PHOTO: COURTESY FLEXPORT
Freight forwarding is big business – a $1.1 trillion global logistics spend. It’s also a complex business with a lot of moving parts. Freight never stops moving. It crosses multiple time zones through numerous borders and customs checkpoints. And it gets handed off from one carrier to another many times on its journey from origin to destination.
It’s a Challenging Business
Because the business is so challenging it was considered that freight forwarding was the sole purview of huge companies with massive resources. The big three of DHL Supply Chain & Global Forward, Kuehne & Nagel and DB Schenker Logistics, in 2013 generated combined revenues of $73.6 billion.
Where There Are Inefficiencies There Are Opportunities
With that kind of monopoly business processes tend to become stale and entrenched. It may come as no surprise that the majority of the world’s goods are moved by a system of telephones, paper and fax machines. It’s a terribly inefficient process with a lot of room for error, for example every time a document is manually generated and faxed.
And where there are inefficiencies there are opportunities. Amazon recognized this a long time ago and are currently very busy learning the freight forwarding business for the transportation of their own goods. At some point Amazon, with the aid of their technology, will have driven out the inefficiencies from the system, considerably reducing global freight transportation costs. That is the time when Amazon Logistics as a service to shippers worldwide is born.
Primary Drivers For Change
UK-based Drewry Supply Chain Advisors recently released a white paper titled e-Business Disruptions in Global Freight Forwarding. It opens with the statement:
“Disruptive new e-business models and innovative online platforms are gaining market traction and changing the way companies buy and transact international shipping services.”
In other words disruption is happening today and “resistance is futile.”
The report identifies four primary drivers for change:
- Shippers expect a more agile supply chain to meet today’s more dynamic “on-demand economy” with shorter contracts and spot rate requests.
- Eroding margins in commoditized and fragmented forwarding services make it harder for 3PL’s to increase sales. Differentiation and cost optimization can be achieved through improved online customer experience and automation especially for medium-size shipper business and spot shipments.
- The rapid growth of cross-border e-commerce is pushing change and innovation.
- Millennial’s are more comfortable handling activities in a mobile, instant and network connected way.
Disruptive New e-Business Models
The report also states that new entrants are starting to make an impact and established businesses are either resisting change or adapting. New business models are emerging:
- Online sales platforms
- Cloud-based freight forwarders
- Large 3PL’s adapting to online business
- Rate and data service providers
- Transport management system providers and others
Flexport – a New Breed of Cloud-Based Freight Forwarders
Flexport is an example of the new breed of cloud-based freight forwarders. In a recent Supply Chain 24/7 article, Flexport’s founder and CEO, Ryan Petersen, stated
“We’re in one of the last major industries untouched by the Internet. It’s untouched because no one else has figured out how to coordinate the complexity involved.
We think we are on track to win because we’re tackling this problem on multiple fronts – combining human expertise with software to lower costs and create a better customer experience.”
Ryan Peterson has set a big goal for his company
“Flexport’s mission is to bring the world free trade through technology.
By fixing the user experience in global trade, we aim to unite the world in a seamless web of commerce.”
It’s a mission featured on Fast Company’s new series “Challengers” that showcases innovative entrepreneurs across the globe who are racing to develop new businesses that could dramatically improve people’s lives.
Freight Forwarding – There’s an App for That
The drive to lower costs, provide round-the-clock shipment visibility and to satisfy the needs of the “on – demand” consumer is transforming the freight forwarding industry. Incumbents have to adapt or die, because numerous technology driven companies such as Flexport are staking claims to the $1.1 trillion global logistics business.
So for those still wondering, “Freight Forwarding – There’s an App for That” is now officially a “thing” and not an alternative fact.
If you’re interested in learning how shipping by rail might better meet your freight transportation needs call New Mexico Transloading at 505 – 908 – 1911. We’d be delighted to have a conversation with you.