Flexport Business Model – How Does Flexport Work and Make Money?

 

Flexport Business Model

Flexport is an online freight forwarding and customs brokerage service provider. This firm offers a digital dashboard that enables companies to identify, purchase, manage, and monitor the services required to facilitate international commerce.

In addition to customs brokerage, the company also offers import and export clearance, product classification, customs bonding, filing documents with government agencies, air freight, ocean shipping, full containers, and trucking.

Up to this point, the business model has been a big success. One of America’s most successful entrepreneurs founded the firm in 2013, accumulating a value of $3.2 billion and raising $1.3 billion in their venture capital. The firm currently employs nearly 2,000 employees in 14 locations across the globe. 

What is Flexport?

Thanks to modern software, Flexport acts as a top-tier worldwide logistics and freight forwarder service provider that can settle user challenges during international trade.

With the assistance of system real-time inventory tracking for air, ocean, and road transportation, logistics organizations can make better decisions about carriage routes and inventory control, allowing them to serve their customers better.

Built on a cutting-edge online application, it operates as a registered freight forwarder and customs brokerage. Using this freight service, you can simply learn about, order, and keep track of the services necessary for worldwide commerce.

You may concentrate on your primary business while relying on their logistic specialists to ensure that items are delivered timely and cost-efficiently. Moreover, Flexport aims to improve international commerce’s customer experience and promote free trade for everybody using their leading technology.

After graduating from Columbia and UC Berkeley Business School, the alumni CEO Ryan Petersen established Flexport in 2013.

When Petersen was a young boy, he was exposed to many entrepreneurial activities. His father established a software firm that provided major food manufacturers with regulatory compliance solutions. His mother started her engineering consulting business, called Novigen Sciences, which Exponent ultimately acquired.

When Petersen stepped down as CEO at ImportGenius in 2013, he immediately set up Flexport as a new establishment. After realizing the industry’s problems in transportation first-hand, Petersen set out to create his own digitalized freight forwarding company to address those issues.

In their initial three years, monthly sales grew by approximately 25%, making the company a resounding hit.

Since its establishment, the company has had a skyrocketing growth representing a 15,911% total increase in 2018, which triggered this leading firm to rank 8th fastest rising business in the country.

At this time, the company has almost 2,000 employees working in 14 offices worldwide. It supports small enterprises and large companies like Bombas, Sonos, and Zalora. 

How Does Flexport Work?

Sending personal items and small parcels across the world is easy, but sending shipments that weigh more than 150 kilograms is a lot more complicated and needs a considerable deal of time and effort. Companies must assure appropriate customs processing, know local requirements, and carry the items on schedule without harming the consignment.

It has been the practice of freight forwarders to provide these services. When it comes to shipping, they are regarded as specialists in their domestic markets. More than this, people also expect to have an extensive network of transportation partners.

Regarding shipping coordination, freight forwarders depend significantly on regular contact via email, phone calls, fax, and worksheets to keep everything running smoothly.

Conducting business over the fax or phone becomes outdated and incredibly ineffective in today’s environment when software increasingly dominates our ordinary lives. The costs are opaque, and logistics companies can’t always follow deliveries due to this ambiguity.

With Flexport’s technology application, businesses can now better track and monitor their logistics operations. Following that, their software is integrated with their armada.

Flexport, on the other hand, specializes in air, ocean, and truck shipments. Goods shipment by ocean vessel is either outsourced to their cooperated companies or handled by the company like when the company does airplane rental for their own fleet.

In addition, Flexport also offers support for the rest of the supply chain in the shipment context. It may, for example, manage customs filing and provide cargo insurance services.<

What is The Flexport Business Model?

Flexport’s business concept strives to give clients a more effortless shipping service at an affordable price than presently available in the marketplace.

Aside from logistics, it also provides quality assurance, shipping insurance, storage and fulfillment, products acquisition, and trade financing.

More importantly, commodity shipping service is at the heart center of Flexport’s business model, including various services. The fees they charge for shipping the product are their primary source of revenue. And, they also make money by keeping products in warehouse storage, facilitating customs brokerage, providing shipping insurance and trade finance. 

How Does Flexport Make Money?

Multiple sources of income are used to generate Flexport’s revenue. Software is exercised extensively both on the client site and in the company itself to improve the quality of their services.

Let’s take a closer look at each revenue pillar in further depth.

Product Shipments

A large portion of Flexport’s revenue derives from the shipping services to its numerous commercial customers. All three modes of transportation (land, ocean, or air) are possible depending on the route and the kind of goods being delivered.

In addition, the warehousing is also handled by Flexport, either by employing the company’s own facilities or external storage providers. It’s also possible for a business to handle shipping on its own or via a third party.

With the use of historical data from previous shipments on the digital platform, the company can provide consumers with an estimate of the cost of cargo.

Each time a shipping job is completed by Flexport or by external parties, the company retains the entire income or splits it with its external service provider.

For items that must be kept for a prolonged period of time, the company charges a holding cost for the additional storage space needed. There are two options for storing those products, including Flexport-owned facilities or third-party warehouses.

Even though the company’s competitive edge is its capacity to reveal cargo prices in advance publicly, it is still possible that additional fees may arise and will be charged in addition to the first quotation.

Customs Brokerage

To import goods from one nation into another, companies that ship goods across borders must pay customs duties.

Importing goods may be challenging for different countries for a variety of reasons. Because of this, we need domestic customs brokers to support this part of the logistics chain.

Likewise, Flexport correspondingly provides customs brokerage services as part of its supply chain management services. A percentage charge is applied to the customer’s quotation based on the number, kind, and value of the transported items and the nation to which they are imported.

Customs duties, fortunately, may frequently be estimated in advance to prevent any unpleasant shocks.

Shipping Insurance

In some instances, massive amounts of items are shipped and may be unsellable if destroyed in transit. There are a variety of common problems that happened, like the following:

  • Misappropriation or loss of property
  • Accidental damages, such as those caused by water leaks, vehicle accidents, ripped packages, etc.
  • Enterprises often choose shipment insurance to save the time and expense of filing legal claims and appearing in court.

All contemporary freight forwarders, including Flexport, have insurance packages that safeguard any damage or loss that may occur during the transportation process. The company has entered into a partnership with the world’s famous insurance broker, Marsh, to provide this insurance program during their shipping.

Therefore, shipping costs, freight, and customs all determine how much insurance will cost.

Trade Financing

WTO estimates that up to 90% of world commerce is supported by trade finance. Companies utilize it to help further expenditures in their facilities, such as vehicles, warehouses, or employees.

As a result of the company’s data collection from their customer bases, it can accurately estimate how much extra money a borrower will require. The loans are distributed and managed by a separate company named Flexport Capital.

In the absence of any public disclosure, the company’s financing options fall into the following five categories:

  • Discounting receivables
  • Advances on cash
  • Term loans
  • Trade credit
  • Asset-backed security

There is a profit to be made from interest charged on loan.

Conclusion

An online freight forwarder, Flexport assists other firms in shipping and storing their products worldwide. Unlike conventional shipping providers, the company depends on emerging technologies to support the shipping process, giving its clients greater transparency.

Flexport has collected nearly $1.3 billion in fundraising throughout six rounds, stated by Crunchbase. The firm raised $1 billion in its most recent Series D financing as of February 2019, triggering the company’s market capitalization increasing to $3.2 billion.

The company announced their revenues reach to about $500 million for the fiscal year 2018.   In addition, the organization has over 2,000 workers spread over 14 multiple places.

Since its latest funding round, it has collaborated with more than 10,000 clients in over 200 countries.

According to the most recently available information, the company does not operate as a publicly listed corporation as of January 2020. As a result, it will continue to be privately funded for the foreseeable future.