The freight forwarding industry – worth over $170 billion globally – is going through a major shakeup right now. Like many industries across the world, technology is ushering in rapid full-scale transformation that is going to have big implications for anybody involved in the space, both new and old. And for many businesses that rely on logistics to run their operations, this will likely be welcome.
For years, the freight forwarding industry has been dominated by well-established middlemen who provide value by connecting exporters and importers to carriers. They booked freight, nudged customs to keep cross-border trade flowing, and charged a hefty fee for smoothening the global logistics processes. But over time, inefficiencies and an overall lack of transparency led to higher costs and longer delivery times. Understandably, shippers grew frustrated, and this dissatisfaction opened the door for an industry disruption.
Now, a new breed of digital-natives have stepped onto the scene to stake their claim in this space, and technology has enabled them to change the status quo and offer more features (and value) to customers. As a result, they are now steadily chipping away market share from the traditional, non-digital freight forwarders.
Table of Contents
What is a Digital Freight Forwarder?
Essentially, a digital freight forwarder is an online logistics provider. This could be a lean startup, or the digital arm of an established firm, but the main takeaway is that a digital freight forwarder leverages the latest technology solutions (IoT sensors, machine learning algorithms, and cloud-based software) to provide superior shipping experiences and cost efficiencies to their customers.
The digital freight forwarding apps and platforms make moving cargo cheaper and simpler – online pricing, one-click shipment booking, auto-customs clearance, real-time tracking, and so on. Some well-funded digital freight forwarders even connect multiple parties in the supply chain for more advanced coordination.
In short, these companies are serving up the convenience, transparency, and affordability that the shippers of today have come to demand and expect – and they’ve got many of the legacy players scrambling to catch up.
What’s Fueling The Digital Disruption?
Let’s take a look at some of the key drivers contributing to the demand for this disruption.
1. Shippers Want Amazon-Style Convenience – Today’s shipper wants an Amazon Prime-like logistics experience – simple, seamless, and convenient. The truth is, legacy players often struggle to provide things like easy online bookings and real-time tracking – let alone predictive logistics. No wonder shippers are getting smitten by digital natives fulfilling their customer experience expectations.
2. Opaque Pricing Doesn’t Cut It Anymore – Dynamic pricing and transparent quotes have raised shipper trust and loyalty while reducing overcharging – an open secret in this relationship-heavy industry. Shippers know digital freight forwarders provide competitive market rates through their algorithms rather than sweet talking them into opaque bespoke pricing.
3. Data Science Drives Efficiency – By leveraging data and analytics, these platforms enhance efficiency and uncover hidden capacity – be it finding the fastest route between destinations or the emptiest trucks leaving any given city. This means faster transits and lower costs – music to every shipper’s ears.
4. Newer Companies Want Modern Experiences – For young, tech-savvy businesses, those old-guard freight forwarders may feel outdated – piles of paper forms, rigid terms and human errors, etc. They connect better with digitally-native companies providing personalized, software-enabled services.
Key Technologies Powering Digital Freight Forwarding Disruption
As you would expect, the tech stack enabling digital freight forwarders is expanding rapidly. Here’s a look into some of the key technologies disrupting the logistics industry:
Real-Time Tracking Sensors
Tiny internet-connected sensors attached to shipments can now provide 24/7 visibility on location and condition. Shippers receive alerts for delays, temperature excursions, shocks, and other disruptions so they can take corrective action and prevent spoilage. This allows them to have eyes on their goods around the clock – no matter where it is located globally.
Machine Learning Algorithms
These smart algorithms analyze past data to predict optimal carriers, routes and dynamic pricing for every shipment. It’s like having an expert logistics planner that can help point out future trends and events with the utmost accuracy. Machine learning also helps online platforms auto-match demand with available capacity for any shipment, anytime.
Blockchain
Most people are aware of blockchain from cryptocurrencies. But this tech has a vital role in logistics, too, enabling transparent, tamper-proof record keeping. Every shipment gets a blockchain-verified audit trail across the supply chain. This builds trust between shippers, forwarders and carriers on key parameters such as cost, transit time and handling compliance. No more opaque transactions.
Robotic Process Automation
Forget tedious and repetitive documentation. Smart software robotics now handle mundane logistics tasks like customer service queries, emails, and data entry to free up humans to focus on more important tasks. People can then focus on high-value functions like analytics, optimization and exception handling.
Cloud-Based Platforms
Shippers now get an intuitive online platform for everything – quotes, booking loads, shipment tracking, managing docs and invoices – accessible 24/7 via web and mobile. It brings unprecedented ease, control and flexibility to shipper operations with the power of the cloud.
Big Data Analytics
Granular operational data combined with smart analysis unveils game-changing insights – from predicting risk hotspots to reducing warehousing costs. Data helps build institutional intelligence so companies take structural actions to boost efficiency across the end-to-end supply chain.
Final Word
The digital wave has brought us to an inflection point for the global logistics industry. New platforms are bringing dynamic innovation, newer benchmarks in customer experience, and data-driven decision making that legacy players were slow to adopt.
As such, it’s safe to say that it is crunch time for traditional freight forwarders. Market share erosion is real and just having a slick mobile app is no longer going to provide a significant competitive edge.
In any case, it’s likely that we will see a rise in partnerships and acquisitions between incumbents and startups going forward, as is usually the case when new disruptors come onto the scene. Sure there will be road bumps and possibly even a few toppled giants along the way, but as always, those building strategic agility today will shape this industry in the coming decade.
