By Janice Storch @ Shutterstock.com
Unprecedented peacetime spending by the federal government during COVID-19 led to an explosion of demand for consumer goods and a boom in imports to feed it. Now that stimulus measures are wearing off, shippers are laying off employees to adjust to the slowdown. The Wall Street Journal’s Liz Young reports:
Freight forwarder Flexport Inc. is cutting about 20% of its global workforce, or more than 600 workers, as the digital-focused business copes with falling shipping demand and repositions its operations to offer more supply-chain services.
The San Francisco-based company, which raised $935 million nearly a year ago in a funding round valuing the business at $8 billion, announced the layoffs Wednesday in a memo to workers from co-chief executives Ryan Petersen and Dave Clark.
“We are overall in a good position, but are not immune to the macroeconomic downturn that has impacted businesses around the world,” the executives wrote. “Lower volumes, combined with improved efficiencies as a result of new organizational and operational structures, means we are overstaffed in a variety of roles across the company.”
The company, whose backers include venture-capital giant Andreessen Horowitz, MSD Partners and SoftBank Group Corp.’s Vision Fund, has about 3,200 employees across 19 offices and six warehouses around the world.
The note to employees said the company has lowered its volume forecasts through 2023 but didn’t provide specifics.
Flexport said it would continue to hire in certain areas of its business, including adding some 350 to 400 software engineers with a goal of doubling that department.
Founded in 2013, Flexport is among an array of startups aiming to use technology to scrub inefficiencies from the logistics industry. It reported gross revenue of $3.3 billion in 2021, the company has said. Mr. Petersen in June had estimated gross revenue of nearly $5 billion in 2022.
The layoffs come amid a broader pullback in freight demand since the middle of last year as inflation has taken a toll on consumer demand and retailers have pulled back from earlier inventory restocking efforts.
Global airfreight demand declined 13.7% in November, according to the International Air Transport Association, and the latest Baltic Air Freight Index produced by data provider TAC Index Ltd. shows average airfreight prices worldwide have fallen 33% over the past year.
U.S. ocean container imports are also retreating from surges early in the pandemic, with inbound volumes in December reaching their lowest level since June 2020, according to trade intelligence database Descartes Datamyne, owned by supply-chain software company Descartes Systems Group Inc.
The retreat in shipping demand is reaching across the freight sector as some operators begin to pare back payrolls that had expanded as business surged during the pandemic. U.S. freight broker C.H. Robinson Worldwide Inc. said in November it had hired too many people and was looking to cut costs by about $175 million by the fourth quarter of 2023.
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