Freightos And The Epic Challenge Of Building Software For Logistics
Meet Freightos, the company offering real-time pricing for trans-oceanic freight shipping. It’s harder than it sounds.
The high-tech gadgets you’re buying this season have a secret transportation problem. The freight service companies that get cargo containers full of video game consoles, LCD TVs, and smartphones onto massive ships to move them across oceans still rely on handshake agreements, faxes, and emails.
It’s a field ripe for disruption, and an Israeli startup called Freightos thinks they see an opportunity to create a Priceline-style bidding platform for international freight. In fact, the company bought former Priceline CFO Robert Mylod onto their board this past October to do just that.
Much like other transportation service providers such as airports and seaports, shippers frequently use older computer systems and rely on paper and photocopies to an extent that would surprise many techies. And Freightos faces an additional challenge—while consumer shipping is split among a small number of competitors like UPS, FedEx, and DHL, the commercial freight world is split among tens of thousands of smaller companies.
It requires communication between parties located on opposite ends of the globe. In a telephone conversation, CEO Zvi Schreiber noted the challenges of working in an industry where “face-to-face meetings really matter, and things like playing golf is used a lot (to make deals).” Freightos’ business model is largely based on both shippers and companies called “freight forwarders,” which serve as middlepeople that send freight on behalf of companies to their geographic destinations.
The hope is that by offering an automated solution to these forwarders—many of whom are located in emerging markets worldwide—they’ll be able to cut costs for them by replacing haggling and internal back-and-forth with quick quotes.
Freightos uses a subscription and commission model. The company, which has overseas offices in the United States, Germany, and Hong Kong, offers automated quoting and contract management to vendors, shippers, and third parties involved in the logistics process. This approach of offering a software-as-a-service (SaaS) platform to make shipping easier is already commonplace in the logistics industry, but it’s still somewhat unusual for the transportation world.
The company’s public client list appears to be more or less split between companies in China, Europe, and the United States, but they offer discounted subscriptions to Chinese and Indian customers. Freightos’s head of marketing, Eytan Buchman (who was previously interviewed by Fast Company in his role of spokesman for the Israeli military), added that one of the startup’s advantages is the speed they offer product producers and freight companies. Instead of waiting a week for a quote, he said, quotes can be generated almost instantly.
Schreiber says that one of the biggest challenges is generating algorithms for price quotes in the shipping world. For Freightos’s engineers that means deep-diving into the highly complicated world of the freight companies themselves. “Apart from the engineering problems of going through millions of routes in seconds, there were the challenges of big companies like Maersk Lines, for instance.” He says, “For instance, there are seasonal challenges shipping on the Suez Canal and density is very important. What do you do about weight, volume, and size restrictions? There are also restrictions on freight aircraft and many other details. This creates a lot of data problems because every carrier also presents data in different ways in Excel.”
The startup’s approach also signals something we’ll see a lot more of in the coming years: Companies targeting highly decentralized, change-averse industries such as international commercial freight. In order to offer a viable product, Freightos has to offer a UI that works smoothly in a host of foreign languages to a user base dispersed around the world that demands their product work. It’s a challenge, and a risky business to be in… but as more of the world (and more industries) get plugged in, the rewards for logistics startups will become bigger and bigger.