Last week’s dismissal of Dave Clark as Flexport’s chief executive officer was prompted by his neglect of customers and freight growth to focus on expensive technology development for Amazon-like last-mile delivery, reinstalled CEO Ryan Petersen told FreightWaves.
The Flexport founder stressed the leadership change doesn’t mean the company is returning to being a nuts-and-bolts freight forwarder and will continue its transformation into an end-to-end logistics provider, aided by the June acquisition of Shopify’s e-commerce fulfillment unit.
The reboot, he explained, has more to do with focusing on customer service and a mindset of hustling for business rather than simply being a monolithic, tech-enabled delivery company processing orders without a human interface.
“A big reason this change needed to happen is the CEO needs to be out there meeting customers, constantly traveling and seeing them in person wherever, whenever, multiple days a week,” Petersen said in an interview on Sunday. “The culture of Flexport is [based on] seeing the world through our customers’ eyes and solving their problems. As the board started to see that waning … we took immediate action.”
Petersen stressed that “freight forwarding is a service business, it’s not consumer logistics where you just deliver the package and that’s it. In freight forwarding, it’s really about understanding your customer, understanding their network design, understanding their problems. And if you’re not listening to them as the CEO, there’s no possible way you can make good decisions.”
Clark, the architect of Amazon’s sprawling transport and logistics business, was brought in a year ago as a more seasoned executive to help Flexport transition from a startup and sustainably scale the 10-year-old business. He was forced out last Wednesday over differences about the company’s direction and growing red ink.
“The board realized: ‘Hey, this is … a role for the founder of the company. You’re gonna have to drive growth again.’ That’s what I have done really, really well. Dave built a great technology organization here and really advanced us to build world-class operations, so we now are sort of like a tiger ready to pounce,” Petersen said.
Flexport also dismissed several of Clark’s top lieutenants from Amazon late last week, a spokesperson confirmed. Gone are Teresa Carlson, the chief commercial officer; Darcie Henry, the human resources chief; Tim Collins, the operations vice president; and product executive Adrienne Wilhoit. Bill Dreigert, a former Amazon executive and co-founder of Uber Freight who joined in May to lead Flexport’s new domestic truck brokerage business, is still with the company.
Petersen, who shared the CEO title with Clark for several months before taking the role of executive chairman in March, downplayed the need for damage control, saying many customers have sent positive messages about him retaking the helm.
The turmoil preceded Tuesday’s rollout of a self-service technology portal designed to make it easier for independent sellers across major e-commerce marketplaces and wholesale channels to access international freight, domestic fulfillment, financing, warehousing and inventory replenishment.
Flexport promotes itself as a leading adopter of cloud-based digital tools that simplify for customers the complex world of cross-border trade characterized by arcane regulatory rules, intimidating geographical distances and siloed networks of providers. It spent heavily to automate supply chain processes and enhance the shipper experience through shipment transparency, fast response times, data analysis and flexible services.
Flexport grew at an incredible rate and posted its first profit during the pandemic, fueled by demand from shippers that needed a helping hand to navigate massive supply chain disruptions and name recognition generated by the outspoken Petersen. Flexport generated $5 billion in gross revenue in 2022, according to public accounts, but laid off 20% of its workforce, about 650 employees, early this year because of the global freight recession.
Critics argue Flexport doesn’t have any special sauce that makes it stand out from other major freight forwarders. A former account manager at Flexport, who spoke on condition of anonymity earlier this year so as not to jeopardize her job search, said a big problem with the platform is that many suppliers, particularly in places such as China and Vietnam, don’t upload information or communicate through the platform, forcing Flexport staff to follow up manually to process shipments.
“It’s like half of the shipments still exist outside the platform,” she said. “And the platform is outdated. It’s a bootleg Facebook, from the inside out. It was actually modeled off of Facebook. It didn’t quite live up to the hype.”
Another employee who left as part of a downsizing move, told FreightWaves the Flexport technology was mostly for ocean shipments and didn’t connect other modes like air and trucking.
Small businesses liked the platform because Flexport didn’t charge for the tools and eliminated hassle by moving their goods, but the technology wasn’t cutting edge, the person said. “It’s very clunky.”
Heartburn over spending at Flexport
Petersen last week suggested in a memo posted on X, formerly known as Twitter, that Flexport needs to rein in spending amid the downturn in freight volumes and return to profitability.
In the interview with FreightWaves, Petersen expressed confidence Flexport would become profitable if it can bring fixed costs under control because freight forwarding is a high-margin business. And it will still invest in customer-facing personnel, tools and products.
Realigning the company could result in some layoffs, he acknowledged.
“This is not a company in distress. We have a billion dollars of net cash. Some changes are needed. We’re going to be working hard on our fixed costs. We’re not doing any cost cutting as it relates to the people and teams and services that we provide to our customer,” he said in the phone interview. “In fact, we’re gonna invest more, but on the fixed cost basis, we’re going to cut costs so we can be even better for our customers.”
Petersen posted Friday on X that Flexport is eager to sublease office space in San Francisco, Los Angeles, New York and Dallas.
The company has twice as many desks as it needs and other waste that can be cut, Petersen told FreightWaves, but “that doesn’t mean you can’t build new tech and execute on this new vision. … We’re going to invest even more in things that create value for customers.”
Flexport also has revoked offers to 75 people, Petersen announced on X.
The logistics provider has enough IT engineers to build software products but “we’re adding more people that do sales, customer experience work, operations and customs compliance. These are things that drive growth,” he said in the interview.
Flexport is also losing money on three dedicated freighters chartered under a long-term contract with Atlas Air. The forwarder signed the transport services deal with Atlas Air in 2020 when passenger belly capacity disappeared with the pandemic and shippers were desperate for transport capacity, but the planes are a liability during the current weak market. Petersen said the solution is to work harder to find more shipments for the aircraft and that the contracts will prove positive over their lifetime.
Petersen implied that Clark was spending money like he was still at Amazon, where the company had so much goodwill from investors that it could lose billions of dollars for years while building a massive logistics empire.
“Whatever it was, maybe it’s just being used to a different capital markets environment or more funding in a previous company, but in this industry you got to be super dialed in on your fixed costs so that you can use the cash that you have,” he said.
The spending shoe was on the other foot in January, when Clark started to take over. According to the former account manager, it was Clark who made it clear there was too much waste.
“He doesn’t want to spend. The first time he spoke to us the message was we spend a lot of money. We’ve been wasteful and things are going to be changing,” she said.
