Just a year ago, Flexport, a technology-forward freight services provider, was rolling. They had raised a significant round of new funding bringing the company’s valuation to $8 billion. Amid the dash to digitize operations at logistics tech startups, Flexport took full advantage of its position in the market. In fact, during the first three quarters of 2021, supply-chain technology startups raised an impressive $24.3 billion. This represented a 58% increase over all of 2020. In short, a boom for the supply-chain tech industry.
Fast-forward to a year later and the freight forwarder is now cutting 20% of its global workforce. That’s quite a turn of events. Co-chief executives Dave Clark and Ryan Petersen cite falling shipping demand as the principal cause behind the layoff of 600 plus workers. In addition to falling demand, however, improved efficiencies over the operational and organizational levels also resulted in a bloated workforce that was overstaffed.
Flexport operates across 19 offices and 6 warehouses worldwide. The San Francisco-based company employs just over 3,000 people and has effectively lowered its volume forecasts for 2023. The middle of 2022 was the first sign for many that inflation would be taking a significant toll on consumer demand. Retailers across sectors have been contracting and pulling back from their earlier inventory restocking plans.
The International Air Transport Association estimated that global airfreight demand contracted by 13.7% last November. The Baltic Air Freight Index (produced by TAC Index Ltd.) revealed airfreight prices worldwide fell 33% over the past year. On the maritime side, US container imports are declining with inbound December 2022 volumes at their lowest since June 2020. Business surged during the pandemic and US freight broker C.H. Robinson Worldwide estimates that too many people had been hired across the larger shipping sector. One of the largest logistics operators, Expeditors International of Washington, just had its earnings estimate lowered in response to a challenging air and ocean-forwarding market.
Flexport is seeking a more agile future. They will be adding distribution and trucking services that will move the firm more towards a solution-based provider as opposed to just a freight forwarder. They estimate adding up to 400 software engineers to facilitate this shift. Flexport had doubled its revenue in 2021 to an impressive $3.2 billion having moved approximately $19 billion in merchandise across 112 countries. The 2022 revenue estimates were close to $5 billion but have yet to be reported.
