Do Freight Forwarders Lag When It Comes to Technology Adoption?

The logistics industry gets little credit when it comes to the adoption of technology. It seems like there is a new technology startup appearing every day promising to “disrupt” the $3 trillion shipping industry  – while at the same time criticizing shippers and logistics companies everywhere as luddites.

Maybe the perception comes from the tough nature of the work logistics companies do. Freight can be a dirty business, literally and figuratively. The attitude for most people in the industry is that, in the end, all that matters is the delivery gets made and style points don’t. Or, at least they didn’t in the past.

This idea is perhaps also a broader statement on the industry itself because at least parts of the shipping process remains manual and paper-based for everyone – through no fault of the service providers or shippers. There has clearly not been a compelling enough reason for things to change more than they already have.

If shippers had demanded more, providers would have to make more changes to make the process better – like adding technology. The bottom line is that up until now the pain being felt by anyone has not been great enough to inspire change for everyone.

Today, we argue that the industry has reached a tipping point and this is no longer true. Freight forwarders and other logistics companies who have not invested in or using technology are now feeling a negative impact on their business – and this is finally inspiring action.

There are several reasons it’s happening. For one, companies leveraging the correct technology operate more efficiently – this is a pretty simple idea. Track and trace, rates and cost data, and other information flow through their operations and to customers better. A thing as seemingly simple as how technology can eliminate the need to rekey important shipment information saves time and eliminates errors. It also helps to create a more consistent, repeatable workflow that enables easier sharing.

The benefits extend beyond just operating better too – Read About That Here: Logistics Technology Is About More Than Process Automation

Freight forwarders using technology are able to provide a higher level of service and customer experience. The aforementioned benefits of track and trace, as well as reporting are two important examples. From the customer’s perspective, forwarders using technology are simply better to do business with.

Technology also makes forwarders better customers themselves. They are able to provide more accurate and timely information to their carrier partners. This is rewarded with more competitive rates and preferential treatment when problems come up – and they always do. We are talking about shipping after all.

As a final note and speaking of issue resolution, technology digitizes much of the paperwork in the shipping process which is especially important to international logistics. Documentation that gets lost is replaced faster when it’s digitized and available through a central technology platform.

The perception that the whole logistics industry is behind the times when it comes to using technology is often over blown. Yet, there are a lot of companies that could be doing a lot better – many of them freight forwarders. These companies would be smart to start seeing technology as a requirement of doing business and a key way to serve customers better and make that part of their own ROI equation.

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.

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.

Four Ways Technology Helps Freight Forwarders Reduce Risk

Freight forwarders and NVOCCs face a lot of every day risks in their business that technology can easily solve. Many of them are the result of exposure to the routine challenge of managing the complexities of global shipping – like rate management, responding to RFQs, and general competition in the market place.

Still, many companies are slow to adopt technology solutions that help overcome these types of challenges. The failure of companies to keep up in this way is a mistake – here are four ways technology enables freight forwarders to reduce key risks in their business, and for their customers.

Rate Accuracy

A forwarder’s entire business is based on the process of buying transportation services at one rate, and selling it to their customers at a higher rate. The difference in these costs is how they make money – period, end of story. Yet, many forwarders have no automated way to ensure accuracy with their freight rates and have no idea of their own cost basis.

Calculating global freight rates is a complicated process, and subject to GRIs, surcharges, and countless other fees that are constantly changing. Lacking freight rate management technology, calculating the cost basis for a forwarder is impossible. This creates risk and makes every quote a potential money-loser.

Service Commitments

Every global shipment involves a lot of coordination – with things like paperwork, sailing schedules, origins, local carrier partners, and countless other details. Lacking access to any of this information, like sailing schedules or the ability to verify space on a particular ship, leaves customers at risk to missing the specific sailing they were counting on to meet their own service commitments for deliveries. Technology makes it possible for providers to verify this type of information for shipments and ensure they’ll make their customer’s expected delivery time.

Routing Decisions

Every shipment involves a lot of important decisions – like what carrier to use and what mode. But primarily it’s about balancing the cost and service requirements to get the best of both. Yet, lacking technology to support decision making, there is risk of failing to meet the either. The choices are always complex – with hundreds of options for even the simplest international shipment. Technology is the ONLY way to support decision making that will reduce the risk of bad routing choices by guaranteeing the best choice is made for every shipment.

Happier Customers

Technology also lowers risk of losing business by enabling forwarders to provide better service to customers. Real time connections to carriers allows more up to date track and track, for example. API and EDI connections reduce the reliance on phone calls and emails for load status updates. Technology can even make the documentation and customs clearance process smoother by digitizing much of the required paperwork and information. In the end, forwarders are able to provide a more reliable and positive customer experience when they are supported by technology.

It’s the freight forwarders that embrace technology adoption that lead the industry. Logistics technology shouldn’t be thought of as a ‘nice to have’ – it’s integral to any forwarder’s operations and key in reducing risk for the business, and their customers. 

Data Interoperability and the Logistics Technology Stack

Logistics technology has made huge strides in the last 8 to 10 years. Once thought of as an industry that always lagged in the adoption of technology – both shippers and service providers now have access to applications that can transform the way they run their business.

This is a topic we’ve written about a lot on this blog. Throughout this post, we’ve linked back to several of them.

Blog Post – Overcoming the Hurdles of Logistics Technology Adoption

Blog Post – How Do You Choose the Right Supply Chain Software

Not so long ago, that was not the case for several reasons. For one, the technology that did exist was really expensive. The term logistics technology was synonymous with TMS (Transportation Management System) or WMS (Warehouse Management System) – with these usually just being a module within a huge ERP system. The advent of smaller, more easily implemented SaaS based solutions has changed this for companies of all sizes and made many types of #logtech infinitely more accessible.

A second reason is that there are many specialized applications that satisfy a more narrow range of functions. This has enabled companies to build their own “Logistics Technology Stack”, which combine technology from different providers to create a customized solution. The benefit here is that this stack serves a company’s needs better than a more expansive software that may do a lot, but not not any one thing all that well. These new types of solutions are made possible by using applications that help facilitate data interoperability and make the experience seamless for users – who can then “cherry pick” the solutions they want.

Blog Post – How Freight Forwarders Can Use Gap Analysis to Fix Missing Pieces in their Logistics Technology Stack

Freight rate and contract management is a great example of a process within shippers and service provider’s operations that can benefit from specialized technology.

Blog Post – 6 Ways Freight Forwarders Profit From Rate and Contract Management Technology

Take a freight forwarder – most rely on technology (such as Cargowise One) to manage many parts of their business operations. Our platform, QMS, integrates with Cargowise so that the ocean rates and contracts managed in QMS can be accessed seamlessly in Cargowise. Similar examples also include rate sharing that is possible between QMS and 7L for air freight rates, and a similar connection for pulling in LTL rates from Banyan Technologies.

Blog Post – It’s Time to Gain More From Your Logistics Technology Stack

The point is this – companies are no longer beholden to large TMS or other types of technology platforms that try to be everything to everyone. Functions like ocean rate and contract management are highly specialized and have NOTHING in common with other modes like Truckload. And like it or not, there is no one system that does everything all that well.

Taking advantage of the web services and APIs provided by different types of technologies allows both shippers and logistics services providers to build a combination of logistics applications that do exactly what they need it to do. This makes for a better solution for users, while keeping costs low.