The Industry is Moving Past Speed and Cost

The Industry is Moving Past Speed and Cost

Somewhere along the way, we decided calling up a pizza place to order our large Hawaiian was simply too difficult to bear. That opened the door for companies like Seamless and UberEATS to swing in and take all the headache out of picking up the phone and talking to a human.

Seamless is kind of like a freight forwarder for French fries. It’s made relationships in the food industry and can now sell the access and knowledge that it’s picked up along the way. Instead of you having to schlep over to the phone, call the French fry purveyor, and then discover that it doesn’t actually do delivery, Seamless just does all the work for you.

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I promise this isn’t an advertisement for Seamless, by the way.

What these companies are doing is really nothing more than what freight forwards have done for years. Shipping is incredibly complex. Imagine you need to get 4,000 boxes of marbles from China to fifteen different US locations. Now swing on down to the local USPS and see what kind of response you get.

Now here’s the interesting thing – freight forwarders are information specialists at a time when information is generally free. We no longer pay for the sort of information that we used to.

We’re finding our own houses because MLS listings are available online. We book our own rented rooms through Airbnb. We have free access to MIT classes, dictionaries, product reviews, maps, breaking news, and just about every other kind of information possible.

Want to know how many movies Jack Nicholson and Diane Keaton were in together? The internet can tell me in a fraction of a second. Two, seems to be the answer – Reds and Something’s Gotta Give.

So the real question is, how does freight forwarding move into this brave new world without losing the very characteristics that have gotten it this far?

Challenges with modern freight forwarding

If you’re looking for one buzzphrase to capture just about every change in traditional industries technology is invading, that phrase would be “value add.” Logistics is no exception to this rule. As technology makes the process more and more efficient, freight forwarders have to offer something beyond button pushing to differentiate themselves.

Adding value –through expertise, additional contacts, or specialized technology – will be the way companies define themselves. One of the challenges forwarders face is the fragmentation of the marketplace.

According to a report from Ti (Transport Intelligence), the global freight forwarding marketplace is made up a bagful of players, with just three forwarders holding more than a 5% share of the market – DHL, Kuehne + Nagel, and DB Schenker.

On top of that, shipping is a largely commoditized service. Freight forwarders are fighting for market share with very few tools in their belts. Can you get it there faster or for less money? Great. If not, then you have nothing to offer.

Value-add services can change that equation and give forwarders a place to plant a flag. That, in turn, will give them something to offer beyond a lower price or a faster shipment. It’s the customer reviews that come with Uber, offering more than just a ride for your dollars.

One of the reasons value-add is so important is the ongoing price pressure being ladled onto shippers. Falling fuel prices and an overabundance of capacity have pushed prices down, especially in the Pacific. Accenture recently called out overcapacity as one of the major issues facing forwarders.  

Adding value can, once again, move the focus off of the price-time equation and help companies under pricing pressure find new ways to get a hold in the market.

Finally, traditional freight forwarders are facing down a shift in technology. We’ll finish out talking about one of the companies making a change, but traditional forwarders risk falling behind the technology curve.

An increasing demand in technology requirements could also increase the barrier to entry in the space, leading to a drop in the total number of forwarders and some consolidation in the marketplace, as we’ll see below.

The future of freight forwarding

That consolidation is likely to begin over the next few years as changes in technology and demand increase startup costs. In its report, Ti notes that “The freight forwarding industry has low barriers to market entry and exit,” but that companies looking for value-add offerings will “develop their levels of expertise in niche sectors with higher barriers to market entry in order to differentiate their services.”

There are a handful of companies already making waves in freight forwarding by offering these value-add services and putting technology to good use. Flexport is the shining face of the future of American freight forwarders, and just finished off a round of funding that’s brought its total investment to $94 million.

Flexport manages forwarding, product tracking, reshipment, and other specific logistic challenges. It has also made moves to make the actual forwarding process more straightforward, sourcing quotes quickly and online. Flexport is by no means the only name in the game, with companies like Freightos and Expeditors making some moves, as well.

Thoughts on what’s to come

Technology is doing to freight forwarding what it’s done to just about every other industry – making it rethink its pinch points. Instead of just living with the frustrating part of life – calling the pizza place, waving down a cab, sorting out an international shipment – technology gives us ways to cut out those parts of the equation.

Keep watching this space for more logistics trends and tips and check out Capterra’s logistics directory for the software to keep your business running like a winner. Oh and don’t forget – Seamless: Your food is here.

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