Nathan: What is up all? Welcome to eCommerce On Tap brought to you by Sourcify. Today we have Zvi from Freightos, the CEO of Freightos. Thanks so much for coming on.
Today, we’re really going to dive into freight forwarding and how you get your products from your factory to your warehouse or 3PL. Zvi, thank you so much for joining me, how are you?
Zvi: Great! Thanks for having me on Nathan.
Nathan: Amazing! So, now really before we dive into the dynamics behind freight forwarding, I always like to learn about the person’s background and how you even got into Freightos. What led you to come across these problems involving Freight forwarding?
Zvi: Sure, I mean my background is more in software; I’ve been creating software before particular around Internet. So my background isn’t actually from logistics at all but I did learn quite a bit about logistics in 2010-2011, I managed a company called Li-Tech and we were making power supplies for lightings; small to medium sized companies and we were making designing power supplies and then having them manufactured in Shanghai, China where a lot of electronics were sourced.
And so we were sourcing in the South of China and then shipping every day both by ocean and by air from South China to the US and also to Europe.
And then after a couple of years, I had some good luck to sell the company to GE Lighting that but during those 2 years before I was able to sell the company I was dealing with shipping every day. We were sourcing in China and dealing with shipping and I found it to be incredibly frustrating.
So, one of the biggest frustrations in sourcing was in fact the freights and shipping. And so after selling Li-Tech back in 2011, I decided to start Freightos meant to be like Expedia for international shipping. We want to make it make international shipping just as easy as international travel, that’s the whole goal.
Nathan: That’s amazing, so let’s kind of dive into the dynamics of how Freightos first started, I know you guys created a lot of tools for freight forwarders to really manage their process because one of the most frustrating things is not only for buyers that are trying to ship their products, but also for freight forwarders themselves who used to manage these freight runs by email and Excel.
Zvi: Yeah, the whole thing is a very old fashioned and frustrating experience at least before Freightos. You find a supplier in Asia and hopefully Sourcify will help you find an adequate supplier in China or Indonesia or wherever it is, most often still China.
As you found your supplier and maybe you’ve got some samples and you’re able to establish their good supplier and that’s getting easier and easier to do. And once you find the supplier then you’ve got to do the shipping. And that process is so old fashioned just getting a price quote from a typical freight forwarder or 3PL takes an average of 3 days we find.
And then you get the price but then the actual shipment rarely arrives when you’re told that it’s going to take 30 days, it takes 40 days. In most cases, you cannot do track and trace online. And then when you get a bill at the end of all of that, the bill doesn’t actually match the price that you got in the first place majority of cases. What you’re actually charged is not the price you were quoted. It’s a really frustrating process and you know when I started out in 2010, I thought shipping would be like sending a FedEx box, you know.
You see the price online, you book, you pay with a credit card, it arrives 80%-90% of the time it arrives at the time they say, you can track and trace it online. When you’re shipping pallets of full containers, it’s completely different. And so, we’re really setting out to change that and I think we’re having some success in changing that.
Nathan: That’s amazing and correct me if I’m wrong but I remember when Open Table was first starting, they started by trading tools for restaurants and then they open up this marketplace and now that you have all the data from these freight forwarders, the Freightos marketplace is incredible where you can actually get freight cost in real time. And so, that similar dynamic to how you guys collected this data and we’re able to price freight runs of time?
Zvi: Well, that’s exactly right you see I mean 6 years ago, we said, “OK, we could expedite freight, create a website where you can search origin destination, weight, volume and get a price” but then we discovered the freight forwarder are taking like 3-4 days to process quote and we thought this would not be a really compelling website where you do a search and then you have to wait 3 days for the results, that’s not going to play well on a website.
So, it’s exactly as you said, we did the first 4 years of Freightos since 2016 providing tools to freight forwarders around the world and currently, we’re working with 1000 freight forwarders not the biggest ones even the multi-billion dollar freight forwarders have this is what many of the biggest freight forwarders in the world and we’ve provided tools for them to help them automate the process.
And that includes the door-door routings because the only way to do a price quote is going to figure out that track and what it’s going to go through and then sailing in the truck on the other end so we do the door-door routing and pricing of the freight forwarders and the strategy is just like you said for the first 4 years, we provided these freight tools to freight forwarders, help them to automate the price quotes and only after that we were in a good position since that marketplace with instant pricing.
Nathan: It’s incredible, I know we have some listeners through Sourcify that have used Freightos and had an incredible experience, walk us through that kind of process of actually you’ve got your products finished in your factory, you go to the Freightos marketplace, how easy is it to book freight and actually get it to your warehouse or 3PL, what is that process really like? Break it down for us.
Zvi: Yes, so the booking is super easy and the operations is getting super easy, we’re still work in progress, I’ll explain that in a minute but you go to Freightos, it’s a free sign up, you say you put in the address of your supplier or if you’re buying FOB, then you say it’s from the port of Shanghai, and the supplier maybe bringing it to port, that’s FOB the supplier will know already.
So, either it’s from the door of the factory or it’s from the ports in Shanghai, Changchai, Mumbai or wherever it is so you just type in freight, a single form, you put in the origin, you put in the destination can be just the use of code in the US and then you put in the dimensions of the dimensions would be the weight and size of the pallets or if you’re big enough, it would be a full container.
So you just either choose a full container or you choose a few pallets with the dimensions and as soon as you put in the origin and destination on the pallets, you search and within about 30 seconds, you can see thousands of price points.
If it’s a full container, you’re only going to see ocean price quotes but if it’s loose pallets, we’re going to give you air and ocean options. And then you book online just like you would buy a ticket online, you’ll pay with a credit card or you can request credit and pay later, if you’re qualified to get credit and pay later.
And then we also ask you for some documents that you’re going to need for international shipping including the commercial invoice power of attorney. And so, all of that is really easy; I mean if you know the dimensions, you know the addresses, you can book it in 3-4 minutes.
And the second half of what we do which is working quite well but still not perfect to be honest is then the track and trace, we want to make sure that’s around the process and it can be 40-50 days if it’s ocean, transpacific. So, throughout those 40-50 days, we want you to have complete transparency of where your cargo is, any documents that need to be exchanged. And all of that is working pretty well but not yet perfect because not all the freight forwarders are getting us timely updates about where the containers are.
So, we’ve made reasonable progress and making sure you’ve got full visibility of the whole process but that aspect is not perfect yet, we’ll put the whole team working to make sure that all the freight forwarders are giving us timely update so they can manage the whole process online in every single case.
Nathan: That’s awesome and that’s a really good run down and I’m trying, I want to- because we have a lot of listeners that, their unit cost and really their cost of the supply chain goes up because of freight and sometimes, unexpected cost.
If you’re an eCommerce entrepreneur and let’s say you’re just shipping 1-2 containers, and you’re really starting to scale out a few hundred thousand dollars mark, what’s the process you need to look in your freight forwarders you know shipments and understand how can I cut costs? Where’s there room for me to save money? What kind of approach would you take to cut costs in freight forwarding?
Zvi: Yeah, I mean that’s key, of course the first thing that we do to cut costs is give you choice. You know, lower cost is all about competition, and on Freightos you’re typically going to see multiple freight forwarders and not just cost but it’s also at the transit time and their reputation. Because it’s also if they’re late, that also costs you money because they may be that miss out on sales and that kind of things.
The cost is not just the direct cost of the freight but also the reliability is critical. So of course, the most obvious cost saving is if you can switch from air to ocean. That’s not always possible but if you can figure out your demand 50 days ahead of time, then you’ve got time of 40 days depending where you are in the US or other countries. You know, then you can do everything by ocean which is a lot cheaper than air. That’s a key way to save cost, additionally, if you can do consolidation, I mean sending one full container is cheaper than sending two half containers.
You pay a premium when you’re sharing a container which you know if you’ve only got of a few cubic meters, that’s still going to make sense but if you can plan it so that you fill the container that’s going to be a lot cheaper.
Sometimes you can save money with FOBs, sometimes if you tell the supplier; he’ll bring it to the ports of in Shanghai or wherever it is. If you can get the supplier to bring it to the port, sometimes that will save you money but sometimes that will actually cost you extra because they may charge you actually all for that than you would cost it yourself.
So it would really make it really easy for you to compare the FOB cost which is just from ports versus door to door and that’s also an important depending on the supplier, one may end up cheaper. Air versus Ocean, door to door versus FOB, trying to consolidate into fewer or bigger shipments, these are big cost savers.
Nathan: Yeah that’s awesome and when you have some small eCommerce entrepreneurs are just getting started not necessarily knowing the dynamics behind how long it typically takes to ship products via ocean or air, can you walk us through times that it takes from a factory to the freight forward in the ocean, in the air, I mean what’s really the main difference in timing and also what’s the kind of cost difference on the average?
Zvi: Yeah, let’s look at this dynamically; I’m going to do a search on Freightos to give you some real examples in about a minute instead of just making estimates.
Nathan: This is the beauty for everyone to learn, you can go to freightos.com right now and get free quotes, yes it’s in real time. I mean that’s something that I don’t think you can get anywhere else in the world, that’s pretty epic.
Zvi: Yeah, it’s quite a change in terms of yeah in this industry of course in passenger travel; we’ve been able to do this for like 20 years already right? 20 years, you could stop and buy airline tickets online. But for freight, it’s really the first time that you do it. OK I’m just doing a search in Freightos, I’m going to get results in about 30 seconds.
What I’ve done is, I’ve taken 5 pallets, each pallet is about a cubic meter, about 3×3 feet. And normally for international trade we’re talking cubic meters. And each pallet is 200 kilo which is 500 pounds, total is 1 ton which is about 2200 pounds
And so, I’m looking at door to door from Shanghai to Chicago and Chicago is one of the more– you know it’s almost in the middle of the country you can have extra time getting in from the port.
So, the results I’m getting on Freightos is at about 150 results here. If I look for the cheapest, it’s ocean it’s about $1000 door to door and it’s going to get bound, depending on which supplier it’s going to take something between 35-70 days, full door-door; that’s not just the time of the ocean but that’s the full time together, to the port, through the port, across the Pacific, through the port in the US side, on a train or a truck to Chicago, through the US Customs and all the way to total door to door can be anything between 35-75 days and the prices vary between $1000-$1500.
Now when we look at the air, that’s kind of a different situation, air is going to take more like 6-10 days door-door and it’s going to cost at least $6,000, it’s more expensive.
Nathan: I mean really if these companies if they can plan ahead with the data that they have on the inventory they conceived so much more going through freight, I mean that’s one of the biggest dynamics, you know at the end of day if you want to cut your linen cost down, you’ve got to understand the data behind the inventory and you know schedule your freight in advance so you make sure that lead time fits within your schedule.
What do you then let’s say you have a freight set up, you know you’re scheduled with the 3PL, you’re doing your shipment in-house, there’s greater sync up with three different warehouses as well and I mean I know you guys can take a freight from the factories and you also notify the warehouses that you’re shipping the end product to.
Zvi: Actually lot of the shipments that we do occur to a sort of third party warehousing solution. Amazon of course is the most popular, so we do a lot of the shipments end up in an Amazon warehouse but also we work with other suppliers like which is a smaller competitor of the SBA.
So, yeah I mean e-Commerce is a big part of our business and many of our shippers are first timers so we have tutorials, quite a lot of people using our sites at the very fast in the ball and so we make sure that we get them lots of tutorials about what to expect, what documents to have ready and specifically if you’re shipping to an Amazon warehouse for example, there are some extra requirements and extra cost Amazon needed to be labeled in a certain way, we have specific features to make sure that so you don’t get any surprises and that you’re getting the service you need to deliver.
Nathan: Speaking of Amazon, do you guys help with any FBA crap that is usually required by Amazon?
Zvi: Yeah exactly so when you look at Freightos, there’s actually a button in the corner saying ‘shipping to FBA’ and then we give you an option to actually pay a few extra tens of dollars and get the labeling done and get the appointments booked for the track. So, we do quite a lot of Amazon deliveries and we offer all the necessary prep.
Nathan: Got it! That’s incredible and I want to kind of talk from a broader perspective speaking of Amazon where we see this trend at Sourcify where a lot of these marketplaces like Amazon or are starting to start their own private label brand. So, you have Amazon not only creating their Amazon basics line but also their own apparel and shoes and all sorts of different products.
Where do you think, as the eCommerce seller, what does that mean in the long run as Amazon starts knocking off their third party sellers, is that going to be a complete change up on these marketplaces?
Zvi: Look, I’m no expert on that right; I mean we are more into shipping. So you probably know more than me about that; that sounds to me like that’s a real risk. Amazon is a very successful and aggressive company, the president doesn’t seem to like them very much at the moment, that’s a different story.
So yes, I mean I think they potentially will be, they already to compete with their customers or you could put it another way, I mean they started as their own retailer and then they invited people to come and share their shelf and share the physical shelf so in a way they’re an open company and they share their infrastructure, their warehousing infrastructure, website traffic, they share that with people which is a very positive thing.
But they’re also aggressive and you need to know where, when you use their warehouse and their website, then you need to know that you’re competing with Amazon.
Nathan: That makes sense, so I want to talk more about Freightos, what’s the future look like for you guys? You know, you’re going to start on your own assets in terms of having planes and cargo ships, focus more on the data, really what’s the future? What does the next 3-5 years hold?
Zvi: Yes, for us, it’s all about expanding and data like you said correctly Nathan, its key for us to for example, I’ll give you one example where we’re improving the experience. We discovered that freight forwarders are rarely honest, I don’t wan to say honest but really accurate when they tell you it’s going to take 30 days.
It doesn’t take 30 days, I don’t say dishonest because that would imply that doing it intentionally, they have it seems rather it’s wrong, they’ll tell you 30 days and it’ll take 40 days. And that’s really damaging for eCommerce vendor who in the meantime may be stuck with an empty shelf because it’s on the ocean for 10-20 days longer than expected.
So, we’re using our data to solve problems like that, what we used to do is tell you how long the freight forwarder says it will take and now we don’t do that anymore, now we use our data to tell you how long would it take. So it’s all about making the whole experience more predictable and more transparent using the data that we have. You know, now we’ve done enough thousands of shipments that we can actually know how long it will take and how much it will cost.
And then also, we mentioned this earlier, we’re also using data to make sure you have transparency right along the way that you have a lots of if there is a problem, if there’s a weather condition, if there’s a strike, these things do happen so trying to make sure that you have a lot.
Nathan: Makes sense, one last thing I want to touch on before we wrap up here is the actual customs process, does Freightos help products through customs and what happens if something gets tied up in customs and I mean it’s not just stuck in there? Do you have any kind of insider advice in terms of preparing shipments so they get through customs?
Zvi: So, we help indirectly with the customs, in other words one of the services that you buy from Freightos is not just the shipping but the customs brokerage. We’re not ourselves the customs broker but we absolutely make sure that you’re selecting a customs program’s going to get it through US Customs in an efficient way.
We also have customs estimates which can help you to classify your goods, it’s really important to understand the category of the goods of that you can estimate how much duties are going to pay.
Besides that, it’s just about I mean you know the majority of shipments go through customs at the proper property classified if you know what kind of goods you are shipping and you have what’s called the ‘HS code’ as a legit if you the category. Then, you should be able to estimate your duties properly and clear customs in no time.
But some specific percent of shipments will be stopped for inspection and there’s nothing you can do about that, you need to take into account that there is a chance of a few percent of your shipments will get held up for customs inspection and that will take a little bit of extra time and provided you classify your goods correctly, not only a few days, but of course if you’ve misrepresented your goods then you’re in trouble.
So yeah, it’s all about getting the classification rights and that for most goods that’s pretty clear cut but in some cases there are gray areas, you know importing Halloween costumes, is that retail or is that toys? There are some interesting in-between cases where the classification could be gray and you need an expert to help you get that right. The difference your cost as well I mean I know somebody who had to will tons of classifications for the good amount one was—the duties was 5% but the other one on the duties was 30%, that made a huge difference to their business.
Nathan: Right, that’s a big thing. Well, you know I want to thank you so much for coming on and if people want to learn more about Freightos or want to learn more about yourself, where can they find you?
Zvi: Yeah, I’m on Freightos.com, my name is Zvi, so just go to freightos.com or look for me on LinkedIn.
Nathan: Thank you so much guys that was another amazing episode of eCommerce On Tap brought to you by Sourcify, when you guys manufacture products through Sourcify, manage your freight directly, it’s a seamless process. Thank you again for tuning in and keep an eye out for the next episode.