top of page
  • M T

Freight Forwarding Businesses Could Disappear in 5 Years. Here's Why.

Updated: Dec 22, 2020

The logistics industry has been notoriously slow-moving in the adoption of new technologies and some are starting to see the dangers of staying behind. It is no secret that the processes of freight forwarders remain the same today in 2019 as they did decades ago.

We hate to break it to you, but if nothing changes, you may start to lose customers and struggle to keep your business. The first thing is to start getting informed.

We've researched and gathered 3 of the reasons why your freight forwarding business may not survive in the next five years, and also, we're suggesting some steps to avoid that.

What is threatening your traditional freight forwarding business?

1. Digital Freight Forwarders Taking Over The Market

The tech world long ignored freight forwarding as it seemed boring and unattractive. But there is a wave of digital disruption coming to this sector proposing to optimize processes, create efficiencies, digitize paperwork and improve customer experience.

The rise of Digital Freight Forwarders is one of the main threats to traditional freights as we know them. We're seeing various examples in the news, such as the case of Flexport, a digital freight forwarder that recently completed a $1 billion in fresh funding.

These are companies that are directly targeting freight forwarders head on.

Investors are recognizing the business opportunities in these companies and they're witnessing a new era of professionals that are described as young, tech-savvy, and data-driven.

Unfortunately for small and medium-sized traditional freight forwarders, the digital freight forwarding business is moving at a quick pace. Some even argue that they serve as a replacement for forwarders and their advantage relies upon some of these offerings:

  • Easy to find rates online

  • Quick booking process

  • Digital contracts and documents

  • Improved data and tracking

2. Big Carriers with robust infrastructures offering freight forwarding

Large cargo companies and shipping lines are also recognizing the need for data and digital solutions to manage freight.

They not only have the means to invest in better technologies but also have the control of information that could put freight forwarders at a benefit or disadvantage, such as the status of the shipment, warehouse specifications, customs, etc.

We can see this example with Hapag-Lloyd offering schedules and rates directly to customers and providing detailed information about the shipments online.

This specific practice aims to completely replace the work of traditional freight forwarders and it is particularly worrisome.

3. Freight Marketplaces

There's a lot of questioning in the industry about marketplaces like Freightos and Sea Rates.

The idea for a equivalent to freight forwarding seems to generate curiosity. But there are few problems with this:

The information about your rates is no longer in your control when you upload them to a marketplace.

By having rates shared publicly and not owned or controlled by you, freight forwarders are forced to compete with lower prices.

Marketplaces are contributing to the commoditization of the industry

Clients and marketplaces get the benefits of having information and buying power which results in lower revenue generation for forwarders.

Furthermore, the job of the forwarder involves coordination of various processes - a marketplace provides a rate and oftentimes, the transaction ends there. The client is then asked to input information for the forwarder to contact them and follow the old-fashioned steps once again. This can result in slowing down the process even further and again, risking shipping and meeting deadlines.

How can forwarders take action?

It is not a matter of knowing that you need to digitize: Freight forwarders KNOW the importance of digitization.

A survey by Logistics Trends and Insights says that a whopping 86% of industry professionals consider digitization "extremely important" or "important" for their business strategy.

The difficulty comes in the HOW. Here's what you should do to take action and save your business:

  1. Review the processes that you want to improve.

  2. Look for information that can help you make a decision of what tools to use for transforming your business into a digital one.

  3. Use technology that is easy to understand and quick to implement.

  4. Leverage your areas of expertise to create competitive advantages.

  5. Focus on improving your customer experience.

  6. Automate your sales to be available 24/7.

We created a checklist for digitization to help you visualize and get an idea of the aspects that you need to change in your business. Fill it out here to find out where you stand in the process.

What's keeping you from going digital? Tell us in the comments.

905 views0 comments


bottom of page