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In 2017, the global freight forwarding market grew by 8%, the largest annual increase since 2010. Last year also saw revenues of the global logistics industry reach $4.8trn (€4.23trn). BIFA, the association for FFWs in the UK reported that the global freight forwarding market achieved growth of 4.9% in the first half of 2018, with air freight forwarding expanding 5.3% and sea freight forwarding growing 4.3%. As the ‘middle-man’ in the shipping process, Freight Forwarders (FFWs) are at the very heart of an industry that, quite literally, keeps the world economy afloat.
Indeed, the Freight Forwarder (FFW) is a key stakeholder in international logistics. In the UK, for example, almost any business that trades internationally in these countries typically will rely on one or more FFWs to serve as an intermediary between the transport companies (carriers) and themselves. FFWs not only facilitate business relationships between global companies, but they also deal with all operational and documentary issues connected with international trade. FFWs’ job is essentially to guarantee the best possible shipping service to their clients. In order to do this, they offer very specific expertise, a global network of offices and agents and crucial logistics assets such as warehouses, especially in the case of the largest FFWs. They are a central node in the global logistics network: clients rely on FFWs, who in turn rely on local operators (transport companies) for first and last mile road freight.
In terms of figures, the latest ranking of global FFWs reflects that the big players are still based in Western Europe (Switzerland, Germany, the Netherlands, France), the United States and the more developed Asian economies (China, Hong Kong, Japan). Some obvious players still dominate the market, among them: Kuehne + Nagel (Switzerland), DHL Group (Germany), DB Schenker Logistics (Germany), GEODIS (France), Panalpina (Switzerland), DSV (Denmark), Bolloré Logistics (France), Expeditors (United States), Nippon Express (Japan), and CEVA Logistics (United Kingdom). In Spain in particular, the biggest 5 FFWs were Iberia Líneas Aéreas de España Sociedad Anónima Operadora, Kuehne & Nagel, DHL Spain, XPO Transport Solutions Spain and Compañía Trasmediterranea. Below are more details about the Spanish market:
The Need to Go Digital
While logistics may be big business, its fundamental operational processes haven’t changed much since the 1950s and 60s. FFWs continue to coordinate the global supply chain with a physical paper trail, using mostly - wait for it - fax. The money and time wasted in manual, paper-based FFW activities is substantial. After all, the documentary tasks and processes that an FFW carries out are significant, not to mention the operational, and often manual, tasks involved in track & trace activities. According to IATA, an individual air shipment can require up to 30 (paper) documents, meaning there are about 7,800 tons of paper documents created each year. It’s no surprise, then, that the UN estimates that the time it takes to export goods could be cut by up to 44%, and costs cut by up to 31% just by digitising all of the Asia-Pacific region’s trade-related paperwork. Indeed, digitising even some of FFW’s activities could make a huge economic difference on an international scale.
As the reality of global logistics changes, FFWs are also facing rapidly eroding margins due to unnecessary inefficiencies. Digital trends are overwhelming the market: tenders are now shorter, spot quotes are becoming normalised, customers expectations are rising, and global online sales competition from a diversity of carriers is giving FFWs a hard time. It is no surprise then, that over 50% of logistics professionals agree with the idea that ocean freight is increasingly unprofitable, with roughly 40% saying the same thing for air freight. Digitisation is the only way for these companies to keep up with the growing challenges that a digital market poses. Technavio reflected this in its 2017 report on the potential savings of digitisation in Freight, finding that the enhanced operational efficiency and improved satisfaction achieved through digitisation could possibly result in up to 12% savings for FFWs. As they say: “if you can’t beat them, you might as well join them”.
The digitization of the air cargo industry will create more efficient processes (Source: IATA)
This anachronistic nature of FFW company practices hasn’t gone unnoticed by the organisations themselves. According to the “Global Freight Forwarding 2017 Report” produced by the London-based think tank Transport Intelligence (Ti), 58% of survey respondents saw online freight marketplaces as an opportunity for traditional forwarders. A 2012 Economist report also revealed that 86% of senior logistics professionals say that they see technology as the number one way to deal with margin erosion in future. Indeed, 2017 and 2018 saw a handful of top forwarders selling online, and not without good reason. Given the many different elements involved in shipping cargo from point A to point B - from finding the best mode of transport, to managing documents, to track and trace, and beyond - digital solutions such as cloud-based platforms offer a traditionally paper-heavy industry an opportunity to significantly reduce costs and increase productivity.
Increased, reliable capacity
Historically, FFWs have often used dedicated onsite fleets due to capacity problems that have jeopardised the quality of their service and their client reputation. Alternatively, digital solutions like Ontruck have a constantly updated network of shipping providers and automate their shipping and routing processes. This solves traditional capacity issues since they have constant access to a large, reliable network of truckers. This allows FFWs to reduce their dependence on dedicated fleets by not only reducing the number of vehicles but also eliminating the need to subcontract or increase fleet capacity as the business grows.
Making FFWs More Responsive
With digital tools, FFWs can become proactive - rather than reactive - when it comes to solving potential issues and responding to clients. Services like Ontruck combine both operational teams and technology-enabled alerts solve problems in advance, and notify clients in time in the case of delays. FFWs that provide the digital solution-provider with a large number of shipments can also benefit from data-driven analytics and insights, which enable their key decision-makers to make better, evidence-based decisions. These business-critical insights can also help them identify potential areas for future optimisation. For example, Ontruck allows FFWs to monitor the evolution of their business using indicators such as their success rate, on-time rate, cost per kilometre and the percentage of incidents at pickup and/or dropoff.
Reducing operational burdens
Operational processes like quoting, track & trace and digital POD take up a lot of time and come with significant costs. Digital solutions using IoT and AI, among other technologies, enable the real-time tracking of boxes, full containers, crates or pallets. Consequently, this reduces the time spent manually managing cargo and allows stakeholders to easily access the location of packages via one, shared platform. Digital platforms, for example, give shippers the ability to analyse a broad range of pricing and booking metrics immediately, meaning that they can access the most accurate price points and make their booking in just a few clicks. This reduces the burden of non-added-value or non-core tasks, allowing employees to focus on more important issues that cannot be so easily digitised.
How Ontruck Can Help
Multinational FFWs are critical in both facilitating and stimulating international trade. They have a very specific set of expertise, networks of offices and/or agents spread around the world, and assets such as warehouses. They can then leverage all these resources in order to guarantee the best possible services for their clients.
Ontruck understands the complexity of international trade. It thanks to this understanding that we have come to be very important partners to some of the world’s largest FFWs, including DB Schenker, Kuehne Nagel, CEVA Logistics, XPO Logistics, DACHSER, and DHL Supply Chain. With a 99% success rate on every type of vehicle from vans to articulated vehicle, we help FFWs with a small but critical part of all the complex service they provide, adding to their final success.
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