Flexport is implementing Friday a 20% workforce reduction teased a week ago and notifying employees whose jobs have been eliminated as the freight forwarder moves to plug financial losses and become more nimble, CEO Ryan Petersen said in a message to staff posted on the company’s website.
The reduction in force is less than originally floated. Flexport officials last week confirmed plans for layoffs, with internal sources saying that up to 30% of personnel could be let go.
It is the second time this year that Flexport has laid off 20% of its workforce. The new cuts represent about 600 employees in a company with approximately 3,200 people.
Petersen has characterized his return as CEO as one of righting a ship taking on red ink because of excess spending. He is focusing on driving growth in the core forwarding business through more focus on customer service and driving down costs.
The layoffs are the latest drama since Petersen took back control of the company from handpicked successor Dave Clark, a top Amazon logistics executive who was supposed to help the 10-year-old company move from a fast-burning startup to a mature company with sustainable growth. Petersen has blamed Clark for overspending, but CNBC has reported that Petersen and the Flexport board were on board with Clark’s moves.
“Customers need to be able to count on Flexport as a reliable partner for their supply chain. Over the last month my leadership team and I evaluated every role in the company and its relationship to solving important supply chain problems for our customers. As a result, we are confident that this reduction in force will not impact the customer experience we provide to our customers today,” Petersen wrote in his blog post.
Petersen claimed the tighter fiscal policy could return the company to profitability by the end of 2024. Flexport has suffered a significant drop in revenue from the steep downturn in international ocean and air shipping over the past 18 months. Flexport’s revenue has deteriorated more sharply than at many of its large competitors. International freight markets remain at the bottom of the business cycle and many experts don’t see a recovery in demand until the second half of next year.
“With more than $1 billion in net cash, following this change, Flexport is now in a great position to take advantage of the opportunities in front of us to return to profitability as soon as the end of next year,” the founder said in his message. … “We’ll be able to get back to profitability without raising prices or placing our fortress balance sheet at risk. Instead, our path to profitability runs through delivering outstanding global logistics and technology solutions that solve customer problems. We will continue to relentlessly focus on the quality of our services as measured by on-time execution, quote to invoice accuracy, shipment milestone accuracy, direct customer feedback and net promoter scores.”
He reiterated that Flexport isn’t abandoning technology projects that help simplify international trade processes for shippers. But the message made no mention of the company’s recent push to enter the last-mile delivery space and technology investments needed to build on last summer’s $2.1 billion acquisition of Deliverr.
“Today’s change does not change our commitment to pursuing our long-term technology vision. We see endless opportunities for technology to improve on-time performance and reliability, upgrade compliance processes, and save businesses money in their global supply chain. We are the technology leader in this space and will continue to accelerate.
“With a flatter organizational structure, our talented tech teams will be able to make quicker decisions and deliver technology across as many customers and use cases as possible. Businesses come to Flexport for technology that improves reliability, visibility, and control over their supply chains, but they stay and grow with us because of the passion and expertise of our people. That won’t change, as we are more committed than ever to our customers,” Petersen said.
The statement suggests Flexport will be more cautious spending on IT products until they can be paid for from recurring cash flow.
Petersen said laid off workers will receive nine weeks of severance pay, two months of extended health care and assistance finding new opportunities. That deal is worse than the one in January, when terminated employees got 12 weeks severance, six months of extended healthcare, a bonus payment and accelerated vesting in the employee ownership program.
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Twitter: @ericreports / LinkedIn: Eric Kulisch / ekulisch@freightwaves.com
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