In many respects the international freight forwarding sector has changed very little over the past few decades. A freight forwarder’s role is to facilitate the movement of goods around the world, acting on behalf of importers and exporters. In addition to dealing with Customs organizations, preparing documentation and finding the best, cheapest or quickest routes, a forwarder also buys and sells space on board ships or airplanes. It is the latter role that accounts for the majority of their revenues and hence largely characterizes the dynamics of their business model.
Unfortunately this buy/sell ‘middle man’ role, means that margins can be very thin in a hyper-competitive market. Opportunities to differentiate product offering can be few and far between and success or failure of a forwarder can come down to its buying power in the market (to drive down rates) and its ability to execute efficiently and with the lowest possible overheads.
The importance of technology to freight forwarders cannot be overstated. Freight rates and oil prices are highly volatile; the market is undergoing structural changes as patterns of demand evolve with opportunities disappearing as quickly as they arise; and an uncertain global economic situation means that forwarders need to be attuned and responsive to macro-trends.
Unfortunately, many forwarders, even some of the largest, lack the tools that would give them the visibility and hence the agility to prosper in this challenging market environment. In this document we will discuss the key trends that have shaped the freight forwarding industry as it exists today; we highlight some of the problems facing the industry and discuss how the latest technology innovations can help forwarders navigate a successful path through uncertain times ahead.
Until the 1990s, the freight forwarding sector was a largely ignored or undervalued sector of the transport industry. However, the globalization phenomenon and what could be termed ‘the rise of Asia’ changed this perception as manufacturers, retailers and investors realized that global logistics networks were required to underpin international supply chains. As we will see, this brought about major mergers and acquisition activity, which still characterizes the industry to this day.
However, globalization is no longer the only macro-trend in town. Although it is still at work and should not be dismissed, there are a number of other trends helping shape the market for forwarders as well as the strategies they have adopted in order to survive.
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