There’s room for many types of freight and logistics services provider in a fast-changing market place – as long as they’re agile.
Featured in Logistics Business Magazine – February 2020
There’s been a lot of commentary lately on the changing freight forwarding and logistics marketplace. Are the ‘old-fashioned’ forwarders being left behind by the technology-driven new breed of ‘e-forwarders’? To which extent will the ocean carriers’ foray into 3PL services be disruptive? Are we going to see an increased ‘Uberization’ of freight and logistics procurement, and who will be the winners and losers in the end?
The case for the importance of IT solutions delivering supply chain visibility, efficiency and optimizations is clear and unassailable, of course, providing that they are intelligently designed and effectively implemented. The difference between the e-forwarders and their more established competitors is that the e-forwarders’ ‘asset-microlight’ service offering is led by the value and benefits of the IT solutions, addressing customer’s supply chains on a largely bespoke and holistic basis, rather than by the provision of domestic and international network and/or non-network-based logistics services. It can clearly be a successful model, and some of the e-forwarders’ customer case studies make for impressive viewing.
Yet the newer entrants and their promoters probably shouldn’t underestimate the abilities of the established 3PLs and 4PLs (the latter being the precursor to the e-forwarder model anyway) to integrate IT solutions and functionality within their infrastructure and services. The fact is that all the leading players – across the range of asset/non-asset business model ratios – have been doing just that for many years. And the majority of them continue to develop their digitalisation credentials and portfolio, driving and nurturing new innovation as an inherent strategic priority. Many have even changed their corporate management structures so as to emphasise and better facilitate digital progress.
There are compelling dual reasons for this strategy. On the one hand, they have to address the essential task of ensuring that customers’ increasing scope of requirements for order integration and visibility, as well as relevant KPI information and data, are met, whilst maintaining high overall levels of customer service. Simultaneously, the harnessing and leveraging of operational data and analytics internally can yield a range of productivity improvements, underpinning a fruitful combination of enhanced competitiveness and margins.
The continuing importance of smaller and/or medium-sized freight forwarders shouldn’t be underestimated either. For many customers, especially but not only SMEs, the ability to deal with a freight service provider of perceived equal stature, on a direct and personal basis, forms part of their key selection criteria. Reliability, accessibility, trust and continuity all come into play in this respect. Ultimately, people do business with people. In addition, we’re witnessing a rapid pace of innovation and product development from an increasing number of IT ‘connectivity platform’ service providers, enabling web-based, integrated access between shippers, consignees, carriers and customers. Such platforms include the plethora of digital freight exchanges. This provides burgeoning opportunities for smaller forwarders to increase their presence on the digital playing field and compete very effectively in many instances. And with the current, unprecedent volatility in international freight rates as well as the operational complications following the end of the Brexit transition, having a pro-active and experienced freight forwarder to turn to is a big advantage for many businesses. As far as the ocean carriers are concerned, it’s true that there’s been a move towards the direct provision of logistics services which to a large extent has been driven by some significant examples of mergers, acquisitions and vertical integration. Nonetheless, in the vast and expanding $ 840 Billion global third party logistics services marketplace, any announcement of the death of the forwarder is a bit premature, to say the least.
There are plenty of unhelpful forces at work right now which are compromising global supply chains, from the human and logistical impacts of the pandemic to the shortage of transport equipment and relentless upward pressures on operational costs. It’s not totally clear yet whether some of these impacts will become structural rather than temporary, but the effect on the long-term shape of manufacturing and distribution supply chains could be severe. In a partly fragile yet fast moving and responsive freight and logistics marketplace, there is certainly room for all types, shapes and sizes of logistics service providers, as long as they’re agile and adaptable to their customers’ evolving needs.