The freight forwarding market is a fragmented one. Known as the middleman, the forwarder is responsible for meeting the needs of its customer, the shipper, while being susceptible to external economic and political forces and to changes among air and ocean freight providers. As such, because of the nature of the business, the forwarding business typically has not been known for its efficiency.
However, thanks to the introduction of cloud technology, a plethora of logistics and forwarding start-ups has emerged espousing efficiency as a major benefit. Many of these start-ups address specific needs that logistics and forwarders lack, including real-time visibility and transparent invoicing. Another plus for these start-ups is that they have leveled the playing field with the traditional larger forwarders, thus increasing the already competitive field.
Indeed, these new players have stirred the competitive pot in such a way to have caught the attention of the traditional forwarders. According to a 2017 freight forwarding survey conducted by Logistics Trends & Insights, 92 percent of survey respondents indicated that digitization adds value for forwarders. Furthermore, 58 percent of survey respondents indicated that the improvement that will be utilized the most in the next five years for forwarders will be digitization of all services.
As such, investments in technology have increased. For example, introduced in 2017, DHL Freight’s Saloodo! digital platform connects shippers and transport providers on demand. Shippers can obtain quotes, issue invoices and payment all on the online platform.
Meanwhile, other forwarders are investing in global online transportation management system platforms. Partnering with SAP, Panalpina is connecting its suppliers, partners and customers into a collaborative business network. According to Panalpina and SAP, the system will support all land, sea, multimodal and air modes, including multi-leg, parcel, buy/sell-side rating, tendering, freight contract management, documentation, planning and execution. In other words, Panalpina’s processes will become more efficient and transparent.
Will all freight forwarding services be completely digitized? It’s highly doubtful. For such digital forwarding start-ups as Flexport, there has actually been a move into physical assets, specifically warehousing.
Despite calling these digital players a “real threat”, DHL also noted this shift towards physical expansion in its third quarter 2017 earnings report. An interesting observation is that this shift is almost reminiscent of the omnichannel strategy some online retailers are currently pursuing.
As more forwarding tasks such as rate comparison and booking, document management and tracking and management of shipments are automated, will forwarders remain relevant? Some 68 percent of those that responded to Logistics Trends & Insights survey, indicated “yes,” while 17 percent indicated “no,” and 15 percent were not sure. Not exactly a resounding conclusion but one which indicates that the freight forwarding market is indeed evolving.
As change comes to the freight forwarding market, relationships between shippers and carriers will continue to be important. With many tasks becoming automated, the forwarder is becoming more efficient and thus able to utilize the time typically spent on these tasks to ensure that the shipper’s strategic goals are achieved.
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