Flexport soars from ‘unsexy’ to $800m valuation
Flexport’s charismatic Ryan Petersen has wooed investors again – and raised another $110m – giving ...
Logistics operators should recruit from outside if they want to keep pace with the rapidly changing face of their industry, due to digitisation.
In a panel discussion at last week’s Transport Logistics show in Munich, Bernd Schwenger, director of Amazon Logistics and general manager of Amazon Deutschland Transport, said the consumer-centric approach of the e-commerce giant meant its staffing philosophy markedly differed from more traditional logistics operators.
“Everything we do comes from the customer,” he said. “I don’t like this term ‘supply chain’, because for Amazon it is very much a ‘demand chain’.
“It’s very important to work backwards from the customers’ perspective – logistics needs to approach and interact with the customer. We have to understand what they want and how we integrate with that.
“As a result, 70% of our team are operational researchers and mathematicians, while the remaining 30% have experience in logistics. In fact, I am the only employee in the company that holds an HGV licence.”
He added: “But I’m learning a huge amount from the tech people, and I would say it is much easier to teach them about logistics than vice versa.
However, CEO of Panalpina Stefan Karlan argued: “We might soon be able to handle shipments without any human involvement, but you will still need humans with logistics experience to deal with customers and supply chain exceptions.”
Ryan Petersen, chief executive of Flexport, a San Francisco-based freight forwarder at the forefront of the digital disruption, told the audience that his company’s recruitment policy “simply focused on hiring super-smart people”, before considering whether they had experience of the logistics industry.
“If we do employ people from the logistics industry, we generally tend to go for those with limited experience, because we don’t want people locked in the old ways.
“We are more interested in really smart people who give stuff a go and fail, rather than experienced people who say ‘it can’t be done’.”
However, he acknowledged that Flexport’s focus on developing its own software, as a key differentiator between itself and traditional forwarders, had to be accompanied by equally heavy investment in warehousing and facilities.
“We are a freight forwarder, full stop. We are also a software company, full stop. We believe every company needs to be a software company to a greater or lesser degree, because that is how you will be able to differentiate from your competitors.
“So, we built our own software and now we have to invest in becoming a better freight forwarder.
“We also have to invest in physical infrastructure and we have just opened our first two warehouse cross-docking operations in Los Angeles and Hong Kong, because just adding a digital layer on the real world doesn’t add that much value – you have to invest in the physical world as well.”
Part of the reason for the investment, Mr Petersen told The Loadstar, was to cut the added cost and potential for mistakes that occurred with leasing warehouse space from third parties, as well as to create further cost synergies by consolidating different shippers’ volumes in one place.
But the new warehouses, particularly the site in Los Angeles, will also allow Flexport’s customers to break up container shipments while in transit.
“A Flexport client can now ship a 40ft container to a destination in the US and, at any point while that container is on the ocean, they can reroute a single pallet from it to a unique destination.
“When the container arrives at our facility in Los Angeles, our team will pull the re-routed pallet, re-label it, and arrange for delivery to the new destination while the remaining pallets continue on their original journey.
“This will allow companies to fulfil all of their client orders directly from the shipping container – reducing fulfilment time, the cost of delays and lost sales, and ultimately client inventory and working capital needs,” he said.