International supply chains bank heavily on the maritime network, so much so that about 90% of the freight moves over the oceans in more than 200 million containers every year. However, this also leads to severe inconsistencies within the network, as ‘dead miles’ rack up when ships return with empty containers after their intended cargo delivery. “The shipping industry loses out on nearly $20 billion a year due to empty containers moving around. In that, $5-10 billion is lost over completely avoidable and company-specific imbalances,” said Florian Frese, director of marketing at xChange.
xChange, a maritime startup headquartered in Hamburg, Germany is offering container lines the possibility of reducing their dead miles by helping them supply or use one-way container moves or SOCs from 2500 locations across the world. “More than 200 companies like NVOs, freight forwarders, carriers, and traders use xChange on a daily basis to find partners for their one-ways,” said Frese. “In addition, we offer tracking, do invoice and payment handling for our customers, and also provide insurance and other value-added services, making our platform a one-stop shop.”
The founders of xChange come in with many years of experience working in BCG, consulting for some of the largest container lines in the world. It was during their stint at BCG that they discovered the immensity of the empty container problem, as carriers struggled with reducing dead miles and the costs incurred due to it. There was an environmental aspect to it as well – for instance, a container shipped empty between China, and Europe would end up contributing 1.9 kg of CO2 to the atmosphere.
“The initial solution started out when our founders were at BCG. They created an excel document where they collected information on how much of a surplus a company had, and in which location. They then matched different parties using that information,” said Frese. “The news spread via word of mouth and the excel document quickly exploded as everyone wanted to be a part of it. This was when the founders realized there is a need and a huge value for such a solution.”
Today, xChange provides a transparent platform that is automated and highly scalable, unlike the traditional brokerage system that is inefficient and frequently run with vested interests. “We have a vetting program before we let companies join, and containers change hands with a multi-party exchange agreement strengthened by a contractual framework. This makes our system safe for companies to find partners, negotiate deals and in tracking their containers, while also benefiting from low demurrage and detention fees,” said Frese.
Though xChange is now a leader in its niche, it started out with just eight customers and a rather small market footprint. Back then, users complained the product was a bit hard to navigate, as it ended up adding more steps to repositioning – which was already a time consuming and expensive procedure. “We ultimately had to create more interchanges for them and spent the last few months making the process simpler. We realized it was not just about making the solution cost-effective, but also about making the lives of users easier,” said Frese.
“The focus of the product has changed heavily from the time we made the MVP,” said Jan Matysik, the CTO at xChange. “Back then, the core part was the page where we showed the balances for each location and information on where a potential match could happen. Then we had the request page which only had two steps – create and accept – with the process being finished within our software.”
However, matching has become more sophisticated now, as the company considers a lot more parameters in the picture. “We now cover the whole journey of the container, till it gets back to the company that supplied it,” said Matysik. “These companies can see where their containers are in real-time, and can manage the whole voyage via our platform, making it a smooth process.”
The cost-saving measures are on point as well, with data from BCG’s Shipping Benchmarking Initiative showing parties saving $200 per unit for every transaction on xChange – just on harbor costs. The company now has transaction hotspots in the Middle East, SE Asia, Europe, and China. xChange is currently on an expansion spree, rapidly adding on to the location list as it positions itself as a truly global maritime company.