Using digital technology to open up the movement of information in freight transport markets is not new. Starting with the ‘dot.com boom’ there have been a string of attempts. Most have failed. However, others such as Coyote Logistics or FreightEx in road freight have succeed and Freightos is looking to replicate this success in the market for container shipping.
The Hong Kong based company has just received a second round of refinancing totalling US$25m, led by GE Ventures. This brings the total outside investment in the company to US$50m.
The basis for Freightos’ approach is the ability to a create cloud based ‘software as a service’ platform that delivers quotes and customers to sea freight purchasers and providers respectively. The software is easily accessible via the internet and therefore can be used in parallel with any company’s existing IT architecture.
The benefits of such a system for purchasers is obvious. The quality of data on prices and market options increases. More surprisingly, Freightos claims the patronage of several large forwarders including CEVA. The company asserts that “23 of the top 25 forwarders use Freightos technology internally”. How they use the service and to what degree is unclear. After all it is surely the purpose of a freight forwarder to act as an intermediary between the client needing shipping services and the container line. It would appear that in the long-term Freightos is a threat to this relationship.
Of course, it may be the case that Freightos does not impinge on the long-term relationships that forwarders have with either their shipper clients or shipping lines. Prices in such contract relationships are usually very different to those in the spot market and it appears it is essentially a more transparent and accessible spot market that Freightos is looking to create. Thus Freightos becomes a tool, used at the operational level, making the ‘long/short’ trades that characterise so much of freight forwarding, more easy.
However, it is unlikely that the relegation to a mere desktop tool is the ambition of Freightos and its backer, GE. Such companies are looking to create ‘platforms’ which dominate trading and whose strength in the marketplace enables them to charge a fee. Such a business model would certainly be a problem for freight forwarders, as well as shipping lines.
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Source: Transport Intelligence, March 30, 2017
Author: Thomas Cullen