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Another day, another headline: Forwarders under threat! Death of the Middleman! Automate or the industry won’t need you!
It’s not the kind of Monday motivation we look for. But it’s true, we should be worried. We’re under attack. New tech start-ups, ‘game-changing’ market entries from the big guys, aggressive competition from our long-term suppliers, all chipping away at the market share we work so hard to maintain.
In truth, we’ve been fighting a competitive and saturated market since the business was founded in 1994.
It’s been a while since I read any industry news and felt a sense of positivity about the global freight forwarder. Some articles recently have felt more like a smear campaign than news. Is the only way to promote your new venture to attack existing businesses and forwarders in the market?
Shipping is not just about moving containers from A to B – which is the premise of some of the new tech start-ups. A flat rate, inputted to a system, to quote on a container from one destination to another.
On the desk we all know it is so much more.
Daily we experience customs clearance issues, customs brokerage, police escort arrangements, specialist handling, extreme weather conditions, short shipments… the list goes on. Are we expecting a machine to process these considerations and make the same arrangements a human would?
When I tell my friends that I work for a freight forwarder, they look at me blankly. I guess if you’re not in the industry you’d be forgiven for not knowing the term. I explain that we help importers and exporters transport their goods in a safe, efficient and cost effective way. By our own definition a freight forwarder has specialist knowledge to prepare the types of documents required for moving goods via sea, road, rail or air. There’s pick, pack, storage, distribution, warehousing and trucking considerations that need to work in sync for harmonious supply chains. So let’s say Artificial Intelligence takes our place, how long would it take the machine to find the root of a problem, in one single part of the chain.
It’s not that we have anything against new tech start-ups, any entrepreneur developing software designed to make shippers’ lives easier is welcome in our office. When the right online platform comes along we’ll happily embrace it – if it adds value for our customers.
I’ve now tried three of the very publicly heralded freight marketplaces, promising to revolutionise global shipping bookings.
I entered a FOB 40ft Container from Shanghai to Felixstowe, one of the biggest trade lanes in the world. I was hoping for a plethora of choice and super-competitive rates. Quaking in my boots (thinking about my redundancy pay-out) I waited for the results to load – only to be greeted with ‘your route cannot be found, sorry no rates found, no results found.’ I couldn’t even enter a destination on one site. Was I doing something wrong?
And if I’m feeling like this, imagine what a first-time importer would think?
Maybe the freight marketplaces should change their slogans to “making global freight rates so transparent they can’t even be seen.”
We’d all welcome a Sky Scanner-style solution to the movement of global freight. It would certainly make our lives easier- but I feel its living in a dream world.
Even if we replaced people with amazing digitisation, I would like to hope that the future of our world is not based on faceless online encounters. We visit a car dealership for the experience, the satisfaction of selecting the right product, the trust built from the test drive and the bargaining with the salesman. All these tangible aspects of a sale are still crucial for purchasing decisions. People still value people. They appreciate knowledge as value in the supply chain and lean on expertise. This is something technology can never really replace.
We love Andrews Craig Bennett’s article: “War has been declared on forwarders.” Well, if it’s a war they want, try fighting us with the right weapons. We’re fighting back.
Kate McCauley is in marketing & communications at Tuscor Lloyds Global Freight Forwarders.
Comment on this article
Tim
February 07, 2017 at 11:48 amHi Kate,
My business is the article just below yours and perhaps a little of what you are referring to in your article. https://theloadstar.com/warning-forwarders-plug-play-sea-freight-aims-cut/ What my article fails to do is outline that I am a freight forwarder. I was a customs broker, that was pulled from a CEO of a major freight forwarder to do a Logistics Degree. I then worked for an Art and Specialised Freight firm as their General Manager. I have pretty much seen both sides of the fence.
What Freight Forwarders, especially in the UK are doing is profiting well from the forwarders in say China. Lets be honest profit is a 50-50 split on the freight and most terms are FOB. This means freight forwarders in the UK make allot more money off the shipment for doing hell of allot less. Basically profiting on the local charges in the import country.
Systems like mine simply enable shippers/importers around the world access to what you have access to. And the suppliers on our platforms are allowed access to your clients.
Brave new world? No, just a square up.
mca
February 07, 2017 at 2:23 pmYour comment surely assumes that FOB term really pays a lot more to the receiving forwarder rather than the one on the sending side. What evidence (other than your own experience) can you offer?
Where I do business from, FOB term is not a guarantee to the rich profits you mentioned. Rather close to 50/50, of course it varies at times. But I am in the same “boat” when business is prepaid, so it’s not really that different overall.
I also am not sure why FOB would automatically mean a lot more work completed on the sending forwarder side? Perhaps you have never handled a high volume import lane with many to-door deliveries and inter-modal rail parts over long distances. It gets complicated, and you carry all the risk (freight payment) with a customer breathing right on your neck …. how is that compared to a sending forwarder environment? I think a much more fair statement would be that both sides of the trade have their own issues and challenges, which certainly is true as most forwarders know from their own experience …
Tim
February 07, 2017 at 10:38 pmI assume nothing. The figures and details I gave you were first hand and from our system.
High volume? Please – China to Felixstowe?
FOB – Origin agent not only has to control the supplier – importer payment terms (Cargo Release), cuts the bills of lading and organises the paperwork as per the country of import. What you use in the UK is not the same as say the USA etc. Your effort and role as import agent to accept all this. Hardly a comparison.
Two points.
1) Did you care about the taxi drivers when Uber came along? The travel agent when the likes of Expedia and Air Bnb came along? Perhaps you miss your local grocer now that the multinationals are here?
2) The reason and not assumption you have no rates to the UK is due to the local charges. We have spent 1000s of hours investigating a UK solution. The conclusion is that is that the LOCAL market are the ones inflating the rates and for their own benefit. The USA however is much more doable. As to Asia and many other areas. Royal Mail has a Hong Kong solution it is trying to expand, I would be more wary of this.
Tim
Kate
February 08, 2017 at 10:04 amHi Tim,
Thanks for your feedback. Glad the article has caught your eye!
I think implying that forwarders are still profiting from shipments is somewhat of a myth. Have you seen freight rates lately? Often we’re lucky to break even on box shipments. We’re being squeezed on every angle be it suppliers, customers, shippers.
I tried the freight calculator on China Sea Rates as part of our research. Ex works and FOB FCL 20GP Shanghai to Sydney and no results were found?
As mentioned in the article above we’re very happy to embrace new and entrepreneurial technologies to improve our customers’ lives and add value to our service – but only when the right technology comes along. As of yet, we can’t say we have found this.
Tim
February 08, 2017 at 11:07 amSure you where using the right website? .com.au?
We have delivered a door to door sea freight price platform China to USA for FCL or LCL. For any platform, website or application. That is the .com
Pretty sure we can say it has been found.
Eytan Buchman
February 07, 2017 at 12:12 pmInteresting read, Kate – always nice to hear another perspective.
I think the point we differ on is that many technology platforms aim to empower forwarders, not eliminate them. And yes, manual processes that require experience can be automated. Ask Tesla, Palantir or Uber. As a tech company, we aim to eliminate manual labor, not forwarders. More efficiency means higher margins for forwarders, which are passed on to the shippers.
Insurance is online. Banking is online. Freight can be online too. And the forwarders the provide a value-add will be leveraging technology to provide even more of a value-add than ever before. Your competition isn’t tech companies; it’s forwarders that pick up on the technology first.
Kate
February 08, 2017 at 10:22 amHi Eythan,
Thanks for your comments.
Many of the companies you mentioned above are B2C and our network of customers are predominantly other businesses, with complex supply chain requirements. B2B is notoriously extremely service led, built on relationships made over time.
What I cant get my head around is the difference between inputting our request into an online marketplaces vs. sending an email / picking up the phone to our trusted contacts across carriers to obtain rates.
There’s also the issue of personal relationships between massive corporations. Every forwarding company and every freight agent have their own buying power and relationships with carriers. One rate for one shipper may be completely different for another depending on the trade lane traffic they can provide the carrier. Unless we standardise the basic rate for a container for every single trade lane across the industry this won’t change. And even if it was implemented would we want to see the effects as present with Uber? Where fares have been pushed so low that taxi drivers aren’t even paid a living wage anymore in some parts of the world?
Perhaps I am not 100% clear what the benefits of the online marketplace technologies are for forwarders and how we can leverage these, but we are very happy to learn more. (you have my email address I think?) As mentioned to Tim above we want to embrace new and entrepreneurial technologies to improve our customers lives and add value to our service.
Alex Lennane
February 09, 2017 at 2:45 pmThanks for all your comments. Today we examine how well some of the online booking platforms perform – you can read all about it here: https://theloadstar.com/freight-booking-platforms-beef-inefficiency-not-forwarders-can-deliver/
Najma Qureshi
July 20, 2017 at 6:48 amIts really a matter of concern. Excess capacity, the continued introduction of mega-ships and falling rates resulted in volume gains for many forwarders. However, for many forwarders, these volumes gains proved difficult to translate into profits.
Freight forwarders need to differentiate with better service and more value-added service. Thanks for sharing this article.
phnompenhspeed.com/van-chuyen
December 26, 2017 at 3:58 amAs a forwarder, i do believe what we sell is relationship. I don’t know about your place but it is true for my country. All about realtionship:
Custom clearance requires us to have good relationship with the custom house. this is really precious, because it is not easy to get. Business who sell their products overseas understand and add this into their cost, and we have what we are providing today. But who knows if there will be something called custom clearance procedure in the future?
Relationship with transporters is also what we offer, because we ensure their volume of shipment, lower freight is what we take in return. But who knows if they will need us in the future?
These are what i believe forwarders are selling in my countries. I would like to know yours.
CGL Network
January 14, 2019 at 10:10 amThanks for the information. I really like your Articles.