Flexport COO: Maersk integration strategy no threat to business (with video)

The chief operating officer of digital freight forwarder Flexport said Thursday that he sees the newly integrated company of Danish shipping line A.P. Moller – Maersk parent and its Damco air forwarding and less-than-containerload (LCL) business as a boon to Flexport rather than as a competitive threat.

Speaking on the first day of the FreightWaves LIVE @HOME virtual event, Sanne Manders said the fast-growing Flexport views the Maersk-Damco combination as a partner rather than a rival. For example, Flexport supports Maersk-Damco’s application programming interface (API) development strategy because it “works really well” with Flexport’s systems and “makes it easier to work with them,” Manders told Steve Ferreira, founder and CEO of Ocean Audit.

Manders’ comments stand in contrast to the view of other freight forwarders that perceive the September announcement that Maersk would fully integrate Damco’s air forwarding and LCL operations as a direct threat to their businesses. The integration is designed to further Maersk’s strategy of offering end-to-end shipping and logistics services rather than continuing to rely heavily on its core ocean freight operations, a commodity business subject to significant price volatility.

Manders lauded Maersk for taking the proper approach in pursuing vertical integration initiatives to facilitate the “client journey.” Vertical integration strategies, which are not new, have for too long been driven by margin concerns on the part of the acquiring company rather than in building value-added customer solutions that can be priced at more predictable premiums, Manders said. 

Flexport has added value, and thrived, by making the historically complex process of international trade and transport easy for all stakeholders, he added.

Information technology advancements are the catalyst for this favorable trend, according to Manders. In the past, providers delivered value-added solutions by “throwing bodies” at the problem, Manders said. Today, scalable technology enables providers to deliver more robust services at lower costs than in the past, he said. Freight forwarders that can effectively combine a strong value proposition with sustainable cost efficiencies will come to dominate the market, he predicted.

San Francisco-based Flexport operates on a unified platform shared by all stakeholders in the freight forwarding supply chain. “Importers and shippers want to have all their data in one basket,” Manders said.

Another reason that Flexport may not be troubled by Maersk’s moves is that it has long penetrated the small to midsize customer base that the shipping giant is beginning to seriously court. Smaller customers need a lot of “hand-holding,” Manders said. In addition, they are willing to pay well for that level of service. “We grew up serving small clients,” he said.

Manders said he expects 2021 to be another volatile year for international trade and transport. Businesses will be frantically restocking in the early part of the year to replenish depleted inventories, he said. However, air and ocean capacity will continue to lag. Capacity assurance will be the central issue for the industry over much of 2021, Manders said.