In response to the question Who is a Freight Forwarder, I explained that in the most succinct and layman terms, a Freight Forwarder maybe defined as a multi-function agent/operator who undertakes to handle the movement of goods from point to point on behalf of the cargo owner..
Simple enough description.. But when one reads what happens in a day in the life of a freight forwarder it may not be so simple..
In the recent months there is a big conversation going on about the impact of “digitalisation” and “disruption” of the shipping and freight industry, to the extent that some people are terming it as the beginning of the end for the freight forwarder..
Is it really so..?? Let’s put it in perspective and see..
Technology has touched every aspect of the human life and business.. Shipping and freight industry is no different and things have changed much from the days of vintage shipping and how it was done to how it is being done today..
In my opinion, the terming of technology and technological innovations as a “disruptor” in itself is a wrong concept.. I would much prefer to consider technology as an “enabler” than as a disruptor.. In fact the term disruptor itself is so new that the online dictionaries don’t seem to recognize it..
Each and every entity handling shipping and freight is exposed to some form of technology in their business, whether it is the standard and reliable Microsoft Office suites or complicated and high end ERP systems that some companies use..
Technology has added value and will continue to add value to the shipping and freight industry.. Starting from how containerization shaped the modern world 60 years ago, to the evolution of various container size/types, to the advent of the mega ships currently, technology has enabled the industry to a large extent..
Recently Maersk Tankers used a drone to deliver a parcel to a vessel at mid sea as a test.. They plan to explore the possibilities of using such technology to safely and quickly deliver parcels such a spare parts without the ship having to come into the port for the same or a tug boat sailing out to meet the ship..
Using a drone for such activities saves the shipping line a substantial amount of money in comparison to using a tug boat which is also more harmful to the environment compared to a drone..
Similarly there are other technological advances such as fully automated port terminals (APM Terminal Maasvlakte II), Amazon’s proposed Airborne Fulfilment Center (a floating warehouse) capable of hovering 45,000 feet above your home and delivering cargo to you using drones, IoT (Internet of Things), Autonomous Ships, Online Freight Marketplaces, Freight Bench-marking services etc etc etc..
So does all this mean that this is the beginning of the end for the freight forwarder..??
NOT AT ALL..!!
A freight forwarder’s job does not only involve buying and selling of freight and arranging shipments.. While this is “one” of the many activities of a freight forwarder, this is in no way their “core” function..
In my opinion, the freight forwarder’s core function through which they really add value to their client, is to properly guide and advise their client on the requirements related to a shipment..
This includes, but not restricted to, providing guidance on
- the process that needs to be followed to achieve optimum efficiency and effectiveness in transporting the cargo from point A to point B whether it is by sea, road, air or rail (yes a forwarder also deals in modes of transport other than sea)
- the documentation that is required for the various cargoes that are being shipped (for example some ports may require specific documentation in order for cargo to be discharged or transported – like a Cargo Tracking Note)
- how the customer can save costs by using the most optimal method of transportation (for example using an LCL option for cargo that maybe less than 6 pallets etc)
- how the cargo must be packed for safe and secure transportation
- which cargoes are allowed or not allowed in which parts of the world or using which transhipment route (like Wine is not allowed to be transhipped via Jeddah port for example)
There are also other specialised fields within freight forwarding such as Project Forwarders and Reefer Forwarders etc who deal with specific types of cargoes.. These cargoes require specialist knowledge, know-how and expertise and cannot be entrusted to just about anyone..
Let us assume you are a forwarder who has been appointed to assist with the logistical requirements for setting up of a power plant at an obscure dot on the map in the middle of Zambia.. You as the project forwarder need to know and have complete information about the destination, the route and access to the destination, the best suited port for the arrival etc etc..
For example, Zambia is bordered by Tanzania on the East and Namibia and Angola on the West all 3 of which have active seaports.. Although one port might be closer to Zambia than the other in terms of distance, that port might not have the infrastructure and transport options to discharge and move this cargo into Zambia or the route from that port might not be the best and safest..
It becomes the job of the forwarder to ensure that these issues are checked, verified and considered before advising the customer on the best option.. It is local knowledge such as this, which will serve to be invaluable to the shipper, consignee or the project consultant who maybe sitting in other parts of the world..
It is knowledge such as this and human interaction at the various levels that can never be replicated by technology (at least in the near future).. There are no real technological alternatives currently that can replace a freight forwarder in all of the above mentioned cases..
So I would say that the role of a “traditional” freight forwarder or a “brick-and-mortar” freight forwarder (a recently developed term in some quarters to differentiate a traditional freight forwarder from a digital freight forwarder) is very much alive and well and still very much required in the shipping and freight industry..
Many traditional/global freight forwarders have been around for many decades and have come up with their own innovations within their own space and are seen to be well equipped to give this new breed of startups a run for their bitcoin.. 🙂
A sustainable long-term formula would be a strategic collaboration between the two parties which would allow the customers to access the traditional knowledge, know-how and expertise of the brick and mortar freight forwarder and the technological innovations of a digital freight forwarder..
It would also be interesting to see what happens when more “enablers” enter the fray inspired by the successes of the current startups..
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A freight forwarder is an agent who acts on behalf of importers, exporters or other companies to organize the safe, efficient and cost-effective transportation of goods. You will use computer systems to arrange the best means of transport, taking into account the type of goods and the customers delivery requirements.
The Freight Forward industry like every other industry is going to be affected by technology. Now, it could bring benefits for the companies that figure how to take advantage of the new thing, and for the others that do not implement new ideas will be a disadvantage. In the near future sending cargo to one place from another will be less expensive, therefore competition will harder for company using old techniques that do not integrate with new technologies. Example transporting a container from Los Angeles to Miami will cost half of it cost now due to autonomous trucks. So when tech behemoths discuss electrifying or automating the trucking industry, it’s easy to see why there’s room for change. Also, remotely controlled ships, piloted by people on shore, and autonomous ships, which can take actions for themselves, are the latest beneficiaries of increasing digital connectivity and intelligence, bring cost of transportation down.
My point, is not the beginning of the end of freight forwarders, however is the beginning of a change on how freight forwarders do business.
All written here is well known phrase for the sales managers within the industry. It’s true for truly specialized freight forwarders (project cargo, exhibition, f&b, GOH, personal effects). The reality is that majority of a base customers for a regular freight forwarder are doing same cargo, same route on a regular basis. The most efficient method of transport is already defined there. Normally the goods are going through the process quite smooth and if sth goes wrong, it’s forwarder skill which can make a difference.
Unfortunately, most of the wrong cases are human caused or caused by missing SOP’s.
Now imagine that you cut the middle man.
Smooth data exchange among the limited number of partners ensure high accuracy and less mistakes. Then the business may rely on one click on the website. It’s already happening on Alibaba.com where you can purchase a cargo, add container transport to the final destination and pay with alipay. Transport will be arranged by maersk.
New generation will be in charge of logistics departments soon and they will wonder why you need to pay for a forwarder services ? They will cut this business out, same as they cut TV, newspapers and taxi’s. At least for this massive,simple FCL or LCL or parcel regular business. This is a core business for many. This gives a revenue and cash flow for the freight forwarders.
Is above scenario plausible?
Although the introduction of digitalization has brought many efficiencies to businesses, I also agree that freight forwarders are going nowhere, at least, YET. Technology and programs might be able to tell you the most cost effective route, or which modes of transport that will get you your shipment in a shorter and safer trip. However, if your company does not know how the process works, and the “ins and outs” of the system, then how can you be so sure that the tech is actually helping you? I believe that both tech and freight forwarders need to work together, to benefit all parties involved.
Great article, Hariesh!
Hi Hariesh,
All your articles are amazing and interesting.
I recently stated working for a Freight forwarder , were most shipments are imports to the US from Asia.
I’m still very unclear about everything that’s on the Asian part.
I will greatly appreciate, if you can tell me which of your articles might be helpful to to make things clear for me.
Thank you,
Rosie
thanks for your brilliant explanation .not thing in the world now can replace a FREIGHT FORWARDER ,not even their modern technology.let then keep trying.
Thanks for your good article with insight.
I believe there are things only human beings can do with 4th industrial generation. The relatives of Freight Forwarding also find out the creative ways that only human beings can flourish and deep into it. Your article also gave a chance to think about this matter.
Excellent article, indeed!
Be it a project or whatever the nature of shipment, a forwarders contribution is going to remain intact, as long as it is comprehensive and cost effective for a buyer / seller in making exchange of goods / services, better and smoother.
Thanks for your inputs Manoj..
Very interesting article for the freight and forwarding industry. The traditional roles of a forwarder can only be enabled by digitalisation but other benefits of a forwarder indeed get much improved by IOT. Again very insightful article in the logistics industry.
Thanks for your comments Were, glad you found it interesting.. 🙂
I think we have to keep reinventing ourselves and the logical solution is thru the embracing of technology . Live Information is what everyone desires ( both as providers and customers) as decisions are influenced by it. Containers that ” talk to us ” about where they are , what they carry , the journey and the ROI Etc they give us … The challenge we face is our margins are always under pressure , and raising prices as we all know is sometimes almost a suicidal act. Naturally driving input costs down becomes the focus , and one of the main drivers is technology.
I agree our experience and knowledge is critical but there is a MASSIVE CHALLENGE.
Now days everything is driven by price. It’s the ticket to the ball game ( service is naturally expected as a standard) , but doesn’t guarantee you even get to play .
I’m keen to see how we face this challenge ?
Hi Grant, yes everyone is under price pressure which is not good in the long run because in a lot of cases service and trust takes a backseat in favour of securing business through rates.. However, in a lot of these cases the “seller” (meaning the provider of services) may choose to follow unethical and illegal methods to save on their own costs and not bother about their customer and that is when things start falling apart.. Thanks for your inputs..
I congratulate you for an article so we’ll written. So precise and informative. I see that you are privileged to have a global and macro view of what a freight forwarder is. Some of your information is also an eye opener for local freight forwarder who does not go beyond their border. I believe every freight forwarder will have their niche. every freight forwarder will have their specific market to swim and flourish in.
Thanks for your comment Stephen.. You are absolutely right in saying each forwarder will have their niche.. It will be interesting to see how things pan out in the long run.. 🙂
There are 3 things in life one can be sure of death, change and taxes. Unfortunately they do not occur in this order. The article is insightful and the comments are generally relevant. I believe that most of these people are advising that there are changes coming for the freight forwarder in order to stay relevant.
The role of the Freight Forwarder has evolved over time. The clients have become more demanding (quite rightly so) and are pushing freight forwarders into more non-conventional service offerings which include supply chain, credit terms (secondary banking), trade finance and outsourced logistics services. This type of integration into clients’ business will keep freight forwarders relevant in my opinion.
It is true that blockchain technology will increasingly be used in trade as more and more multi-nationals and SOE’s adopt this change.
Well said Lionel.. 🙂 Thanks for your inputs..
Some of the points you mention are valid from a current standing perspective in specific geographies perhaps.
But stating that local knowledge and advice on optimizing the freight movement process will continue to differentiate a forwarder is too simplistic an assumption.
One wouldn’t need fancy algorithms to do this job, data based decisions can easily be enabled by such “emablers”. What is going to happen is that the role of a freight forwarder will evolve into carrying out the execution which these enablers will bring in as business.
It would be naive to assume that small scale forwarders (up to 200 customer base) will be able to resist temptation to do business with these enablers or be able to fight them sustainably.
While it’s not the beginning of the end, I feel it’s the beginning of another evolution cycle, a much needed one for this day and age.
@Rahul, “local knowledge and advice on optimizing the freight movement process will continue to differentiate a forwarder” is certainly not an assumption..
While there are a lot of forwarders that have the capability to negotiate brilliant freight rates based on their volumes, if they don’t have the service to back it up, they will fall flat..
Customers are quite savvy now in terms of pricing and service and know where to draw the line..
While I agree that one wouldn’t need fancy algorithms to do this job and data based decisions can easily be enabled, that is also precisely the problem that such data is not readily available in many of the world markets and therefore the customer depends on the presence and comfort of a physical forwarder..
But I agree that this will be the beginning of another evolution cycle.. 🙂
Thank You Amazing Article…!
Thanks Damien, glad you liked the article.. 🙂
Hi
Machines are Machines and Humans are Humans
Nobody can replace both, but they can work in tandem to make the project successful. We had similar discussion about two decades before whether the “Shipbrokers will sruvive” against online platform, i still alive to see one good platform which can deliver the function of any shipbroker on a world wide basis. We have at least four version of B/L rules like Hamburg Rules, Rotterdam Rules, Hague and Hague Visby rules, there is no unison to accept any of these.
So when it comes to legal aspect many countries may ban use of of drone as they feel it is intruding the personal life, phones have already done that by using of cameras, now it is ground level and with drone it will be cloud level.
My feeling in a short sentence, how much the industry mature human involvement will always be there, but we may not get involved in traditional work, may be different things. Olden days we use write book keeping manually huge books, now we have software do that, future we do not know in what form it will be. So to say relax and dont get worked up and carry on your wok efficiently. Drone can not come to any Arbitration dispute settlement. it is you have to settle as human.
Thanks
@T.Balasubramanian, some very good and sane points here.. Thank you for your contribution and thoughts..
Great article, but technology will change how things are done as it changed before. So if Freight Forwarder or even a broker are not willing to accept to change they will be disappeared from the books. It is a process of developing; you see changes take them and use them for your own behalf and make a good use out of it. I can see in near future shipping will be more faster (not sailing fixings) so everyone will be in need for a platform which makes everything transparent and reachable. Shipping is going to be a fair game.
update and news of Freight Forwarders scenario
@Capt.Tolga, yes the world is moving at a breakneck speed all around (except some Governments ;)) but yes it will be interesting to watch and see the progress of our industry.. Much has changed and much more will change..
Tanks for this interesting article. Though I believe it is a matter of time until intelligent Algorithmus will take over those tasks once local services and geopolitcal information is available via digital grid. Until then the freigthforwarder may be still required.
@Dario, thanks for your comments.. Let us see if and when that will happen to the extent that the freight forwarder becomes obsolete.. I doubt that very much..
What is the role of forwarders on CY/CY shipments now that there are 3 alliances and 6 global carriers left?
Hi Harry, a forwarder is not replacing a carrier or alliance and vice versa.. A forwarder is the gateway between an exporter/importer and a shipping line.. Yes an exporter can deal directly with a shipping line and cut out the forwarder if he/she so chooses..
But as mentioned in this article as well, a forwarder does not only negotiate rates and makes bookings.. They do much more than that and if an exporter or importer is able to do all of what a forwarder does themselves, then kudos.. 🙂
A forwarder does not discriminate between a port to port or door to door shipment.. They handle the shipment as required by their customer.. A typical shipping line also may offer a door to door service, but a lot of them do not have own assets to do this door to door move and they will be using some 3rd party to handle the non-ocean side of business.. In some cases I have seen shipping lines passing on these services to their friendly forwarders as well who have these assets to fulfill the shipping line’s service offering..
Love your work, great article. It’s not the beginning of the end, but rather the beginning of change.
As you mentioned above, a freight forwarder’s role includes in-depth knowledge of many key aspects of the supply chain, which will always be required for specific movements, projects, routes etc. But when technology allows a lot of the ‘guidance’ they bring to become automated (as it has done for many other industries), the reliance upon forwarders for standard movements becomes less and less. This would affect revenues in this part of their business.
Forward thinking businesses in every industry foresee changes and become proactive to minimize the impact, they make changes to models and/or focus on growing revenue in other areas. As mentioned above, a lot of new technologies evolving in the industry are ‘enablers’ which actually bring great opportunity to partner together with existing companies in this space to work into the future together.
Change is ultimately driven by consumer’s demand and increases in efficiency. Exciting times ahead.
Thanks for your inputs and comments Ben.. Some good valid points here.. 🙂