During FGN’s early days, we used the Five Forces model to understand the pressures that a US-based Flexitank Logistics company would face. Examining things like customer power, vendor influence, and technological disruption, we designed a business model that we hoped would take advantage of opportunities and avoid the pitfalls in our chosen niche industry.
The results of our analysis led us to believe that several things were inevitable. First, that shippers would increasingly trend toward using integrated Flexitank Logistics companies rather than parse their business to a combination of flexitank manufacturers, freight forwarders, truckers, and warehouseman. We anticipated they would inevitably find benefit in our “one-stop-shop” business model.
Second, we figured that improved flexitank manufacturing practices would lead to downward pricing pressure on the flexitank itself, driving the manufacturers to seek scale, and ultimately leading to a shakeout in the manufacturing sector.
Thirdly, we came to understand that state-of-the-art logistics technologies could be applied in innovative ways to the Flexitank Logistics process to create competitive advantage. Flexitank Logistics appeared to be particularly vulnerable to technological disruption.
The Flexitank Logistics space has changed significantly over the past five years and most of our assumptions have proven to be true. Flexitank quality has improved, prices have come down, and now, as a result of industry consolidation, there are many fewer flexitank manufacturers making tanks around the world.
Further, the percentage of international flexitank shipments handled by integrated Flexitank Logistics companies has continued to increase. Shippers and ocean carriers support the integrated Flexitank Logistics model, recognizing that oversight across the whole shipment process by one entity increases safety and simplicity.
And finally, with the implementation of state-of-the-art logistics technologies to the Flexitank Logistics process, companies like FGN are driving shipping costs down and offering their vendor partners a more efficient logistics partnership process.
Porter’s Five Forces model proved to be a useful tool in understanding the opportunity that Flexitank Logistics offered. The hard part is executing on that opportunity, which we strive to do every day.