Forto's 'course-correction' a shield against economic headwinds to come

Digital forwarder Forto has braced for this year’s expected headwinds and, following last year’s job cuts, has pulled back its expansion plans.

“We all knew how the market was developing,” CCO Jochen Freese told The Loadstar. “We could see freight dropping drastically, so we course-corrected.

“We’ve delayed our expansion plans and started to get ready for a recession.”

Some 10% of roles were cut from the forwarder, which now has some 900 staff, he said, adding: “We cut roles we didn’t need and simplified the organisation for the future. It wasn’t a cut in every team – just certain ones that had been in place for expansion.”

Recent industry job cuts have been from digital forwarders such as Flexport, logtech companies such as cargo.one and, of course, major tech companies.

But alongside this ‘tech-sodus’, observer also note that it is VC-backed companies in the firing line.

So what is specifically behind the job cuts at Forto, which has so far raised more than $600m from a variety of investors, including Softbank and AP Moeller Holding?

Mr Freese, a forwarding veteran with stints as CCO at Ceva and Hellmann, as well as being EMENA president at UTi, said Forto was no more vulnerable than traditional forwarders. he said: “I don’t think I’d have done anything differently at my previous companies. The market required changes and an adaptation of our strategy. I would not relate it to being a digital forwarder.”

Matt Petot, head of CargoAi, a booking platform which boasts strategic investors, recently said VC-backed companies “have a business model which relies on achieving specific key performance indicators (KPIs) to be able to unlock the next round of funding.

“Those KPIs are different from normal companies, and can sometimes force or influence short-term and wrong behaviours.

“As funding is currently becoming more difficult to secure, we can anticipate VC-funded ‘LogTech’ companies will run into significant fundraising challenges this year and will have to drastically change the way they operate.”

But Mr Freese disputed that this was Forto’s experience.

“We consider how much cash we have in the bank as pretty comfortable. Our decision to cut back was not based on investors or shareholders, it was based on a changed business environment. Up to the third quarter of last year we had certain market assumptions. It was not about meeting KPIs, we needed to course-correct. And, in fact, we’ve continued hiring new people in customer-facing and commercial roles.”

Forto specialises in Asia-Europe and had planned to diversify into other trades this year, such as the transatlantic.

“Instead, we are more focused on the activities we already have and our tech; we are focusing on the core. The outlook can’t be ignored.”

While the forwarder has seen some sourcing shifts to South-east Asia, and has a busy operation in Vietnam, it plans to stick in China. Mr Freese explained: “It’s so large, and is also an importer – it will always stay relevant.”

Despite low demand, Forto is growing, winning market share – although Mr Freese is quick to point out that the company is not “buying” market share. He said: “We are doing it through digital engagement and our digital product.”

Forto talks to customers about how to improve its platform, which Mr Freese said was particularly good at visibility and ease of engagement, as well as data collection.

It is also keen to use its technology to support carriers, as well as customers.

“Our carrier choices are driven by capacity and technology, we like to improve things on both sides and it means carriers have an interest in working with us.”

Happily, Forto is not carrying expensive capacity into 2023 – “we had very little long-term committed capacity,” said Mr Freese. “If you think of our age and where we were, we couldn’t enter multi-year contracts, so we have not been burned.

“And we’ve seen a lot of support from many carriers – partnerships are important to us.”

And they will continue to be – alongside tech, Forto is prioritising emission reduction. Mr Freese said: “The whole environmental mission is very much part of our DNA, we are far more advanced than others.

“We have secured long-term biofuel deals in air and ocean, which we can sell upfront. Some companies are very open to it, others need convincing, but there is a lot going on.

“And we plan to be CO2-neutral by 2025,” he concluded.