News / TPM24: Otto Schacht on the future for independent freight forwarders

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Despite waves of consolidation among larger players, the future of independent freight forwarders serving SME shippers has never been more secure, delegates at this week’s S&P TPM conference in Long Beach were told.

Otto Schacht (above), who led Kuehne + Nagel’s ocean freight department for over two decades until moving to an advisory role last year, said a fundamental characteristic of the freight forwarding sector was how splintered it was, globally.

“The freight forwarding industry has always been heavily fragmented – if there is around 150m teu or so that makes up the global market, around half of that is controlled by freight forwarders.

“Of that share, the big forwarders, such as ourselves, DB Schenker, DSV, Expeditors, CH Robinson and so on, control around 25m teu, so there is still some 50m teu controlled by independent forwarders.

“And that won’t change – the market shares will stay the same for at least the next five to 10 years, because smaller forwarders cover niche markets and provide a very good service to clients, which are normally also SMEs and rely on that service level and, as a result, rarely change 3PL provider. That’s how the independent forwarders survive,” he said.

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Asked if he was concerned about shipping lines intruding into forwarders’ business area, Mr Schacht referred back to the 19 years he spent working for Hapag-Lloyd before joining Kuehne + Nagel.

“When I began working in shipping, 95% of business was done directly between carriers and BCOs; freight forwarders weren’t in the ocean business at all.

“But whenever the carriers lost money, their response was to shut down an office and lose sales people, and at that point, the freight forwarders stepped in – so we don’t mind carriers selling directly to shippers; we are competitors and partners,” he added.

“This industry remains a people business, right down to the little forwarder that has now effectively become the extended sales arm of the carriers, particularly for SME shippers,” Mr Schacht explained.

However, he remained sceptical about the prospects of Maersk’s integrator strategy, and suggested that the approach of CMA CGM, with its “umbrella” of logistics solutions, was better suited to shipper behaviour and needs than trying to capture all the cargo of specific shippers through offering integrated services.

“The very integrated model is very difficult,” he explained, “because so many customers prefer to keep their air, sea and road transport and warehousing contracting separate from each other – and that’s another thing I can’t see changing, they prefer to do it that way.”