Representatives insist the forwarding sector is continuing to demonstrate its value to customers despite, and in many cases because of, the extraordinary supply chain management challenges that have faced cargo owners and their suppliers over the past difficult year.
Freight forwarding representatives insist that their sector is continuing to demonstrate its value to its customers despite, and in many cases because of, the extraordinary supply chain management challenges that have faced cargo owners and their suppliers over the past difficult year.
Their comments come in response to claims last week by one logistics specialist that the disruption of 2020 had undermined the faith of shippers in freight forwarders and might increase the opportunities for digital disruptors to make inroads into the sector and increase the uptake of digital marketplaces.
Robert Keen, director general of the British International Freight Association (BIFA), strongly rejected the suggestions made by Kris Kosmala, Strategic Advisor at BunkerMetric and a partner at management consultancy Click & Connect. Keen said Kosmala’s comment that the current crisis had shown that ‘when everything goes pear shaped, having or not having a trusty freight forwarder at your side makes little difference’ was “highly subjective” and claimed that it “bears no resemblance to the reality that forwarders and their clients have witnessed as they have sought to find solutions for the problems and issues facing international multimodal supply chains which are the result of circumstances beyond their control”.
Keen also said he could “happily furnish him with a multitude of examples of the work BIFA members are doing to help their clients to cope with the current challenges”. And he said that “to state that the freight forwarder’s rudimentary job is finding the cheapest price possible from A to B” showed a lack of understanding “about what freight forwarding companies actually do”.
BIFA’s director general added: “The empirical evidence I have seen over the last six months is that our members’ clients are, by and large, delighted by the extraordinary efforts that our members are making to help them overcome huge supply chain management issues that are not of their making.”
Keen continued: “The empirical evidence I have is that digital disruptors will no more kill-off today’s forwarding sector than the advent of European rail did in the 1800s. I do foresee a different outlook in the years to come, and there will be changes, but I’m certain there will still be a BIFA, with a healthy membership of freight forwarding companies, in 10 years’ time.”
Needed more than ever
Jordi Espin, Maritime Transport Council policy manager at the European Shippers’ Council, also stressed the value freight forwarders still provided to cargo owners, noting: “Forwarders are needed more than ever. They perform for shippers as a transport broker. They advise on savings – both financially and on transit times. They were vital last year.”
Meanwhile, one European freight forwarding source acknowledged that Mr Kosmala “makes some interesting points on digitalisation” but had little time for his other points.
According to Kosmala, the service shortcomings evident in 2020 had potentially further opened up forwarding markets to disruptors, including the “less competent, but cashed up” providers of freight technology. “The low-hanging fruit will get picked at continuously with increasing transparency in prices which allows real-time quoting, and more flexible sourcing arrangements,” Kosmala said.
Kosmala also said that efforts by forwarders to replicate the low-cost, low overhead simplicity of digital marketplaces were being hampered by many continuing to hang on to legacy business models which prevented them from making significant cuts to unit costs. He claimed these failures explained why venture investors continued to invest in logistics digital marketplaces “where demand and supply is easily aggregated, transaction costs are low and revenues per employee far in excess of what even the best traditional freight forwarder can ever generate”.
He added: “The freight forwarders’ argument for survival is, of course, that the B2B business is too complicated for digital platform players; but the message, if any, has not discouraged the disruptors from chipping more customers off the incumbents’ old block.”
Kosmala said pressure on freight forwarders had also increased from carriers over the last year.
“If the digital plays are not enough to ruffle freight forwarders’ feathers, even more pressure will continue coming from the sea freight carriers building up freight forwarding capabilities through acquisition of both digital and hard assets,” he said. “They will keep cutting into freight forwarders’ space, because they were much faster appropriating the most important asset in the service game: the data.”
Brandon Fried, executive director at the Airforwarders’ Association, generally rejected the suggestion that the disruption of 2020 had undermined the faith of shippers in forwarders and might increase uptake of digital marketplaces. He responded: “While the various digital marketplaces offer a convenient way to compare rates for occasional shipments, frequent, large volume shippers know that moving cargo can be a cumbersome and challenging process, often requiring the expertise of experienced experts.”
Fried concluded: “Forwarders offer peace of mind so that shippers are relieved of the burden of vetting carriers, comparing prices, and negotiating contracts. Circumstances in transit can quickly change, and forwarders are always flexible and ready to deal with diversions caused by the carrier, varying weather conditions, and government situations that often occur. Further, forwarders offer a relationship providing additional services such as emergency warehousing, packing, and complex distribution services not readily available in the digital marketplace.”
Brian Wu, chairman of the Hong Kong Association of Freight Forwarding (Haffa), acknowledged that many of the freight challenges in the past 12 months had been out of the control of freight forwarders, commenting: “As the role of forwarders is the intermediary of different parties; we always try to solve the problems for someone and get compensations (profits) in return.
“We show our values during good and bad times – not only in 2020. We hope the bottlenecks will be relieved later this year, while we don’t own the aircraft as well as vessels… so we can only try our best provide solutions to our customers to do their trades.”
Source: lloyd´s
