The cutting edge of new generation freight forwarding is … peculiar. Arising out of such anarchic technologies as bitcoin, itself an outgrowth open source software programming, these developments might not, on the surface, seem likely to impact the long-established and highly traditional freight forwarding industry – but read on, we think we can convince you differently.
Understanding the position of the freight forwarding industry
Where many freight forwarders are specialist – with skills in moving frozen foods, hothouse flowers or livestock, for example – the industry can look like a highly diverse marketplace. However, there are common factors that can help freight-forwarders, and their clients, understand challenges the industry is likely to face in the near future.
Traditional warehousing and transport services are giving way to new value-added options, often called contract logistics to distinguish them from the ‘old school’ forwarding. These new services include:
- returns management – vital for clothing and household goods retailers to maintain margin
- warranty processing – a cost for retailers that is increasing by absurd by freight forwarding organisations at the cutting edge
- insurance and customs brokering – this is the best established of the ‘new’ services. It was often previously a hidden benefit of calling on a particular freight forwarder’s experience and network but is now offering as a distinct option which helps differentiate one forwarder from another.
Risks to the freight forwarding industry
- Rising fuel costs are a constant menace to profitability
- Both political and economic challenges bedevil the European union
- Instability in South America and protectionist rhetoric in North America both cause doubt about easy transportation of goods
- A slew of natural disasters around the globe have affected both freight forwarding and many manufacturing bases world-wide.
As a result, growth is likely to be low to flat, with those exploiting value added options more likely to see better profitability. Air freight is oversubscribed while sea freight is over-capacitised. Shipping continues to reduce on all routes, leading to cheap capacity, which can be good for retailers but can lead to freight forwarders finding themselves sitting on capacity they can’t find buyers for.
What are the new technologies?
There’s an app for that – at least there is if you’re involved in vehicular freight-forwarding, which is where nearly 85% of the spend in the industry occurs, although nowhere near 85% of the profit! So how do apps make a difference? Both drivers and forwarders benefit through having a realtime marketplace where they can see potential ‘short’ deals. For example, a frozen food haulier who’s taken a cargo of beef to London might spot the opportunity to pick up some imported langoustine from Felixstowe, on his or her way back to their Midlands base. Surprisingly, individual hauliers and small transport firms are benefiting most from this digital revolution, with 3PL – including flexible warehousing – allowing small retailers and specialist suppliers to undercut the Goliaths by delivering more rapidly, more cheaply or more effectively than the big firms. The time saving from using app marketplace options over the traditional phone and email approach is reckoned to be substantial – around 30 minutes to finalise a deal rather than the two or three hours required by phone, fax and email.
Big Data is watching you – and reporting back. Data aggregation is likely to be one of the most disruptive technologies for the freight forwarding industry in the next decade but because it will all happen in back office operations, customer may never know what’s changed. Freight-forwarding firms who have a solid grasp on their own data and the systems to slice it in many different directions will find a range of cost-cutting and value-adding benefits including: new and more sensitive ways to analyse the relationship between routes and travel times; ways to explore driver behaviour (for example braking and accelerating patterns which might relate to tiredness or even to lack of refresher training) and; the ability to examine how weather patterns influence transport costs. These benefits can be passed on to clients in the form of cost savings but also as expertise, being able to advise on likely delays or difficulties with proposed forwarding plans can give a freight forwarder the edge over competitors.
Blockchain as built in – if you haven’t heard of blockchain, don’t feel bad. Blockchain is the underpinning technology that allows bitcoin to operate. Bitcoin is a cryptocurrency invented by a bunch of anonymous programmers and its essential underpinning is that it’s peer to peer – with no intermediary. On the face of it that’s the opposite of freight forwarding where the intermediary is the essential link between the stages of the process but the point about blockchain is that it consists simply of chronological data sets which are available to every stakeholder in the process and which update instantaneously and simultaneously sets of data. The key factor is that this stream of data is visible to every stakeholder and all the streams update simultaneously – for a freight forwarder this gives instant access to every part of the supply chain, massively reducing the time required to update the players in the process. The first blockchain solution was built into a British logistics system over a year ago, and the company who invested in the process says it is confident that it will be a game changer, not just because of speed but because blockchain processes are unlikely to be affected by the kind of cyber attacks that have recently threatened Maersk and other shippers.
Where new generation freight forwarding will show its strengths
- Emerging markets like Russia, India and Brazil are currently dominated by the most successful freight-forwarders. They are likely to continue this dominance, bringing quicker and more complete solutions that allow them to maintain growth.
- Customer relations will continue to be crucial. While it might seem that all these technologies actually damage the relationship aspect of freight-forwarding, being able to demonstrate profound understanding of customer industries and their needs will allow freight forwarders to build themselves into those customers’ supply chains more deeply.