As global freight forwarders face falling freight rates, rising interest rates and geopolitical instability, they might be excused for pulling back on technology investments in 2023. But that conclusion couldn’t be further from the truth.

In a survey we conducted in the fourth quarter of 2022 of 100 logistics companies, every single one said they had increased their technology spend since the pandemic. As to where freight forwarders planned to invest, they cited a long list of technology priorities, from freight visibility to pricing and quoting optimization, automating operations, freight visibility and analytics.

At first glance, these results might seem counterintuitive. The headlines are full of tech layoffs, falling freight rates and general doom and gloom. The Freightos Baltic Index, a measure of global ocean freight pricing, peaked at $11,109 in September, 2021. A year later, it was down to $4,862, and it finished 2022 at $2,246, making for an 80% drop in five quarters.  

We’ve seen some fundamental drivers that are causing freight forwarders to buck the trend and keep their innovation engines running. First and foremost, the need for visibility trumps all. The pandemic-induced chaos proved that the old way of doing business, where forwarders manually tracked every shipment, was foundationally broken. Digital-first forwarders and pure-play visibility providers fundamentally changed shipper expectations.  Many forwarders are playing catchup to this rapid shift in customer expectations.  

As a category, visibility ranked as the most important priority for both freight forwarders and the shippers they serve. Forwarders' second priority was automating operations, while that of their customers was pricing and quote optimization.

One top 20 global forwarder said it sees freight visibility as more than just grabbing information from a provider and passing it along to a shipper. Instead, it approaches visibility as an opportunity to differentiate from its competitors. By pulling data from multiple sources and applying its own expertise, the forwarder can provide shippers with better outcomes than if the shipper used the raw data in isolation. This key pairing of data and insight fulfills the fundamental value of a freight forwarder: to be a trusted adviser in the supply chain.

The second major driver to have emerged from research is that companies are seeing concrete returns on investment that justify increased spend on logistics tech. For many years, there were dubious claims about emerging technologies that would provide some theoretical benefit in the mid-to-long term. As the underlying capabilities have matured, companies are increasingly investing with partners that show immediate cash returns.

One chief executive officer said its two most strategic investments in the past year have been in robotic process automation (RPA) and an off-the-shelf customer-facing portal. The RPA tool led to the shuttering of an offshore data processing center, with an immediate increase in sales efficiency.

As money becomes more expensive and margins compress, forwarders will continue to invest in technologies that demonstrate a clear return on investment and direct benefits. Likely categories for future spend include operations automation and pricing and quote optimization. More abstract investments, such as big data and analytics and risk management, are still valued, but rank lower on the priority list.

Perhaps the biggest surprise in our data was, when asked about shipper interest in technology, forwarders said carbon and environmental-related software solutions trailed all other categories by nearly 20%. On the list of forwarders’ investment priorities for 2023, that category also ranked last. Given that our survey skewed toward North America, however, we believe this to be a regional aberration. As regulatory landscape around Scope 3 emissions reporting solidifies, we expect shippers to rapidly change the demand profile of this category. Forward-looking service providers who are investing in this area now will reap benefits as the regulatory environment spurs demand.

It's encouraging to see that a once-lagging industry has fully embraced the benefits of technology, and will continue to invest regardless of short-term economics. Forwarders that pull back on investments that deliver a clear ROI risk being left behind, with their competitors delivering faster service at a lower cost. At the same time, software providers selling abstract solutions with unproven benefits may find stronger headwinds in the coming year.

Brian Glick is founder and chief executive officer CEO of Chain.io.