As digitalization in the sector progresses, traditional freight forwarders face more and more challenges, and their survival now depends on how prepared they are. Today, there are certain companies that are threatening their position in the market and we think it is important to analyze them, in order to take action on the matter as soon as possible.
Traditional freight forwarders have gone through an arduous process of adaptation and transformation due to the digitalization that is revolutionizing the industry. This increased in 2020 with the pandemic and with the entry of e-commerce into the field. Their challenge is inevitable and it’s crucial to be prepared to face it.
What’s happening in the freight forwarding industry?
With digitalization, many companies saw an opportunity and developed innovative solutions that allow them to provide a better service or adapt to new market needs. Thus, companies such as Agility, DB Schenker, DHL, Kuehne + Nagel, and UPS, were able to formulate digital products adapted to current market needs.
In addition to this, for five years there was almost constant progress in terms of online sales by freight forwarders. They noticed that their most important clients demanded a certain level of digitization in their operations, such as a longer and personal sales cycle, opting to add more value through shipment tracking, predictive analytics, integrated and automated billing, or solutions of credit management.
Nowadays, many freight forwarders have decided to improve their services using digital solutions while stratifying themselves, choosing specific segments, and making large investments in digitalization accordingly.
So, who is threatening traditional freight forwarders?
A large group of freight forwarders, carriers, platforms, and startups are competing. Their biggest bet falls on the growing market of SME shippers. This was defined by the e-commerce’s entry with the COVID-19 pandemic, and the massive increase in small new companies in recent years, growing in size and importance.
- Shipping companies.
Carriers have expanded both horizontally and vertically, offering integral services and taking advantage of the tools that technology provides to do so. As an example, today, five of the Top 10 ocean carriers in the world offer digital rates, with Maersk, MSC, Hapag-Lloyd, and CMA CGM also offering instant FCL quotes. With their platforms, they achieve direct contact with shippers, bypassing freight forwarders.
- Digital freight forwarders.
Most digital freight forwarders now offer instant FCL quotes, in addition to instant LCL quotes, which carriers avoid. This means a threat to traditional freight forwarders, as they also provide useful and easy-to-use search functions, allowing flexibility and comparison between different price options, departure dates, or validity of the quotes.
We also must admit that the line between traditional freight forwarders and digital ones today is getting thinner, as many traditional freight forwarders are gradually joining the digital age. They have decided to follow the saying “if you can’t beat them, join them” in order to survive the industry’s revolution and they are already seeing good results. For example, DHL added instant quotes for LCL to its air offering, while Kuehne + Nagel, the first of the major freight forwarders to offer instant LCL bookings, added FCL, joining Agility to offer instant quotes for all three modes (LCL, FCL, and Air).
Following the previous point, digital freight forwarders such as Flexport are providing digital solutions to make supply chains more efficient, covering all modes of transport, and reaching customers directly, since with a few clicks they can access the information they need. In addition, shipping companies such as Evergreen have partnered with innovative business models to develop a platform that provides their customers a marketplace where they can create quotes, compare freight rates, and book shippings under the Evergreen Line.
On the other hand, we must also consider that certain emerging startups such as Cargofive, can be a great help for this digital transformation process. We focus on providing support and help to those freight forwarders that are willing to become digital disruptors of the industry and increase their profit margins.
As we mentioned before, only five of the top twenty freight forwarders have made significant digital advancements. The rest continues to carry out its operations offline, sharing information via email and managing contracts manually, which should no longer be the case considering the great changes and advances arising from the COVID-19 pandemic.
These companies that can be considered as a challenge for traditional freight forwarders are nothing more than teams prepared and determined to leave a mark on the history of the industry, whether for survival or visionary strategies. They appropriately use the tools that digitalization offers and are encouraged to revolutionize the sector. They also have learned from traditional methods to improve them. Here we may find the opportunity for those who have not yet joined the digital wave since they have had a long way full of experience and wisdom. So, what are you waiting to join?