A Look At the Top 5 Challenges Facing the Freight Forwarding Industry Today

Freight forwarders are as nervous about the future as any other type of company these days – and for good reason. It’s hard to think of another industry facing more uncertainty with many of the macro-trends happening in the world right now. These challenges include everything from the impact of technology and the state of the global economy, to how newly elected U.S. President Trump is promising to shake up global trade.  

Macro-economic reasons aside, there is also plenty going on within the industry that freight forwarders should be watching. Here are 5 of the most crucial ones.

Competition

Freight forwarders are up against more competition than ever. Part of the reason is that many logistics companies that traditionally defined themselves as something else (say an as ocean carrier, or even a warehousing company) are now providing forwarding and NVOCC type services. And of course, everyone is talking about how even Amazon is getting in the game as well – which leads us to the next challenge.

Commoditization

Many, if not most, shippers view transportation as a commodity. All they care about is that the delivery gets made. Meaning, they place little value on service and a lot on price. This makes it hard for forwarders to differentiate themselves from other providers – especially when there are always those who’ll try to win on price. Some forwarders are learning they can better compete and maintain margins by offering new or better technology that improves the customer experience.

Ocean Volatility

Ocean shipping is a big part of what forwarders do. It’s also a very unstable business, based on complicated rates and contracts that take an expert to understand. Many times this makes it hard for forwarders to understand their cost structure – which obviously makes it even harder to provide accurate and reliable quotes to customers. The seemingly random nature of GRI’s and surcharges only adds to the problem. There have been recent calls to simplify the complexity of all these things but there won’t be relief for forwarders any time soon.

Tender Management

A big part of most forwarder’s business comes from responding to tenders. Because the volume of these bids is so high, and each is usually so complex, they are a big drain on resources. Smart forwarders are focused on improving their tender management process to make sure they are bidding accurately and fast, but also on the best types of business for them.

Rate of Change

There are constantly new market challenges for forwarders that need to be accounted for. A recent example is the trend for ocean carriers to form alliances. With almost no notice, these can affect the rates and contracts forwarders have with the carriers, as well as service. The aforementioned effect of technology is changing how forwarders (and their competitors) can manage their business – as well as service their customers. Lastly, market expectations continue to focus on ever faster and cheaper deliveries.

For all these reasons, freight forwarders need to work harder than ever to differentiate themselves in their business – while continuing to focus on service. What the best forwarders know is that just as important as competitive rates are giving customers better service options and technology to support decision making.

Shipping and Autonomous Vehicles: The Future of Logistics Technology

There is no question that the logistics industry will be changed drastically by autonomous vehicles. Research into self-driving machines of all types for use in the supply chain is exploding – from automated ocean cargo vessels to warehouse forklifts.  The push to use more automation in the logistics industry is, of course, largely based on the goal of lowering costs but comes with many environmental benefits as well.  

Cargo Ships

The automation of container ships is part of a larger effort in the industry to automate the way goods get from place to place.  Personnel (about 20 per vessel who need to be paid, housed, and fed), account for nearly half the cost of operating cargo vessels so the ability to cut that part of the budget will have a dramatic impact on this struggling industry.

Automating a large vessel carrying hundreds of shipping containers is a complex project.  Rolls Royce, the makers of luxury cars, is at the forefront of researching and implementing this technology for large ocean carriers. This is a major priority for the company, with the philosophy that automated ships will redefine the shipping industry. There are many technical and regulatory and policy issues that need to be solved before this endeavor can become a reality, but when it does, expect massive changes to the global supply chain as we know it. 

Trucks

With over 3.5 million truck drivers in the U.S., replacing human driven trucks with automated ones will create a big change to the trucking industry. Labor-saving vehicles are likely to be adapted faster than self-driving cars, as companies look to cut costs.  

Individual self-driving trucks are not the only way businesses are looking to decrease transportation costs. Tests with convoys have also been conducted, using Wi-Fi, sensors, GPS, and cameras to connect the trucks. The leading vehicle determines the speed and direction with the rest of the convoy to automatically steer and change speed.

While there is a lot of skepticism about replacing humans behind the wheel of large, load-bearing trucks, there are others that are confident the technology will be developed to safely be able to do this. And the potential savings, of an estimated $168 billion yearly, is worth the technology investment by automotive manufacturers. The economic impact of job loss is also delaying the process somewhat, as trucking accounts for the largest job in 29 states. 

Forklifts

Automation is also taking place in larger numbers with forklifts in warehouses across the U.S. If a larger amount of product can be picked up and put away faster, the more productive and cost efficient a warehouse will be. 

Giant Eagle, a Pittsburgh-based retailer has been using automated forklifts and robots to unpack pallet trucks and stock its distribution centers. The company claims an increase of 10-30 percent in productivity with the use of automated warehouse vehicles. 

Each vehicle has sensors that gather data, such as size of load picked, how long it takes to deliver it, and location of the vehicle.  This allows the company to find out quickly if the vehicle has a problem and adjust as necessary. These sensors also help to prevent accidents within the warehouse. 

Logistics and the global supply chain are often discussed as being the most ripe for new technology and “disruption”. This means investment in automation for different types of transportation vehicles will only increase as more companies look for ways to cut costs and operate more efficiently.

How to Stand Out From The Crowd as a Freight Forwarder

It’s hard to stand out as a freight forwarder these days because most shippers see what forwarders do as a commodity.

A big reason for this is that the line between what each type of logistics services provider does for customers becomes more blurred all the time. This has led shippers to come to expect a full suite of logistics solutions regardless of the type of LSP they are working with.

This means as a forwarder, you are now competing against everyone, all the time. You need to find ways to set you apart and get the attention of customers. Here are some easy-to-implement ideas we’ve observed on how to do that.

For one, it’s clearly the details that differentiate. Even though it seems too obvious to mention, websites matter, and most top forwarder’s websites are terrible. This is shocking because what company hasn’t recognized the fact that almost every potential new customer will always go to your website first?

Consistency with your messaging matters too. The things your sales people are communicating to prospects needs to be in alignment with your website and all other marketing materials you create.

Forwarders that stand out are always considered experts on their customer’s businesses. On your website, and everywhere else, your marketing message needs to speak in terms of your client’s problems and how you’ll help them. To be successful with sales and marketing, your prospects HAVE to think about your company and envision how you will help them. This can only happen when they feel you know and understand their unique challenges.

Well written case-studies and content that project thought leadership on topics important to your target audience are a great way to accomplish this. Remember, prospects are researching and evaluating your company based on what they find on your website – usually before they’ll ever talk to a sales person.

Technology is another great way to differentiate yourself as a forwarder. Even beyond improving your internal operations, many of the types of technology available to freight forwarders will improve your customer’s experience working with you.

Most company’s claims about service being what makes them better are just talk – everyone says that. But, when technology can make you faster and more accurate with your service to customers this claim will have real merit. This is important, because your technology then becomes part of the story your customers tell themselves as they envision working with you.

Remember, projecting an “all freight is the same” attitude only plays into the commoditization story you are looking to avoid. The hardest part of this is making sure you have a focus, and don’t try to be everything for everyone. This can be the most difficult temptation to avoid for every type of company.

If you want to talk to new customers about why you are different, you’d better have a good story to back that up.

Can You Benefit From Logistics Business Process Outsourcing?

The idea of outsourcing in the logistics industry is not new. In fact, in many ways freight forwarders and customs brokers are in themselves a form of Business Process Outsourcing (BPO).

BPO is a common method companies turn to for cutting costs, helping their operations run more efficiently, and freeing up time to focus on their core competencies.

After all, is it really the best use of an employee’s time at any company to perform labor intensive back office logistics functions – many of which can be automated with technology or at least managed more efficiently by a team set up and dedicated to the specific task?

At a high level, smart BPO develops ways to take arduous tasks and make them run better. Many functions that are manual and repetitive can be completed more efficiently when they are done at scale and with trained people. Another way to look at it is that BPO is about spending your resources on higher value activities like reducing freight rates and expenses, or finding new ways to better serve your customers.

It’s the purpose of logistics and the supply chain to worry about the tasks and goals that are core to making businesses run better. BPO helps to enable this focus, but doing it successfully takes an outsourcing partner who brings resources and deep industry experience – and most importantly a sound process.

A common way to deconstruct a BPO project is in four parts, each integral to how a final solution is implemented:

  • Current State – a look at what is happening now
  • Gap Analysis – finding areas that can be improved
  • Design – documenting and planning for the solution
  • Measure – a process for managing and determining level of success

The process of managing logistics for any large company involves a complex network of data, technology, suppliers, as well as countless other details. A big part of it is also inertia – the ever present idea that things are done a certain way because “that’s always how we’ve done it”. BPO is a great way to break through that inertia.

With so much of logistics, in particular international shipping, being data and documentation intensive there are many areas BPO can provide added value.

Here’s a list of common logistics processes that can be improved with BPO.

  • Rating (pre-rating, pre-audit)
  • Booking
  • Import Security Filings (pre-alert processing, CA-CS file creation)
  • Track and Trace (issue resolution)
  • Load Planning (container utilization)
  • Shipping Instructions
  • BOL Data
  • Manifestation
  • Export Invoices, Payables, Import Invoices (exception handling)
  • Import Arrival Notices
  • Import Renewables (on-carriage, import deliverables)
  • Long Standing, Unclaimed Cargo
  • Customer Service (issue resolution, complaint handling, data entry)

Many of the tasks and functions on this list are things your logistics operations must do. Thinking of each, do you see any gaps in your process for getting the work done? Do you see where a technology, or team trained to focus on a specific task could make it easier?

One way to describe the concept of logistics is to say it is controlling complexity through efficiency. As a logistics professional, you know there’s a problem that needs fixed when your processes, technology, and data are not optimal.

If you see inefficiencies within your own operation, then the answer to the original question is yes – you can benefit from BPO.

Container Shipping Celebrates A Milestone Birthday

Few recognize the shipping container as an invention that revolutionized the logistics industry – much less the world – but it has in a major way. For 60 years, container shipping has made the global transportation of almost everything we use in our daily lives easier and more efficient, as well as enabled economic growth worldwide.

The First Container

Prior to the shipping container, goods were shipped in barrels, sacks, boxes and wooden crates, which created a very labor-intensive (and slow) loading and unloading process. Since all these types of items were small and had to be handled multiple times, many were often lost, damaged, or stolen.  While over time some advances were made in the laborious process of commercial shipping, it wasn’t until the 1950’s that the first shipping container was used. 

Malcolm McLean, a trucking tycoon, is the man credited with starting the practice in 1956. He used a converted tanker to move the first container filled with cargo from New Jersey to Houston by sea. As simple as it sounds, this demonstrated the basic idea that cargo could be handled just twice – once at origin and once at destination – a significant improvement.

A few years later, Sea-Land created the first transatlantic service using shipping containers, and after that Overseas Container Lines launched in the United Kingdom. Since that time, companies have been utilizing large cargo containers for shipping all types of goods overseas.

Enhanced Efficiency

The advent of shipping containers led to increased efficiencies in the shipping industry by eliminating the need for many manual operations associated with transportation, particularly at the docks. Most significant was that less personnel were necessary for the loading and unloading of the ships. 

Containerization helped to speed up cargo handling dramatically, and allowed for the standardization of port handling equipment. Today, full containers can be loaded at a shipper and delivered to the consignee almost anywhere in the world intact and unopened. In addition, it improved cargo safety, both in terms of security and a decrease in damaged goods. 

Global Impact

While containerization has resulted in major advances in the shipping industry, it’s had an even greater worldwide impact on globalization.  Emerging markets have been able to make their resources, and competitive advantage in labor and costs, available internationally. 

As outsourcing and relocation of manufacturing continues to grow, global container transportation becomes increasingly important as well. Shipping containers and supply chains reach destinations around the world thanks to ocean cargo networks that grow in volume every year.

Overall, the innovation of the shipping container has developed and changed the global supply chain to operate more effectively, and drive costs down for all stakeholders.

Lower Costs

Prior to containerization, the costs for port operations and cargo handling accounted for most of the cost of shipping. Now, the ability to ship items in containers has lowered the cost per unit of many items. Operating costs have dropped because the larger container ships can hold more cargo, and reduce the number of trips taken. 

The use of container shipping has revolutionized the logistics industry over the past 60 years, changing the supply chain dynamic and opening up global markets for shippers and producers everywhere. The humble shipping container is arguably the most important single ‘technology’ in the world’s supply chain.