A Look At the Top 5 Challenges Facing the Freight Forwarding Industry Today
Freight forwarders are as nervous about the future as any other type of company these days – and for good reason. It’s hard to think of another industry facing more uncertainty with many of the macro-trends happening in the world right now. These challenges include everything from the impact of technology and the state of the global economy, to how newly elected U.S. President Trump is promising to shake up global trade.
Macro-economic reasons aside, there is also plenty going on within the industry that freight forwarders should be watching. Here are 5 of the most crucial ones.
Freight forwarders are up against more competition than ever. Part of the reason is that many logistics companies that traditionally defined themselves as something else (say an as ocean carrier, or even a warehousing company) are now providing forwarding and NVOCC type services. And of course, everyone is talking about how even Amazon is getting in the game as well – which leads us to the next challenge.
Many, if not most, shippers view transportation as a commodity. All they care about is that the delivery gets made. Meaning, they place little value on service and a lot on price. This makes it hard for forwarders to differentiate themselves from other providers – especially when there are always those who’ll try to win on price. Some forwarders are learning they can better compete and maintain margins by offering new or better technology that improves the customer experience.
Ocean shipping is a big part of what forwarders do. It’s also a very unstable business, based on complicated rates and contracts that take an expert to understand. Many times this makes it hard for forwarders to understand their cost structure – which obviously makes it even harder to provide accurate and reliable quotes to customers. The seemingly random nature of GRI’s and surcharges only adds to the problem. There have been recent calls to simplify the complexity of all these things but there won’t be relief for forwarders any time soon.
A big part of most forwarder’s business comes from responding to tenders. Because the volume of these bids is so high, and each is usually so complex, they are a big drain on resources. Smart forwarders are focused on improving their tender management process to make sure they are bidding accurately and fast, but also on the best types of business for them.
Rate of Change
There are constantly new market challenges for forwarders that need to be accounted for. A recent example is the trend for ocean carriers to form alliances. With almost no notice, these can affect the rates and contracts forwarders have with the carriers, as well as service. The aforementioned effect of technology is changing how forwarders (and their competitors) can manage their business – as well as service their customers. Lastly, market expectations continue to focus on ever faster and cheaper deliveries.
For all these reasons, freight forwarders need to work harder than ever to differentiate themselves in their business – while continuing to focus on service. What the best forwarders know is that just as important as competitive rates are giving customers better service options and modern freight forwarding software to support decision making.