2024 Global Digital Shopping index

Logistics Startups Slash Jobs as Freight Volumes Drop

freight

Last year saw a surge in layoffs in the logistics sector as freight volumes declined.

So far, 2024 isn’t shaping up to be much better for the industry, as The Wall Street Journal (WSJ) noted in a report Monday (Jan. 29).

Among the companies cutting jobs this year are Flexport, warehousing provider Flexe and digital broker Uber Freight, the report said, as weaker freight volumes and high interest rates leave firms feeling stretched.

“You need to basically hunker down and survive,” Larry Aschebrook, managing partner at venture capital fund manager G Squared — which has backed Flexport — told the WSJ.

The report notes that logistics startups achieved huge valuations during the pandemic as shipping rates reached record levels thanks to strong consumer spending. When consumer spending slowed, freight volumes fell, and these companies began to struggle.

For example, digital freight broker Convoy — another G Squared investment — shut its doors in October of 2023. The company had been valued at $3.8 billion the year before.

As PYMNTS wrote last year, Convoy had already cut two-thirds of its staff and was expecting its funds to run out within weeks at the time it closed down.

“These companies are all bloated because they are building in advance of demand,” said John Anderson, an operating partner at private equity firm Greenbriar Equity Group. “That’s fine as long as someone keeps funding you on that prayer and that hope.”

The WSJ report said that venture capital investments in supply-chain technology startups dropped to $780 million in the fourth quarter of last year, down from $5.2 billion in the same quarter of 2021, per PitchBook Data. As funding and revenue decline and losses add up, startups have been forced to let people go.

Among them is Flexport, which cut 20% of its staff last year and is now reportedly planning another round of layoffs at the same level.

Meanwhile, PYMNTS last week examined the use of artificial intelligence (AI) in the logistics and transportation sector in a conversation with Yoav Amiel, chief information officer at freight brokerage platform and third-party logistics firm RXO.

He said that the transportation sector is ready for AI adoption. It’s something that’s been happening at larger organizations, though the democratization of AI is slowly but surely breaking down barriers for smaller companies.

“Long-haul trucking is much more open to automation,” he said. “There are more potential savings and efficiency gains there that are easier to implement. Short-haul trucking has higher implementation costs and tighter margins, so deploying AI and embedding these engines could be more complex.”