Supply Chain Matters This Week in Supply Chain Tech highlights the announcement by high profile logistics start-up Flexport of a significant headcount reduction amid a need for a recalibrated business model.
High profile San Francisco based freight forwarder Flexport announced this week that it will be cutting 20 percent of its total workforce, amounting to upwards of 600 workers. This digitally focused start-up cited falling demand for shipping services in 2023 and the overall macroeconomic downturn that has impacted global businesses as reasons for this action.
In a communication to employees, Co-CEO’s Ryan Peterson and Dave Clark cited improved organizational efficiencies as a result of revised organizational structures leading to a conclusion that this start-up was overstaffed in a variety of roles.
Addressing the road ahead, an added statement indicates:
“At Flexport, 2023 is going to bring extraordinary velocity- we are in the process of doubling our software engineering talent and moving to single threaded business organizations to build world class products faster, and we will continue to invest in delivering best-in-class operational execution for our customers.”
In a special edition of this column in February of last year, we highlighted the completion of the $935 million Series E investment round for Flexport led by prominent Silicon Valley venture capital firm Andreessen Horowitz, along with MSD Partners, DST Global, Founders Fund, and SoftBank Group’s Vision Fund. The pegged valuation was $8 billion, an indication that private equity players are willing to invest in levels over two times 2021 revenue levels. In June, Ryan Peterson indicated to investors that this company was tracking to upwards of $5 billion in revenues for 2022.
According to reporting by The Wall Street Journal, Dave Clark, previously CEO for Global Consumer Business at Amazon, indicted before these reductions were announced that the start-up had plans to shift its business model support of international shipments to the adding of services for trucking and distribution from manufacturers to retail channels. Clark will take the sole CEO role for Flexport on March 1, while founder Peterson will assume the Chairperson role.
Freight broker C.H. Robinson which recently dismissed its CEO, had announced a reduction of upwards of 600 employees in November of last year because of declining volumes across global transportation segments. In our highlights of the involuntary CEO departure we pointed to speculation that this established freight broker’s board felt that the company was not making adequate progress in meeting the threat of digital based brokerages.
These ongoing developments involving high profile tech start-up along with established industry players are preludes to what industry supply chain management teams, stakeholders and services providers should anticipate in the coming year. These are realities of consumers cutting back in their overall spending because of economic and inflationary cost pressures. They are a reflection of the reality of a changed baseline for online retail and commerce growth that has occurred.
There is also a further reality, namely that digitally enabled, and lucratively funded logistics and transportation focused start-ups are not immune the recalibration of two significant forces. High profile PE investors seek more accelerated timetables toward profitability milestones in an uncertain macroeconomic environment. Rapidly changing dimensions of the actual industry and business challenges that technology can solve are running into the realities of heightened competition amid a declining industry segment.
Our research arm has factored such realities in our forthcoming 2023 Predictions for Industry and Global Supply Chains research advisory. Today we shared our fourth prediction, namely that talent requirements, skills development and employee retention take center stage but with different priorities.
Next week, we will unveil on Supply Chain Matters our fifth prediction, namely that transportation, logistics and brokerage services sectors will face a challenging year with significant consequences.
© Copyright 2022, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.