When Flexport (FP) first came on the scene in 2013, I was excited by the prospect. While forwarders have always been digital, I was hopeful that technology was going to take the industry a great leap forward. Investors shared my enthusiasm, pouring $2.4 billion into the company to help make their vision a reality.

Fast forward ten years...and it’s worth an examination of the hope versus the hype.

As a Forwarder they have definitely been successful as measured in financial terms. In 2021 they generated $3.3 billion in sales, a 20% EBITDA, and had 3,200 employees. However, according to statistics from Armstrong and Associates, they are still not among the very largest forwarders. As far as market share, A&A has Kuehne and Nagel at the top with nearly $41 Billion in sales, while Flexport hasn't cracked the top 20.

On the other hand, I haven’t seen much progress on the digital front. Generally, there are three areas where forwarders can compete digitally.

FP chose to build their own operating system versus buying one. While it’s difficult to know if what Flexport built is better than what’s available on the market, many larger forwarders have chosen to buy versus build. Notably DHL and FedEx—who spent many years and vast fortunes building their own—are now switching to CargoWise. As an aside, CargoWise just reported a whopping 50% EBITDA!

FP also chose to build their own CX. I saw a demo recently, and it’s definitely a cut above the other systems that I have seen in the market. It will be interesting to see what impact companies like GoFreight have here. GoFreight builds Customer Facing Systems for forwarders - and in theory—can give even a very small forwarder the ability to provide their customers with a modern UX.

With $2.4 billion in backing, they could deploy entirely new tech in a business that sorely needs it. Two possibilities are upstream and downstream. Historically 3PLs have focused on pickup to drop-off. Order management in the first mile, and e-commerce in the final are both ripe markets for expansion. They could also move from logistics to supply chain. Offering an Amazon like experience where purchasing, logistics, and sales are integrated.

While the final chapter isn’t written, they do have a new CEO, Dave Clark - who came from Amazon.

Despite their great margins in 2021, Forwarding has historically been a low margin, brutally competitive business. There are 3,000 OTIs in the US alone, and some of the biggest brands in the world compete in this space including Amazon, FedEx, UPS, and DHL.

Given this, it’s tough for me to envision how FP is going to 'change the game' without significant advances in either technology, or by entering into the supply chain space.

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