Covid disruption sees smaller, 'more nimble' forwarders score over big rivals
Small forwarders are winning against top-25 players in the battle for surging spot-buy airfreight volumes. According ...
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By Sam Whelan
Singapore hi-tech start-up Cargobase is disrupting the $350bn ad-hoc freight market with its ability to cut shipping costs by up to 30%.
Although ad-hoc freight is a relatively small segment of the $3.7 trillion logistics market, Cargobase chief executive Wiebe Helder told The Loadstar these costs were disproportionately large for shippers.
“For most companies, ad-hoc freight is a small percentage of their total logistics volume – however it accounts for a way bigger percentage of their actual freight costs.
“For example, you have companies with 0.2% of their volumes as ad-hoc freight equalling 10-20% of ...
Comment on this article
Paul Kelly
March 03, 2016 at 2:54 pmI don’t see this as a development for anyone.
If anything, it’s a backward step for forwarder and shippers alike.
The buyers that use this type of portal are typically sceptical of the value provided by forwarders and have minimal expectations, which is why they have a preference for swift and effortless transactions, regardless of product differentiation.
They assume that there is an absence of any effective differentiation between providers and that freight products are indistinguishable in terms of tangible features and capabilities.
The key for forwarders, in diminishing this commodity status, is not what they do to their freight services – it’s what they do to their customer.
They need to find a way to re-engage with buyers, like these, who are past caring.
Commoditised customers choose on the basis of price alone because they have become convinced that the options available are fundamentally the same and any minor differences among them are minimal and therefore not worth investigating.
They stopped asking “Which of these will add value to my supply chain?”
That’s why turning off commoditisation is so difficult.
This will remain true until forwarders start to do things that make shippers sit up and take notice.
It’s a hard problem to overcome because fresh rounds of innovation go unnoticed, and well-formulated marketing messages are not received immediately.
If forwarders don’t take control of their own destiny and start demonstrating their value and professionalism soon, it will be too late.
Jeff West
March 03, 2016 at 3:28 pmPaul, all good comments. What has to be acknowledged is that many shippers/importers base all decision logic on price, service in any traditional sense cannot often be measured by any physical means. The vast majority of forwarders or logistics providers have no real assets or physical product apart from the staff(who are the only real unique thing each company has). After over 30 years in the industry less and less is about real choice based on capability and promised service. Quick quote methods will always have the devil in the detail, be it potential add-ons, service routes, or transit. No-one can talk to an automated quote. It’s frustrating but part of what our open and fast technology now provides. It’s why there are negative rates in the market with inducements (and these are not a new thing). If all you have is price the only way to win is to reduce. Parts of the market went past “zero” a long time ago. It may be fine for the shipper but someone else pays the piper somewhere else. Small importers especially, can then get hung out to dry on local fees. Unless a small parcel service, the only way to really measure price is when one party pays all fees either side, something that the majority of movements are not.
Wiebe Helder, CEO Cargobase
March 04, 2016 at 12:20 pmHi Jeff, thanks for your reply.
Most shipping bid boards indeed focus on price. That is not what Cargobase does. The problem we are solving is something that you will recognize after 30 years in the industry: it is difficult to compare quotes in a short time frame on more than just price.
And that is exactly what Cargobase does. We help our customers compare the quotes on ETA, service mode, routing, payment terms and price. That is extremely difficult to do by comparing quotes manually.
Also note: this article is about ad-hoc freight in particular. Ad hoc is a type of freight in which price is a less important variable; hence the high margins of today. But everyone will agree that this doesn’t mean that unnecessarily high margins should be charged.
Wiebe Helder, CEO Cargobase
March 04, 2016 at 12:23 pmHi Paul, I think you’re making a valid point on the commoditisation of parts of the logistics value chain. Some logistics services indeed see a reduction of the importance of the relationship between shipper and forwarding account manager.
Both this article and Cargobase are not about the commoditisation of logistics services — quite the opposite.
There is no specialised global provider for ad hoc freight. And that results in large forwarders offering ad-hoc shipments but outsourcing it to smaller providers. Those smaller providers are the true differentiators. Those smaller providers don’t have the global sales force and the cash flow to work with Fortune 500 companies.
Cargobase connects shippers directly to those smaller specialists and helps those specialists work with longer payment terms and maintain that relationship. It drastically improves communication (you’re communicating directly with the provider that handles your shipment) and it removes the unnecessary double margin. And for our shippers and providers, that answers your question of “Which of these will add value to my supply chain?”.