3 Things Top Freight Forwarders Do Better

The line between what one kind of logistics company does and any other is more blurred than ever. Take the term 3PL – this is used by freight forwarders, carriers, and even warehouses as a way to describe themselves. None are wrong be each largely do very different things. This shows that logistics companies have expanded their capabilities to provide a whole range of services to clients when in the past they were narrowly focused on just one.

This makes sense because, as the supply chains of companies become more global and diverse, they need logistics partners who can better align with their needs. This has increased competition in the marketplace, and none more so than that for freight forwarders. Even Amazon.com is taking steps to enter the logistics market – a clear sign that any boundaries about what a freight forwarder can or should do are gone.

There are still best in class freight forwarders that lead the marketplace however, and there is a lot to be learned from them by smaller forwarders looking to grow their own market share.

Here’s the Top 25 Freight Forwarders as ranked by Armstrong & Associates. The exact list isn’t important, there are plenty of “top” lists for all things logistics – but what is important is what the majority of these companies are doing to be among the best. Here are 3 things:

Technology

These companies understand the importance of process automation and technology in their operation. Logistics is an industry often criticized for being behind the times with how it fails to use technology enough. This is not a fair criticism of most companies on this list – most are on the leading edge of logistics technology. Many are on the bleeding edge compared to any company in any industry.

They also recognize the value of technology as not just a way to eliminate manual processes, but also a key decision support tool for complex decisions that have too many inputs for just one person to make (like route optimization or freight rate calculations).

Sourcing

Many of these companies are asset based, meaning they operate their own trucks and boats, but also leverage the value other partnerships can provide. Doing so allows them to offer them more flexible solutions (where they are acting as a 3PL) through partners which includes better rates and service options for their customers. In logistics, scale leads to better rates, and these companies are good at combining volume to build it.

Marketing and Sales

Branding and the marketplace’s perception of these companies is something they also invest in. Each has a clear vision of what types of businesses are the best for them. In other words, they are not trying to be everything to everyone – which is a common mistake for small and medium sized logistics companies. When you project a clear vision on what your company “is”, the best customers for you will seek you out.

The top freight forwarding companies don’t become that way by accident. They do it by investing in the areas they understand will give them a competitive advantage and provide the best return on their customers’ experience – like technology that makes them more efficient and marketing that attract the ideal customers.

Logistics Technology Is About More Than Process Automation

There are benefits to using technology that freight forwarders and carriers often overlook.

The common selling points for technology are usually about eliminating manual tasks and cutting down on paperwork. Obviously anything a forwarder can do to eliminate unnecessary phone calls, as one example, can be big time savers. These are all important benefits, especially in a process as paperwork intensive as that of international shipping – but these type of tactical advantages are not the whole story.

Technology provides more significant and strategic benefits, starting with its ability to support better decision making.

For example, the first step in arranging any shipment is deciding on the mode. For international logistics the options are generally FCL, LCL, or Air Freight. All are straightforward enough in what they are, but many shipments fall somewhere near the line between which is really the best option – in terms of cost and transit time. Assuming a shipment of a few pallets is always better shipped LCL and not FCL can be a mistake. Sometimes paying for the whole container, even if there is extra space, can provide cheaper and faster service. In certain parts of the world, the Middle East for example, the economics of air freight often make the mode competitive with ocean cargo options as well. Both these ideas are counter-intuitive to many logistics professionals.

Here’s the point: deciding on the best mode for a shipment is not always clear cut. The inputs and factors that need to be considered are often too great to calculate manually. Technology that helps support faster and correct decision making – like the best shipping mode – provide important value to the shipping process.

There is also the decision of which carrier to choose. Routing is a complicated decision. Finding the best carrier at the best price and service level require too many details to be considered manually. The ability to access all the available rates for a given shipment enable better decision making. Again, supported by technology, complicated decisions become simple.

Looking further up the supply chain, similar types of routing decisions should also impact choices on where to source products in the first place. The cost of shipping is a big cost component of product sourcing. Smart and accurate decision making, supported by technology, helps to optimize supply chain costs by enabling accurate shipping costs to be factored into sourcing decisions on a global scale.

On a more local basis, supply chain modeling can also help to determine where to store inventory that optimizes transit times to customers from warehouses and distribution centers. This benefit is especially important in the current retail market where consumers demand for fast and cheap delivery is only increasing.

When companies like freight forwarders are considering adding logistics technology it is important consider the less immediate and tactical advantages it can provide. Saving time and eliminating paperwork are important benefits, but it’s also the strategic ways that technology can support decision making up and down the supply chain where technology can provide the best value.

Catapult provides a complete suite of rate and contract management solutions for freight forwarders and shippers that supports the complicated decision making process of determining shipping mode and carrier selection. For more information visit our website at www.gocatapult.com.

4 Ways Freight Forwarders Can Prepare for RFQs

RFQs are an interesting thing – how so depends on your perspective. As a freight forwarder issuing a bid, they are actually a chance for you to be the customer for once. Instead of dealing with shipper problems and customer service issues, you are in the position of having something other logistics services providers and carriers want – new business.

Despite having that leverage, it’s still incumbent on you to properly manage each RFQ event. Bids are only ever as successful as the quality of the planning put into the bids themselves. This responsibility lies with you and requires a lot of planning and preparation – here are our tips to help.

Clearly Explain the Business

Any supplier you invite to a bid needs to know what they are bidding on. This is obvious enough and a simple concept. Yet a common mistake issuers make is providing an incomplete picture of the business. With so much of shipping RFQs revolving around cost and volume data, providing a complete shipping history over a long period of time is the bare minimum responders will need. Don’t be one of those issuers who force vendors to extrapolate or annualize volumes based on limited data sets.

Plus, you want the participants to have a clear vision of your business beyond just volumes. Most shippers have product and industry specific requirements – from unloading to special handling to lead times. Providing carrier partners this information upfront is a must.

Keep It Simple

In addition to a clear vision of what they are bidding on, you want participants to be able to provide accurate responses with a reasonable amount of effort. Over complicating the requirements for a carrier will make it difficult for them to respond with their best offers and can sometimes prevent them from responding at all.

This is understandable because responding to bids is a big investment in time for logistics services providers, with no guarantee of earning them any new business. Many quality carriers will refuse to participate in bids they think are poorly or unfairly built. If this is happening to you, take note.

Establish a Process

Once the responses start coming in is where the real work begins. A well-structured bid, and organized tender process is necessary for you to have a process for receiving and analyzing the responses in a constructive way.

In the end, it’s in your interest to pick the best qualified suppliers and optimize costs – which includes all the less quantifiable factors like service and technology. Creating a process to consider and compare each part of the bid and all the responses in an “apples to apples” way is important.

Find the Right Suppliers

Inviting as many suppliers as possible just because you can is a waste of your time (not to mention the carriers’). The business you are bidding out is not right for every company. Like preparing and structuring the bid properly in the first place, finding and inviting the correct types of carriers is vital. The right carriers provide the best service and rates – which is what you want from your bid in the first place. The best (and smartest) carriers can tell when a bid will be a waste of their time. Letting them know what to expect during the bid will give them confidence in your company. This includes setting expectations for how you’ll provide feedback and if there’ll there be a round two, for example.

Successful bids build successful carrier partnerships and it’s always important for forwarders and shippers to have diversity in their carrier portfolio. By all means keep them on their toes and negotiate hard – but a well-run RFQ needs to show potential suppliers you have your act together too. Smart companies will always recognize you’ll be good to work with and will try extra hard to win your business.

The Simple Strategy To Control Detention and Demurrage: Know Your Free Time

It looks like shippers and forwarders finally have had enough. It’s not a surprise to us, the topic of detention and demurrage at US ports is something we’ve discussed frequently.

Our post: How to Use Free Time to Reduce Detention and Demurrage

And, our whitepaper: Use Free Time to Reduce Detention and Demurrage Costs

There are multiple reasons these unnecessary charge have become so common, but of course your feelings may depend on your perspective. Shippers argue it’s about revenue protection for terminals and ocean cargo companies in a struggling industry where everyone is trying to scrape by. The counter argument is that it is infrastructure limitations and regulations that are the reason these cost are necessary.

The JOC.com recently published an article about: US shipper, trucker petition could trigger detention and demurrage relief

The article discusses a petition gathered by a group of US-based shippers and service providers to create a rule preventing ports and carriers from charging detention and demurrage when “uncontrollable” circumstances make it impossible to pick up or return a chassis according to their contracted free time.

From the article, “Shippers, consignees and drayage providers do not create and cannot avoid these events,” the coalition said. “They cannot control the weather. They do not choose the terminals that carriers use. They are not parties to port labor collective bargaining agreements.”

“Shippers have grumbled for years that demurrage and detention fees are being used to generate revenue, rather than to clear out containers to improve terminal fluidity or to incentivize prompt return of equipment. Although a lack of financing from coalition members for the legal push has prevented shippers from filing a formal regulatory request — until now.”

With time, this will play out. But shippers and forwarders are probably better served in the short term to focus on what they can control now that influences detention and demurrage – free time.

Our perspective is that this problem is primarily an issue of rate and cost visibility. The reason is all shipments have a contracted free time in the rate or contract. Yet, few forwarders or shippers take the time to consider this constraint when they are routing a shipment.

Considering free time allows the number of days the companies has to pick up and return the chassis to be included in the routing decision – just like the freight rate and transit time.

The reason this happens is free time is a line item buried in most contracts. It is different based on the port and carrier, and other shipment details. Most companies do not have an efficient way to find their free time on an individual shipment basis. Lacking this, they’ll use an average or estimated amount of free time when planning and quoting a shipment.

Knowing and using contracted free time allows freight forwarders to not only quote shipments more accurately, but develop routings that ensure charges at the ports don’t pile up.

Hopefully, the challenges at the ports for all parties will lessen with time. Until then, taking the necessary steps to include free time in each routing decision is the best thing forwarders and shippers can do to reduce the additional costs from detention and demurrage.

The Implications of e-Business Disruptions in Global Freight Forwarding

Innovative technology and e-centered business models are changing the international shipping industry drastically.  In their white paper, e-Business in Forwarding – Threats and Opportunities, Drewry Supply Chain Advisors examine the effects of technological advancements in online forwarding on freight forwarders and ocean carriers. They argue that the move to more technology based platforms and tools creates both threats and opportunities in the industry.

Causes

According to Drewry Supply Chain Advisors, the move toward e-commerce in the logistics industry overall is impacting the freight forwarding segment as well. New entrants to the market are beginning to have an impact on established companies who are slow to adapt to the change. Shippers are in search of a flexible supply chain that will offer shorter contracts and on-demand spot rate requests, which is driving the need for automated processes.

Technology is allowing customers to use online forwarding to enjoy a simpler, more flexible, and transparent shipping experience. In a competitive shipping market, where it is difficult to differentiate from other companies, many shippers are looking to increase sales by improving the customer experience through automation.  Overcapacity in the market, coupled with volatile freight rates, allow new entrants to get better rates from carriers, especially when compared to those shippers who are not embracing available technological advances. 

Implications

These technological developments for current and new freight forwarders create both threats and opportunities in the market. Most likely, small and medium-sized shippers will move completely to web based forwarding services and online sales platforms, with customer profiling and market segmentation playing a large role. Larger shippers will be able to offer more procurement options and customer insights. All shippers will have better access to information with big data solutions and be able to provide greater transparency to the customer with increased shipment visibility. 

API technology will enable shippers to provide automated rates with simple quote applications, schedule information, as well as shipment tracking services. The use of Transport Management Systems (TMS) allows for comprehensive and detailed processes with flexibility to integrate with other partners, creating a faster and more cost-effective supply chain process overall. 

Freight forwards, both large and small, will need to reassess their business models to make sure they are optimizing their supply chain and providing customers with the lowest cost possible as well as a decreased impact on the environment. Medium-sized forwarders specifically will need to expand through specialization in order to stay competitive with new entrants. 

Advantages

By using online sales platforms, freight forwarders are able to offer more cost-effective solutions to customers with accurate, specific quotes with dynamic pricing. These online sales platforms are being used by both large and medium-sized shippers in order to gain access to spot rates, dashboard tools, and API interfaces. Automated rate solutions include carriers’ tariffs to create a more realistic quote to shippers. International shippers who are able to re-engineer their sales process, are able to give customers a comprehensive package of pricing customized to fit their needs.  

The changes bought about by e-commerce will continue to reshape how freight forwarders conduct business as these providers look to cloud-based applications for end-to-end solutions and connectivity. The demand for TMS indicates that this technology will only continue to expand in the industry. Those business who have not adopted it will not be able to compete with those who are utilizing it.