After a year in which supply chain bottlenecks roiled the global economy, Flexport, which uses technology to improve supply chains, reaches the top of the CNBC Disruptor 50 list.
Freight forwarding, the official name for the industry Flexport is disrupting, is the centuries-old, trillion-dollar global business of matching companies that make stuff with companies that transport stuff over land, sea and air. The industry tends to be opaque, filled with arcane regulations, bogged down by analog processes, and has no “major players,” according to research firm IBISWorld.
In other words, it’s ripe for disruption, at a time when the world needs the industry to be disrupted – and revamped.
Flexport‘s technology is essential to keep goods moving around the world, and it has grown rapidly during a time when labor shortages are plaguing warehouses and ports, and work stoppages at factories in China clash with growing consumer demand.
The company uses data to streamline the movement of cargo on ships, planes, trucks and rail, analyzing costs, improving container efficiency, and calculating greenhouse gas emissions for its more than 10,000 clients and suppliers. What’s particularly notable is that the platform is used not just by Fortune 500 companies but also by emerging brands — the company said its customers moved nearly $19 billion of merchandise across 112 countries in 2021.
“They have a massive addressable market where the technology in that market is basically broken,” says David George, a general partner at Andreessen Horowitz, which led the most recent $900 million funding round into the company. “They have about a 2% market share in their market and they win 75% of the time when they’re in front of customers, so that’s a very simple formula.”
Flexport’s founder Ryan Petersen is a lifelong entrepreneur, who presents himself as a CEO who wants to lead the whole sector – even his rivals – towards solutions.
“There is a big role for technology to play,” Petersen told CNBC last November. But growing from a small market share even with the fast growth Flexport is experiencing will require as much relationship building as innovation. “We have to convince lots of different parties to change the way they are working,” he said.
“This is his life’s work. He’s curious, he’s determined, he’s excessively focused on customers and solving problems. Things like how he approached the problem in Long Beach are perfect examples of his grit, tenacity, and problem-solving ability,” George said.
Petersen also has a flair for the dramatic, using high-profile problems, and Twitter, to showcase Flexport’s capabilities. Last October, he called attention to the Port of Long Beach’s dire delays and recommended specific ways to “overwhelm the bottleneck,” as he put it.
Petersen wanted to understand the pileup at the Los Angeles and Long Beach ports, so he rented a boat to see the logjam of ships and containers up close, finding more than 70 container ships idling at anchor with $64 billion in cargo waiting to be unloaded. The issue: the docks were too crowded for truckers to return empty containers, so truckers couldn’t then pick up a new full container, so those full containers were stuck on the dock and the empty ones on the trucker’s chassis, with more full ones stuck on ships.
“This is a negative feedback loop that is rapidly cycling out of control that if it continues unabated will destroy the global economy,” Petersen tweeted.
He followed by tweeting a solution to target the bottleneck of the lack of yard space, proposing five recommendations, including an executive order overriding the zoning rules to allow truck yards to store empty containers up to six high rather than the prior limit of two, and creating a new temporary container yard on government land. The city quickly lifted its restriction on stacking the empty containers at only two high, lifting it to four, and California Governor Gavin Newsom called him up to figure out how they could work together. It was called the “Tweetstorm that saved Christmas.”
By Christmas, Petersen was at it again on Twitter, this time tweeting about a shortage of French fries in Japan. McDonald’s had to limit sales in the country because of challenges acquiring potatoes. Flexport found three cargo planes that were scheduled to bring goods from Japan to the U.S., and then fly back empty. Instead, Flexport arranged for the planes to return with 300 tons of potatoes. The stunt was far from a long-term fix, but it made headlines and Petersen played the hero, demonstrating the power of logistics.
Two months later, the company announced a $900 million Series E funding round at an $8 billion valuation, with investors including Andreesen Horowitz, Shopify, and Softbank (which happens to be based in Japan).
“He’s got big, audacious goals, and the industry is enormous and broken, and there’s a lot of work to do and it’s a hard problem that’s facing him,” George said. “Raising a big war chest gives him the ability and flexibility to do what he needs to do over the coming years, in terms of introducing new technology products and expanding into new lanes geographically.”
“We have a billion in liquid assets and we believe very much in the principal of having a fortress-like balance sheet to ride out things like geopolitical crises and stock markets going down,” Petersen told CNBC in March.
Since that fundraise, Petersen has taken his passion for solving problems and Flexport’s expertise with logistics into the nonprofit space. In early March, Flexport.org announced that it was organizing shipments of relief goods to Ukrainian refugee sites across Europe, noting that over the last few decades it’s been estimated that 60% of all relief supplies delivered in response to humanitarian crises have gone to waste because of a lack of logistics coordination.
Flexport’s work to improve how goods move around the world is part of a wave of technologies tackling supply chain issues. In fact, there are more logistics-focused companies on this year’s Disruptor 50 list than in any year in the past decade. Two others are in the top ten this year — Lineage Logistics at No. 3, and Convoy at No. 6. And there are other key disruptors, including Flock Freight and CloudTrucks, which specialize in trucking operations.
Then there are the start-ups that are tackling logistics from other perspectives. Gopuff, which wants to quickly deliver food and essentials, making the list for the third straight year. Zipline, which rose to prominence using drones to deliver medical essentials, and is now delivering for Walmart as well. Mexico-based Jüsto, a grocery delivery company; Airspace, which uses artificial intelligence to manage shipping time-sensitive cargo, such as human organs for transplants; and Exotec, a French robotics company that uses AI to manage high-density inventory storage in warehouses.
“I love the idea of solving problems, especially those that have such implications for society,” George said. “It’s a massive, massive space with very, very little technology in place, and the opportunity that you have if you are customer-focused and if you can take big swings, you can actually build products that people love … it’s striking.”
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