February 3, 2016
What We Do at Flexport
I was thrilled to see Flexport profiled by Bloomberg News last May. The headline, however, struck us as not quite right: “Flexport Wants to Be the Uber of the Oceans.” As flattering as it is to be compared to a company valued at over $60 billion, Uber isn’t the right analogy for what we’re building. So I thought to write this piece to explain what Flexport really does and how we see ourselves.
Imagine that you’re a brand that makes products in Shenzhen and needs to ship them to, say, Cincinnati. If your shipment weighs more than 150 kilograms, it physically will not fit in the parcel networks run by DHL, FedEx or UPS: Their conveyor belts are too narrow and the trucks are too small. Instead, your freight will have to travel through an entirely different network, one without all those guys with handy scanners telling you where your stuff is as it makes its way across the planet.
Welcome to the world of the freight forwarder
Our job is to coordinate the complexity required to move freight across a diverse network of logistics asset owners. Because no company is big enough to have all the assets required—trucks, container ships, cargo planes, trains, warehouses, and more, in every country on earth—freight forwarders have to use multiple asset owners on any given shipment.
For every piece of international cargo, freight forwarders have to find a truck in both countries, book freight across the ocean, pass through customs on both sides of the ocean, store goods in warehouses, and then arrange final delivery. On top of that, we have to secure competitive rates and clearly communicate that pricing to the end client to make sure it’s acceptable. For a traditional freight forwarder, all of that complex coordination is done using phones, emails, fax machines, and physical pieces of paper.
Flexport is replacing those technologies with software, not only automating away transaction costs but also improving the user experience for brands moving freight. We structure all data in your supply chain, reinforcing automation and information. As a result, our online dashboard gives clients more visibility and control over their supply chain than ever before.
But here’s the thing: Flexport isn’t trying to use software to automate the entirety of the supply chain. We’re a fully-licensed freight forwarder where people manage our clients’ freight movements. We have dedicated teams that take end-to-end responsibility for the success of every client, including a licensed customs broker, logistics manager, and operations coordinators. Logistics is a relationship-driven business, but we think technology helps here too: Facebook didn’t reduce your ability to stay connected to your friends, it made it easier to remember their birthdays. We take pride in the fact that we provide even higher-touch service than other freight forwarders.
Here’s why the Uber analogy doesn’t really work:
Flexport isn’t a consumer app, managing a point-to-point logistics network where a single driver is required for each move. Instead we’re coordinating complexity across a range of asset owners to move products across international borders. As with Uber, we are in a highly regulated industry. But complying with Customs and freight regulations is serious business—our borders are the front lines against drugs and terrorism, and freight forwarders who flout the law will be put out of business or worse, locked up.
The complexity of international trade compliance means that every single shipment we manage will always need to have an expert involved. So it’s that combination of human and machine intelligence that most sets us apart from Uber and other pure technology companies.
Why is Flexport combining humans and software? There are two big reasons.
First, technology helps us run a tighter ship, with lower transaction costs and fewer errors, thanks to software-driven automation that augments human capabilities. In addition, we build better software because we do the hard work of logistics in the same room in which engineers work. It’s incredibly helpful when people can easily talk about problems and opportunities, when the pressure to win is shared by team members even when they have different roles.
Second, our heavy reliance on human expertise lets us take on a bigger field. Freight forwarding requires a high degree of complex coordination; there’s no way to automate yourself through a customs inspection or ensure that you get space on a freighter in Hong Kong during peak season. We spent years filing for all the licenses to do business in this highly-regulated industry and we’re extremely serious about compliance. That’s why more than half of our office is made up of logistics managers and licensed customs brokers. In return for doing the work that’s hard-to-scale, we’re able to claim a chunk of the $1.1 trillion global logistics spend.
Our software plus human approach lets us take on an industry that impacts every human on the planet, one that’s measured as a double-digit percentage of global GDP. Freight forwarding isn’t something that you can hack together in a weekend, and we offer our engineers work that’s more meaningful than building yet another photo sharing app. At the same time, we offer the most talented people currently in the freight forwarding industry a chance to work at a company that understands the value of modern technology.
We’re in one of the last major industries untouched by the Internet. It’s untouched because no one else has figured out how to coordinate the complexity involved. We think that we’re on track to win because we’re tackling this problem on multiple fronts: Combining human expertise with software to lower costs and create a better customer experience.