Flexport CEO: ‘Efficiency Is a Byproduct’ of Successful AI Implementation
Meghan Hall
6 min read
One major supply chain and logistics company felt ready to flex its new technology offerings, primarily powered by artificial intelligence, late last month.
Flexport launched a smattering of new tools in its winter technology release, many of them aimed at helping customers gain stronger insights into their supply chains and making paperwork and pricing easier.
And for Ryan Petersen, Flexport’s CEO, the fun has only just begun—the company now plans to do two tech-focused product launches annually. This release marked Flexport’s first, with another slated to be announced in the summer.
As Flexport continues to integrate technology into its own processes and into customer-facing dashboards and practices, Petersen said, contrary to all the chatter about efficiency in the industry, that’s not his primary goal for the company’s technology expansions.
“We’re not really pursuing efficiency; to be honest, efficiency is a byproduct. You try to eliminate defects and generate higher-quality output, and then it turns out quality costs less,” he said. “That’s the key mantra at Flexport. Every time we tried to pursue efficiency, quality went down, and then efficiency got worse, because the number one source of inefficiency is bad data,” he told Sourcing Journal in an interview.
By pursuing accuracy and quality, he noted, Flexport has enabled employees in some areas to increase productivity. In the sectors of its business that Flexport has enabled with AI, it has managed to automate about 30 percent of its structured work—and Petersen said he hopes to see that increase to 50 percent of the work associated with those tasks being automated by the end of the year.
Still, Petersen said he doesn’t expect AI and emerging technology to decrease the size of the company’s workforce.
“My working assumption is that the more you automate, the more people you actually need. It’ll be different types of roles, but you’re just going to be so successful. Your cost is going to be lower than your competition; your quality is going to be higher. Guess what? You’re going to grow like crazy, then you’re going to need salespeople. You’re going to need marketers, engineers, account managers, finance people, HR people—you’re going to need more people than ever,” he said, noting that many job functions inside Flexport have yet to be directly impacted by AI because of the complexity of developing systems to meet the demands of some tasks.
Customer-facing tools
Flexport launched two major new products for its clients in the winter release: Flexport Control Tower, and Flexport Intelligence.
Flexport Intelligence centralizes unstructured data and analyzes it to enable clients to ask questions in natural language patterns and receive answers, and leverages AI for inventory and demand planning, which helps to bring goods closer to demand hotspots. It also brings a unique twist to communicating with carriers and supply chain partners; Flexport Intelligence uses AI-powered voice agents to help gain information about shipment statuses.
While Flexport’s own clients aren’t talking to an AI agent when they call or message for support, the company is using AI agents on the backend of transactions to help streamline cargo management. It employs AI voice agents to inquire about shipments and timing; Petersen did not have an exact statistic on what percentage of phone calls placed to supply chain entities on Flexport’s behalf are currently handled by AI.
“We’re having AI make thousands of phone calls every day on behalf of Flexport to get statuses, to get your cargo moving on your behalf,” he said. “I think you’ll see, in the next few years, that it’s going to be the majority of the phone calls—not to our customers, but to the industry. I suspect that…we’ll start seeing AI talking to AI on the phone, which is going to be very interesting.”
Flexport Control Tower, meanwhile, leverages AI to help customers with route planning, order management, booking management and general optimization.
Flexport announced it had launched an AI-powered spot rate quoting tool, which gives customers the chance to book competitive spot rates without having to call or interface with the team directly.
Petersen said he originally expected that capability could have been launched years ago, but difficulties with automatically coordinating door-to-door delivery, as customers expect from their freight forwarders, and with offering low rates prevented the company from launching the product preemptively.
“If you just want to put port-to-port [rates] and not your best pricing, you could build this in a weekend, especially now with AI tech…but if the rates aren’t good, nobody’s going to book it. They’re going to get this impression that your rates are not good,” he said, noting that coordinating multi-modal transportation also proved a challenge.
One priority for Flexport’s summer technology launch will be automating standing rates in a similar way, Petersen noted.
Internal use cases
In the burgeoning battle against tariffs, brands and retailers are looking for ways to make every dollar count. Petersen said one of the most exciting pieces of this launch, which has already saved some clients millions of dollars, is automating duty drawbacks.
Drawbacks are a way to recover some of the capital expended on duties when goods are re-exported or, in some cases, made into something else or destroyed because of excess inventory, and $6 billion worth of eligible duty drawback funds go uncollected annually, Petersen said.
Flexport uses technology to pull the applicable records from customs agencies, then an AI algorithm works to match transactions, giving the company the highest possible drawback return. Previously, much of the matching was done manually.
“I’ve had a number of companies—famous, well-known brands—say our company only exists because of our duty drawbacks…that it effectively [is] like an extra round of venture capital funding they weren’t expecting,” he said.
The duty drawbacks function is just one piece of Flexport’s automated strategy for its customs brokering systems, which Petersen hinted that he plans to expand in the summer release.
It has already built a system to automate importer security filings, which are meant to prevent smuggling and indicate the risk levels of shipments. He expects that same technology to be used to automate core entry paperwork later this year.
And while customs remains a core piece of Flexport’s business, Petersen said it has also been tricky to automate.
“Customs are a very hard problem, because there’s so many government agencies. Depending on what the product is, there [are] 43 different government agencies just in the United States that might take an interest in the product, so you have to have a lot of intelligence and business logic,” he said. “It’s either tech or you need people who’ve worked in the business for 30 years. Our answer is both—let’s get really experienced people, and then give them Iron Man suits to do a better job.”
As the CEO looks forward at what’s to come this year, he said Flexport has a variety of priorities, one of which is responding rapidly to regulatory and geopolitical fragility and changes.
“Being agile and responsive has always been part of our strategy, and we’re definitely building more tech to help customers be situationally aware of what’s coming down the pipeline—more tools for trade advisory like drawbacks are likely in the works,” he said. “We want to connect our international and domestic businesses to improve the flow of cargo.”
