Tight margins and insourcing the greatest threats forwarders face in a new era
Shipper insourcing, rather than digital disruption, is the greatest threat to freight forwarders, while tight margins ...
The global freight forwarding community could be incurring as much as $500m in costs a year to receive and process carrier freight rates, according to a report by Drewry Supply Chain Advisors.
While Drewry found the biggest multinational forwarders were spending around $1m a year – mostly in labour costs to find and manage rates – and the next tier of top forwarders, around $500,000 a year, it said smaller forwarders, which account for the bulk of the spend, felt the most notable impact.
“The size of these small businesses makes the process of receiving and processing carrier buy-rate information about twice as burdensome as for medium-sized forwarders,” said Drewry. “Therefore, this segment would likely benefit the most from a platform which consolidates and updates buy-rates.”
Drewry added that the $500m figure did not include costs associated with investments in systems to support and streamline processes.
The report followed a six-month investigation by Drewry, commissioned by single-rate platform provider CargoSphere, in which it defined the size and composition of the global forwarding industry.
It then conducted meetings with forwarders to identify the average monthly spend to receive and process rate sheets, determine tariffs and create a way to compare carrier options and/or look up a single carrier’s rate.
CargoSphere president Neil Barni said the cost burden of global ocean freight rate processing represented a huge weight on the global forwarding industry that was not sustainable in the long-term.
“This exorbitant cost underscores the need to focus on digitising all aspects of rate management, networking and distribution, as it is an extremely important business enabler for global ocean shipping,” said Mr Barni.
“After all, what company today has the luxury of ignoring technology solutions that can improve productivity, competitive position, and customer satisfaction?”