Logistics provider Flexport plans to reduce its workforce by up to 30%, or about 950 employees, by the end of the month as founder Ryan Petersen retakes control following a leadership purge aimed at stemming losses, a source at the company said.
A spokesperson declined to provide specific details Thursday night but confirmed there would be layoffs.
“Ryan has been very transparent in the need to drive the growth and cost discipline required to return Flexport to profitability. We will do so in a way that doesn’t impact customer service and our ability to help grow our customers’ businesses,” the spokesperson for the San Francisco-based freight forwarder said.
The Information and The Wall Street Journal were first to report on the second round of mass layoffs at Flexport this year. In January, the freight management company released more than 650 workers, about 20% of its staff at the time.
Flexport has struggled with the slowdown in global trade since last year. The company hasn’t provided any financial details, but The Information reported in September that Flexport’s revenues fell 70% to $700 million in the first half and that it burned through $300 million in cash. A different FreightWaves source said Flexport lost closer to $260 million. Large, established competitors such as DSV, Expeditors and Kuehne+Nagel reported first-half declines in revenue in the 40% range and similar drops in profits. Flexport says it has $1 billion in net cash.
The latest move comes a month after the Flexport board terminated CEO Dave Clark six months into his term as sole CEO and less than a year after joining the company from Amazon, where he was responsible for building the retail giant’s massive logistics network. Flexport also fired many former of Clark’s Amazon colleagues. Last week the company fired CFO Kenny Wagers and its human resources chief left, CNBC reported. The management overhaul continued this week with the departures of a top engineering executive and the longtime legal chief, according to The Information.
Clark was ostensibly hired for his management expertise and experience leveraging technological innovations to take Flexport into a mature growth phase after a decade in startup mode. Clark enabled Flexport to acquire the last-mile delivery business of Shopify for $2.1 billion but fell out of favor over his strategy of building up U.S. transportation and warehousing capabilities to provide factory to front door delivery rather than investing in the company’s bread-and-butter international services, even though it appeared his approach had the board’s blessing.
In a phone interview last month, Petersen blamed Clark for losing touch with its customers by over relying on automated systems and wasting too much money.
“Freight forwarding is a service business, it’s not consumer logistics where you just deliver the package and that’s it. In freight forwarding, it’s really about understanding your customer, understanding their network design, understanding their problems. And if you’re not listening to them as the CEO, there’s no possible way you can make good decisions,” Petersen said.
Company officials insist they are not retreating from the end-to-end technology vision but say investments will be spread out to better align with income and protect the bottom line. Tech spending will also focus more on tools, such as a freight forwarding app, to further simplify the international shipping process for small and large companies alike. The retrenchment won’t impact areas of the company focused on the customer, such as account management, customer service and operations, officials say.
Clark and Petersen used the press to point fingers at each other for the divorce. Some accounts suggested Petersen was looking for an excuse to get back in the game, as Bob Iger did coming back to replace his handpicked successor at Disney. But according to one former employee, the negative cash flow kept increasing under Clark as he tried to build a version of Amazon’s infrastructure.
Clark fired back on X, the platform previously known as Twitter, saying Flexport’s spending was out of control when he got there.
“When I joined Flexport as co-CEO in September 2022, I found a company lacking process and financial discipline, including numerous customer-facing issues that resulted in significant lost customers and a revenue forecasting model that was consistently providing overly optimistic outputs. The company had missed cost, margin, and revenue forecasts for multiple quarters prior to my arrival. My go-forward plan for Flexport, which was vetted by Ryan and presented to the Board, was focused on delivering growth and moving to align costs with revenue, not a revenue number based on hope — but one grounded in reality,” Clark said.
Flexport is backed by more than $2 billion in venture capital investments that last year valued the company at $8 billion. Critics say that Flexport’s success, including its first profit in 2021, was because COVID disrupted supply chains and drove up shipping costs to record levels, from which Flexport took its cut. Since then ocean and airfreight rates have crashed to 2019 levels or below.
Click here for more FreightWaves/American Shipper stories by Eric Kulisch.
Twitter: @ericreports / LinkedIn: Eric Kulisch / ekulisch@freightwaves.com
RELATED NEWS:
Flexport founder says ousted CEO lost customer focus, spending discipline
Flexport to cut 20% of workforce as global shipping demand wanes
