Are freight forwarding companies at a crossroads?

Technology companies promise to disrupt the freight forwarder, but will they succeed?

AUTHOR

Edwin Lopez@EdwinLopezT37

Innovation is spreading like wildfire upon the logistics world, promising to disrupt the freight forwarding process like never before. Online load boards; cloud-based freight marketplaces; connected containers; online customs processing.

As consumers, have become conditioned to expect services on demand, businesses too will begin to feel the pressure of customer service. Like e-mail did to fax, or bank statements to endless teller lines, shippers are looking to bypass the micro inefficiencies — those bureaucratic delays that add up, making the entire process slow and burdensome.

In fact, the process is so complex that shippers have long outsourced it to an agent: the freight forwarder. A shipper may choose to contract independently with the truckload carrier, a customs broker and an expeditor for emergencies — in fact, many do — but the forwarder pledges to take on the burden otherwise. A supply chain manager must worry about S&OP and excess inventory, why should they have to file customs documents, too?

Yet the emergence of new, convenience-driven technologies has raised a troubling question: If the process becomes more efficient, will the forwarders’ job become obsolete?

1. Why freight forwarders are not threatened by automation

The answer to that question is, not anytime soon, both traditional and next-generation forwarders told Supply Chain Dive. At the end of the day forwarding is a service, not a task.

Take a typical supply chain: An automotive manufacturer based in Detroit may have buyers in Mexico, Canada and Japan. Without a forwarder, in each case the manufacturer would have to determine the best intermodal route to send shipments to each country:

• Under what circumstances would air freight make more sense?
• Should the shipper send the shipment by rail to Seattle or Los Angeles?
• Would it make sense to truck the goods, and if so, which carrier could provide the best rate?
• When a crisis strikes, how can the shipper ensure production continues?

Adding to that, questions of contracting versus spot rates, customs filing for each good and the need to ensure pickup and delivery cause the job to quickly become overwhelming.

Until technology can offer the same level of customer service and relationships, freight forwarders will not bat an eye.

Supply Chain Dive

Yet the freight forwarder deals with these questions on a daily basis, so when the shipper calls, answers and recommendations are available. In addition, they may have divisions for pursuing better contract rates due to long-standing relationships with carriers, or for ensuring customs compliance is up to date.

If shippers have trusted freight forwarders for decades, it is not only because they can get a product from point A to point B, but because they can dedicate to doing it exceptionally well. This in turn frees the shipper up to manage more complex, strategic issues. Until technology can offer the same level of customer service and relationships, freight forwarders will not bat an eye.

5. How technology will optimize the forwarding process

If the forwarder is not at risk of being replaced, then what’s all the buzz around the new platforms, marketplaces and uber-for-X apps constantly promising to disrupt the industry? Conversations with these companies reveal it is not the freight forwarder’s role they are looking to disrupt, but the forwarding process altogether. In fact, some so-called next-generation forwarders are looking to sell software to forwarders themselves.

The reason? The forwarding process has yet to reach the digital age. A recent survey by online freight-marketplace provider Freight of revealed that just 1 of the top 20 global freight forwarders could provide an instant quote online for an anonymous prospective client.

1. The missing link: full supply chain visibility

Yet, technology providers and apps cannot fix the burdensome market inefficiencies alone. Consumer trends demand both visibility and low rates from an extremely fragmented industry. Yet, technology overhauls can be costly and ROI remains uncertain. In fact, the status quo is compelling in this industry as shippers themselves have been slow to reach industry 4.0.

Digitization may be the name of the game for industry leaders like A.P. Moller Maersk, DHL or Kuehne + Nagel, but supply chains must walk in lockstep if they are to reach the full benefits promised by next-generation technology.

All signs say they are starting to, but … slowly. In just one example, the trucking industry fought a mandate forcing electronic logging devices, a precursor to many of today’s apps, for two decades. Similarly, the World Trade Organization’s Trade Facilitation Agreement — encouraging a customs standard and pushing online publication and processing in a minimum of 110 countries — just entered force this year despite being proposed in 1996.

Innovation is the first step, however — and at least for the moment, disruption in the positive sense appears to be coming for the supply chain.

Antiquated systems within the relationship business has created significant market inefficiencies due to a lack of transparency and access. Why would the spot market rate be lower than a contract rate? How would a shipper know?

From load boards to Big Data-enabled route or rate calculators, new technologies promise to improve access, reduce delays and increase visibility for those who choose to use it.