ORLANDO — If the airfreight industry’s troubles could be summed up in one phrase, it is that “airlines offer something nobody needs,” said Ryan Petersen, CEO of Flexport, the rising, software-driven freight forwarder. Carriers, he elaborated, “move cargo from airport to airport, but every single piece of cargo must go door to door.”
During his Keynote Address during yesterday’s Plenary Session at the CNS Partnership conference, Petersen described the sometimes-painful changes inflicted on a reluctant airfreight forwarding industry over the last few years. “I see our role as we’re in 2017 and our customers are living in 1993,” he said. But he also showed understanding for the slow pace of change in this $100 billion industry: “It’s very hard.”
The “art, and sometimes science” of moving freight on and off various transportation modes is more like a “series of handoffs that, today, almost looks like a relay race, where pieces of paper serve as the baton, telling people what to do.”
While critical of the status quo, Petersen commiserated with the forwarding community, noting that all top 25 forwarders around the world were founded before 1994, “when Netscape was invented.” Even today, with new startups trying to modernize the business via software, “there are major barriers to entry,” mainly in scale and expertise. A global footprint, he added, is tough to replicate, not to mention the “decades of accumulated expertise” among the big players.
Price and service have become the two “main dimensions of competition” in the industry, he said. “But since everyone can claim to have great service, you end up often in a race to the bottom on price.” The way out of this spiral, he said, is to use technology to alter the two dimensions and redefine what scale means and how expertise can be delivered.
“Technology is scale,” he stressed. Automation of a service or product is “infinitely scalable,” as each copy of the original software is essentially free, which may explain how Flexport has managed to raise about US$94 million in the last four years, and expects to be one of the world’s top 50 forwarders by the end of this year.
He also described nascent technologies that can reroute cargo once it’s already in transit and “programmable” freight that will be guided by software that makes routing decisions on its own, without human intervention.
Asked by Brandon Fried, of the Airforwarders’ Association, “what keeps him up at night,” Petersen said much of his worry comes from preserving forwarder culture and maintaining teams of logistics people who can deal with complexity. “We cannot just write algorithms that will map every contingency.”