The personal service conundrum facing forwarders going digital
Customer relationships and industry expertise will remain the backbone of freight forwarding, despite the wave ...
At some point San Francisco-based Shyp claimed a valuation of $250m; at the end of March the portal that had started out offering a simple worldwide shipping solution to small merchants ended its four-year run and shut down its operations. Efforts to stem its losses in the wake of a rapid expansion by pulling out of New York, Chicago and Los Angeles and focusing on core activities brought some relief, but too little too late, according to Shyp CEO Kevin Gibbon.
In a crowded landscape, some shipping portals are bound to fail, noted Albert Saphir, principal of logistics consulting firm ABS Consulting. Practically every week a new player enters the scene, he remarked.
Shyp blamed its demise to some extent on competitive pressure, besides strategic mistakes that left it unable to attain the necessary margins. At the same time, though, the shift in the market raises questions about the appeal of shipping portals. When carriers were chasing business with flurries of discount pricing moves, these offered a good handle on finding bargains, but the shortage of capacity in several sectors – notably air cargo and trucking – has prompted forwarders and shippers to secure capacity through long-term contracts, undermining the case for ad hoc rate shopping.
However, Mr Saphir doubts that the capacity bottlenecks have undermined the interest in portals.
“Price portals are as active as ever. Price is still a huge factor for shippers,” he commented.
Moreover, price portals usually can also be used to find capacity, he added. “It’s more a combination of capacity and price now,” he said.
Price and capacity alone may not be enough going forward, though, he thinks. “You need systems that not only look at price and capacity but also at factors like wait times,” he reflected.
Karl-Heinz Legler, general manager for Rutherford Global Logistics, regards the exclusive focus on price and capacity as a major shortcoming of the digital forwarder concept. Digital platforms or forwarders are good for finding lower rates, but lack operational insights and can leave the shipper stranded if something goes awry, he argued.
“Yes, you may pay $100 less, but there is no service. If something goes wrong, you’re in trouble,” he said.
He stressed that this should not be taken as an argument for ignoring digitisation. Instead of the commoditisation aspect, operators should look to the elements that can help add value, he said: “Forwarders have to get into the digitised world – with things like blockchain, things that give value to the shipper and the forwarder.”
From the airline side, Tim Strauss has other reservations about the use of portals. The vice-president of cargo of Air Canada finds the notion of one rate to put out misleading.
“We have so many different rates, depending on different routing options, service elements, what day of the week you’re shipping and specific contracts. There is really a high degree of variation,” he commented. “It’s not a true auction market.”
This is unlikely to stop new entrants from streaming into the market or new offerings from existing players. Last month technology provider SimpliShip unveiled an instant freight pricing interface designed to enable forwarders and NVOS to offer real-time pricing on their own websites. Without a doubt, there is interest in tools that provide better pricing and capacity visibility, but without more sophisticated service elements they will continue to struggle to find sufficient traction among forwarders.