March 31, 2017
Earlier this week, Freightos, a SaaS-enabled logistics technology provider focused on instant freight quotes for freight forwarders and shippers, completed a $25 million Series B extension round from lead investor GE Ventures and other parties that bring the Jerusalem, Israel-based company’s total funding to $50 million. While not having been around for all that long, Freightos is gaining quick traction in the industry through its Freightos Marketplace that enables instant freight routing and pricing for global freight forwarders and shippers and has seen a 600 percent increase in orders in the first six months following its July 2016 debut, and 100 percent growth in orders from the fourth quarter of 2016 to the first quarter of 2017.
Logistics Management Group News Editor Jeff Berman recently spoke with Dr. Zvi Schreiber, Freightos founder and CEO, about Freightos’ most recent round of funding, the company’s approach to the market, and what is in store for the future. A transcript of the conversation follows below.
Logistics Management (LM): In the press release announcing the most recent round of funding, Freightos said that the capital would be used to “scale the Freightos Marketplace on a global basis and also to continue development of Freightos software suite of global freight pricing routing, and sales automation.” Can you provide some more detail on that?
Dr. Zvi Schreiber: The Freightos Marketplace is quite a big change for the industry, because other industries has been buying and selling online for 20 years already. But in freight it is really very new in terms of freight forwarders and carriers selling online and customers buying online. It does take some capital to educate the market to educate the forwarders what they can sell online and educate the shippers of what they can buy online. When the Freightos Marketplace launched last summer, we initially focused on freight moving from China to the U.S. and have now we have already expanded that for all Trans Pacific routes from Asia to the US. And one of the big things through the capital is to expand our global footprint, which involves setting up offices and marketing operations around the world. It will be capital-intensive but will also be very exciting to see the Freightos Marketplace working in other trade lanes.
LM: Can you provide a basic overview of the Freightos Marketplace? And as a follow-up, what drove the need for it?
Schreiber: I am a software guy, with most of career having been spent building software companies. I did learn about logistics around 2010-2011, when I took over as CEO for a company called Lightech (which was sold to GE Lighting in 2011), which was producing power supplies for LED lights. We were manufacturing in China and shipping regularly from China to the U.S. and from China to Europe and were a shipping customer. We used to do spot shipments to Boston or Paris, for example, and it used to amaze me that it would take an average of three or four days just to get a price quote for a door-to-door spot shipment, which is still the case today. One of the takeaways we saw from that was that this industry has gotten way behind other industries. I have been able to book airline tickets online for 20 years already so the goal of Freightos not an original business model. It was more along the lines of replicating to model of something like Expedia and doing the same thing for freight, where you can get instant prices and find a list of spot quotes.
LM: There are more than 1,000 registered users of the Freightos Marketplace, which includes registered users, dozens of sellers, and the top 20 global freight forwarders (and several thousand others). Prior to the launch, what were some of the issues, or “pain points,” you were hearing from them in regards to a need for this type of service?
Schreiber: We always wanted to create a marketplace, but when I started Freightos we could not create a marketplace, because none of the freight forwarders were able to do a price quote quickly. For the first four years of Freightos, we sold software to forwarders and NVOCCs to help them to automate their price quotes. Our software business is where we are working with the thousands of freight forwarders in helping them to automate their price quotes, which we have been doing since last summer with the Freightos Marketplace. A few dozen of those forwarders are already selling on the Marketplace, and it is still a process to get all these other freight forwarders the ability to quote automatically and now, we have to persuade them to also quote publicly and put their rates online.
LM: How has that process been?
Schreiber: It is really quite a shift for them, and people are excited about. But it remains an issue, which they have to get comfortable with…but as they see it is working and they see that it is working for the freight forwarders on the Marketplace and they are getting orders, we now have a waiting list of freight forwarders looking to get on it.
LM: So were some freight forwarders leery or hesitant because of the idea of their rates being “out there” and they view that as being proprietary?
Schreiber: Absolutely, yes. This industry is sort of used to doing things very privately, or secretly, a little bit. The idea of publishing rates on a Web site is still pretty new, but it has worked well for the airlines so there is a good model for it and now we are working on educating the freight forwarders.
LM: Have you seen gradual buy-in on that front as time has moved on?
Schreiber: Yes, it is a transition and an educational process to be sure. People are nervous about it in that it is new and it is different, but it is working so people follow the success and shippers are finding that they can save time and money by buying online, and forwarders are finding that they can sell online. It is still early, though, and the vast majority of freight is still bought and sold off line. But it is successful, and we are drawing more buyers and sellers.
LM: With rates sometimes fluctuating, how does that get reflected within the Freightos Marketplace to ensure the most real-time pricing data is online?
Schreiber: That is a great question, because that is where a lot of the hard work is. When it comes to rates, there are thousands of shipping lanes across all modes and thousands of global carriers. The biggest challenge is getting all those rates and the rates do change at least weekly or even daily, and in some cases it can be hourly. That is a key challenge and in order to do that we are ingesting Excels (spreadsheets) from all over the world. As an example, Maersk Line will send an Excel spreadsheet with one of the freight forwarders we work with and it will have hundreds and hundreds of rows with pricing information Shanghai to Long Beach for 20- or 40-foot containers, as well as to other locations, and fuel surcharge information and other things, too. These rate sheets are almost always in Excel, and in certain cases we can get an instant electronic connection, but that is quite limited. In 90 percent of cases, we get the rates on a daily and hourly basis in Excel spreadsheets, and we have had to create the technology to read all of that.
LM: For users of the Freightos Marketplace, are they on a subscription model or some sort of transactional fee?
Schreiber: For the freight forwarders that use our software to automate their quotes, that is a SaaS-based monthly subscription model, which is typically around $49 per user per month. When freight forwarders or carriers enter our Marketplace, there are no up front costs at all. They pay Freightos 2 percent of any actual order that we bring them, and for the shipper, or the buyer, they pay the freight forwarder but do not pay us anything.
LM: What is the roadmap for Freightos going forward in terms of scaling up and growing?
Schreiber: One of the key areas for us is the global expansion part, because the market was initially really focused on Transpacific ocean shipping and air, which is a very important trade route but it is not everything. We have rates all around the world, but many of them are private so we want to expand the effort to get rates on to the Freightos Marketplace around the world and invest in marketing to make sure that shippers, or importers and exporters, can buy freight in a different way. This is capital-intensive. Just in the U.S. there are 500,000 companies that are importers and exporters, and when you go around the world there are many millions doing the same thing. It requires some marketing to educate those millions of companies, especially the smaller ones, about a new, efficient way to buy freight services.
About the author
Jeff Berman is Group News Editor for Logistics Management
, Modern Materials Handling
, and Supply Chain Management Review
. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman