Zvi Schreiber was managing an electronics company several years ago when he discovered the fractured, frustrating industry of international freight shipping.
While internet-based platforms that centralize data have transformed myriad services such as travel booking and ride hailing, global logistics has stubbornly resisted this revolution. Figuring out how to get a product from an overseas factory through a supply chain that includes multiple ports, ships and trucks to a store thousands of miles away remains a slow, maddening experience.
Freightos, based in Israel, is trying to drag the $19-trillion logistics industry out of the dark ages by offering technology and a platform that make shipping a product around the world as easy as hailing an Uber.
“The challenge is the culture,” Schreiber said. “It’s a very old industry, and largely a family owned industry. And it’s a very conservative culture.”
It’s a daunting challenge, for sure. Yet Freightos, established in 2012, is working in a changing environment where companies are starting to realize that upstarts like Amazon and Chinese e-commerce giant Alibaba are encroaching on their territory.
Amazon registered as a “freight forwarder” in 2015, meaning that it is licensed to help partners navigate many of the regulatory and logistical issues around international shipping. In the U.S., Amazon is conducting trials of services that touch on other parts of the logistics chain, including Amazon Flex, an on-demand delivery service, a fleet of planes known as Amazon Air and Business Prime Shipping for deliveries between companies.
Meanwhile in China, Alibaba owns Lazada, a logistics company that is building its own network of warehouses and transportation to circumvent the established shippers and accelerate delivery of products across Asia.
And this doesn’t even include the numerous startups like Uber and Tesla with their trucks that want to grab segments of logistics. Or new potential modes of delivery such as drones.
In this environment, sending faxes and making phone calls aren’t going to cut it in the face of these disruptive companies that have developed superior back-end technology.
Logistics remains a messy industry. Freightos’ latest quarterly survey of the global freight economy found that 75 percent of all shipments arrive late. Each individual shipment can take hours to manage. Getting pricing estimates for shipping cargo can take several days.
Enter Schreiber, a serial entrepreneur who had founded and sold several startups, including Lightech, Unicorn Solutions and G.ho.st. In 2012, Schreiber saw a vast system that was disconnected, hampered by poor technology and communication, and divided by corporate structures that often operated in each company as independent silos. His goal was to create a simple online platform that allowed someone to book a shipment in a few clicks.
But what he quickly realized was that the logistics industry wasn’t ready for that. Many back-end systems were so antiquated that companies had to email in spreadsheets, which had to be constantly updated by hand, with pricing, routes and availability. Schreiber decided instead to focus on first trying to automate the technology that shipping companies were using internally.
In 2013, Freightos launched AcceleRate, a cloud-based service that logistics companies could use to begin centralizing information about freight pricing and routes to offer greater efficiency as well as analytics. One of the first customers was Hellmann Worldwide Logistics. The service was a hit, and soon other customers followed.
With enough customers adopting the service, Freightos in 2016 launched its marketplace. By centralizing the automated data now being collected by various logistics company, the marketplace lets customers receive a quote and book a shipment in just a few minutes. The speed and the transparency the system offers gives customers greater confidence in placing an order, which in turns leads to more orders for its logistics partners, Schreiber said.
Freightos sells the cloud-based management service under a subscription plan, and it collects a small fee from any transaction booked on its platform.
“A few years ago, if you wanted something important shipped from China to Paris, you might wait three days for a price quote,” he said. “Publishing their rates on our site was a big shift for these companies. But by doing that, they’re taking the prices that have been secret and making this more transparent.”
Schreiber proved prescient because as he’s built Freightos, the venture capital industry has grown increasingly focused on the markets that touch on transportation. Logistics has become a particular area of interest, with Seattle-based Convoy having raised $80.5 million as it seeks to build out its own on-demand shipping platform. Freightos has now raised $55.9 million in venture capital, including a round last year that was led by GE Ventures.
What excites those investors, and Schreiber as well, is the potential economic impact if the transport of goods is revolutionized.
Whether that’s by futuristic technologies like autonomous vehicles, or simply wringing out inefficiencies and accelerating existing modes of shipping goods, such advances eliminate middle men, allow companies to optimize inventory and allow them to rethink manufacturing cycles that often still need to be mapped out a year in advance.
The result, if this all jells, could be reduced costs of goods and a more flexible system that can change more often.
“The venture awareness of the whole logistics industry has increased in the last two to three years,” Schreiber said. “I was lucky, as I was a serial entrepreneur. If I personally didn’t have a track record, I couldn’t have raised money when we first started. Now it’s different because venture capitalists have discovered this trillion-dollar industry that’s ripe for disruption.”