News / Is being 'fully digital' enough for forwarders, as 'challenges remain'?

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Recent struggles at Flexport have brought into question whether full digitalisation is enough for forwarding businesses to thrive.   

Peter Sand, chief analyst at Xeneta, told The Loadstar Podcast: “You cannot build a successful business one way or another on a digital platform only – in my eyes. 

“Challenges remain for digital freight forwarders. Those that failed to build a sustainable business case during the Covid heydays will find it more difficult to find their ground going forward, in a much-changed market.” 

Forto, a company offering digital forwarding solutions, said the main hinderance for digital platforms was being new to the market: “you have to prove yourself”.  

Jochen Freese, its chief commercial officer, explained that while Forto offered an integrated approach, its technology was particularly useful for saving time by omitting the ‘repetitive’ tasks shippers face, such as copy/paste. Adrianne Montgobert, communications at Forto, added: “We tend to be afraid of technology replacing humans, but there are examples of when technology is better”.   

On The Loadstar Podcast, host Mike King speculated that Flexport’s plight could indicate that digital forwarding was perhaps “struggling to make money after Covid”.  

The Loadstar’s managing editor, Gavin van Marle, explained: “A lot of digital forwarders are backed by venture capital funds. The pressure can really back up on you. 

“Although you raise money from investors, if you raise that money through debt instead, you’d be very highly leveraged and your bank manager would be calling you, worried about whether he’s going to be getting his returns. I suspect it’s a broadly similar situation with some of these digital forwarders and their VC investors.” 

Mr Sand commented: “I think we will see some weeding out; digitalisation is all around us. At the end of the day, shipping remains a personal thing. Everyone loves a face to talk to and a person to hold reliable.” 

He highlighted the huge investment ‘traditional’ forwarders, notably DSV and Kuehne+Nagel, have made towards digitalising their platforms, calling into question whether ‘traditional’ freight forwarders even exist anymore.  

Steve Walker, founder of forwarder SBS Worldwide, now retired, told The Loadstar: “Flexport’s initial approach antagonised everybody…no one likes to see the demise of good, individual forwarders.” But, he added, “they, and other digital platforms, lifted the bar on what people expect”. 

He explained that the demand for forwarders to integrate IT systems meant they had to create software solutions, and he concluded: “There is now no such thing as a digital or traditional forwarder.” 

Forto’s platform offers the option to do everything digitally, but Mr Freese said most Forto customers opt for an integrated approach – combining hi-tech with personalised engagement by staff.  

You can hear the relevant part of the podcast from 11:25.