Global supply chain woes have seen ‘huge improvement,’ Flexport founder says

Global supply chain woes have eased ahead of the holiday season, according to Flexport founder and co-CEO Ryan Petersen.

Ports are less congested, and the cost of shipping goods has fallen significantly this year, Petersen said. The price of shipping a container from Asia to the U.S. is down about 80%. 

“That’s really happy news for any company that’s sourcing overseas and ultimately for consumers buying those goods,” he told CNBC’s Julia Boorstin.

The global supply chain was pummeled with high costs, lengthy delays, crowded ports and shipping container shortages during the coronavirus pandemic. The Drewry composite World Container Index — a key benchmark for container prices — reached record-high prices of over $10,000 during the height of the pandemic, up from pre-pandemic rates of $1,420.

Flexport helps its customers navigate supply chain challenges by providing them with more visibility and data-driven control over their inventories while they are in transit. The company topped this year’s CNBC Disruptor 50 list. 

The falling costs of shipping reflect declining demand for goods and shipping containers, Petersen said. As people readjust to their post-lockdown lifestyles, they are spending more on experiences such as travel and restaurants. 

“They only have so much money to spend,” he said. “They’re spending less on goods, there’s less goods being shipped, and there’s less demand, so some of the backlogs have eased.”

But despite the improvements to the supply chain, Petersen is not convinced the industry has learned much from the challenges of the pandemic. He said the industry is cyclical, and where it was experiencing shortages in many cases, it is now experiencing abundance. 

“They ordered a lot of ships; now we probably have too many ships,” he said. “There have been times in 2016 when there was excess capacity, and we’re right back there when we thought we would never be there.”

For goods to go from a purchase order to a customer’s door, they often have to travel by trucks, ships and planes, and Petersen said it can be difficult for companies to maintain visibility over that whole flow. 

Many ocean carriers are buying trucking and warehouse companies to try to maintain control over the process, but Petersen said Flexport works to provide the necessary data and tools to these companies so they don’t need to own the expensive assets. 

Petersen said shipping and logistics companies need to understand data flows above all else in order to prevent future crises from happening. 

“Our belief at Flexport is it’s better to take a technology-first approach.”