A white paper entitled The Evolving Freight Forwarding Market (2018) and based on 50 responses to a survey carried out by logistics research and consultancy firm Logistics Trends & Insights (LTI) in April reveals a great deal of optimism among the forwarding community – in spite of questions of viability in the face of rapid technological change.
e-commerce, rather than appearing as a threat to the forwarding industry, was rated as the most promising area for freight forwarders. While not a vertical sector in itself, it is playing an increasingly important role across numerous fields as more businesses – regardless of vertical sector – embrace e-commerce, omni-channel and/or multichannel services, the report states.
Retail is one key vertical that is relying on cross-border e-commerce more and more. LTI founder and head analyst Cathy Roberson, who wrote the report, observed: “Forrester estimates that cross-border shopping will make up 20% of e-commerce in 2022, with sales reaching $627bn from the research company’s estimated of $284bn in 2017.”
In response to this trend, forwarders are expanding (or opening) fulfilment facilities in key locations and combining these with their airfreight forwarding expertise to provide fast delivery services to customers.
High tech and healthcare/pharmaceuticals require specialist handling and, as such, continue to provide significant opportunities for freight forwarders and their supply chain partners.
Online freight marketplaces, perhaps surprisingly, also emerged quite clearly as an opportunity for forwarders, with only 13% of respondents viewing them as a threat. Admittedly, 17% were unwilling to commit either way, so there is still an element of fence-sitting on this subject.
Nonetheless, “despite the publicity many of these marketplaces have received in recent years, forwarders have quietly fought back by investing in their own technological tools”, Roberson said.
While platform technology is a “game changer” that allows carriers and shippers to deal directly with each other more easily, it does not replace the logistics process itself. The key to success is to combine both elements to offer an end-to-end, digitalised process.
Digitalisation was defined as extremely important by 54% of respondents and as important by 32%. The industry is taking various approaches to investing in digitalisation: 30% of forwarders are building their own solutions while 28% are using off-the-shelf systems, 18% leveraging partnerships and 16% increasing their capabilities through acquisition.
“In other words, the traditional freight forwarder is fading away and making way for a new type of service provider that quickly responds to the needs of shippers in today’s fast-paced environment and provides value-added services that were unheard of just a few years ago,” Roberson said.
Indeed, 26% of those surveyed for the white paper expanded the traditional definition of a freight forwarder (a firm specialising in arranging and shipping of merchandise on behalf of shippers) to include a role as facilitator, value-adder and consultant in an increasingly complex and uncertain global trade environment.
That expanded definition would appear to be an essential ingredient in a freight forwarder’s ongoing relevance and consequent survival. In today’s tough and rapidly evolving marketplace, those who fail to adapt risk failing altogether.
This is evident from the growing tendency for shipper insourcing, which 54% of the forwarders surveyed for the LTI report identified as their biggest challenge.
More and more users of third party logistics (3PL) services are reducing or consolidating the number of 3PL providers they use, and shippers such as Amazon, Alibaba, and JD.com are taking control of logistics and transportation services – ostensibly, to better meet the demands of their customers.