ATLANTA — Flexport CEO Ryan Petersen predicts that freight logistics will see a lot more AI usage, from ocean freight contract writing to other parts of the supply chain that currently involve manual input.
“In five years we will be talking about what AI has done, which is take stuff we thought wasn’t going to be automatable, that’s taken us 10 years to wrangle data to structured ways that we can write scripts and algorithms to process and take some action against, and it’s turned out to be really, really hard to where all of a sudden AI can just do it,” Petersen said.
He was the keynote speaker on Day Two of FreightWaves’ Future of Supply Chain event in Atlanta. He was joined on stage Wednesday by FreightWaves CEO Craig Fuller in a discussion titled “Challenges and opportunities of integrating ocean and highway services.”
“We see this with our ocean freight contract ingestion, which is a giant XML file that has tens of thousands of rows, port combos, and if-then statements, and it’s very hard to ingest this data,” Petersen said. “It would have taken us a couple of days to ingest those contracts and get them into our database; turns out OpenAI and others can ingest that thing and get it live into our marketplace in a few minutes. … I think you’re going to see that across the board in so many processes that were requiring manual intervention and are now able to be subjected to AI.”
Flexport is a global solutions provider founded in 2013 by Petersen and is based in San Francisco.
Last year, Flexport acquired e-commerce giant Shopify’s logistics arm, marking the company’s expansion into e-commerce fulfillment and last-mile delivery. In January, Flexport secured a $260 million investment from Shopify aimed at providing a boost during a challenging period in freight.
“We had to totally revamp the business from a third-party model — Shopify logistics was the fulfillment arm of Shopify for e-commerce fulfillment, for exporting to the last-mile kind of end to end all the way from factory floor to customer doors, and built a retail distribution business around it,” Petersen said. “It was third-party, about 40 sites run by local 3PLs. We changed the model to five first-party buildings.”
Petersen said while Flexport downsized Shopify’s logistics and fulfillment operation from 40 buildings to five, the new facilities were actually massive compared to the ones Shopify was previously using for e-commerce.
“What we were finding was that the sites were too small. So when we got an order from a customer, if there were more than two items, a huge percentage of the time they were shipping from two different sites. We were splitting these merchants’ inventory too many times,” Petersen said. “Now the merchant’s inventory is consolidated at just a handful of sites.”
Petersen and Fuller also discussed the dismissal of Dave Clark as the company’s CEO in September. Petersen was reinstalled as CEO as part of the move.
“From your perspective, what happened, what was the story there?” Fuller asked.
“Dave ran supply chain and logistics for Amazon for 23 years and we hired him to be our CEO. He had an incredibly ambitious … talk about capital-intensive, let’s go big, invest, take Flexport to that level of an Amazon, and the amount of investments we made really kind of exceeded where we were, even though we have a very strong balance sheet,” Petersen said.
Flexport has raised $2.35 billion in capital and has been valued at as much as $8 billion by venture capitalists.
“I think we just had a misalignment for how ambitious of a company we should be. We want to be very ambitious, we are ambitious, but don’t need to do it all, so fast. There was just a mismatch there at a certain point that became obvious,” Petersen said.