The future is bright for independent forwarders

The future is looking bright for networks of independent forwarders looking to secure profits

In today’s export environment, information is more important than freight, says Gene Gander, Vice President of Business Development, Americas at CargoWise

An analysis of the trends affecting the international forwarding industry leads to one very clear message: For those operations looking to secure a profitable future, information is more important than freight.

Those who control the ships, trucks and warehouses may have ruled in the past, but now it’s those who control the data and consolidate the delivery of IT who hold the key.

Although ever tighter margins, onerous compliance, locked-in customer-to-supplier systems and the consolidation vs. fragmentation of the industry may be viewed as threats, approach these with a different mindset and they can be turned into opportunities.

The great thing about this industry is that we aren’t asset-based; we can be lighter on our feet and evolve rapidly to suit current business climates. But what’s needed now to create service differentiation? The answer lies in switching to new technologies that deliver productivity gains and responsiveness.

One such solution lies in the implementation of Single Source of Truth (SSOT) systems: Integrated and centralised information databases that requires data to be entered and stored only once—and preferably by someone else.

Currently, there are seven trends leading forward thinkers to implement Single Source of Truth systems.

Trend 1: Slowing volumes, tighter margins
According to a Merrill Lynch investment note published in February 2013, the golden age of freight forwarding is finished. Expect tougher competition, reduced profits and slower growth from here on in.

Even well-run shipping lines like Hong Kong-based box carrier OOCL recently announced it had suffered a $15 million (£9.3 million) net loss in the first half of its financial year.

By 2016, slowing global trade will force shippers to adjust from proliferation mode to optimising yields from international flows (Gartner Research, June 2012).

Trend 2: Compliance complexity
Yes, yields are tight and there’s overwhelming pressure on carriers to do more paperwork to make the same amount of money.

All the trade flow acronyms (AMS, ISF, ACI, ICS, eManifest 2014, Japan Advanced Manifest 2014) equate to pain in the collective mind of the industry. With these layers of pre-shipment clearance and advance notification compliance, gone are the days when you only opened a file as the freight arrived at the wharf.

But this costly strain on forwarders can be turned to an advantage. How? Push the burden of data entry up the supply chain.

By having the data collection responsibility pushed to origin rather than destination, be it a 1,000 miles or days away, the pre-compliance job is done. It should arrive complete and accurate.

Warning! Where this falls down is if the data has to be re-entered on arrival: A very unproductive exercise. With a web interface that will facilitate the integration of data, all you should have to do is add your specific pieces in the information chain, not re-key everything.

Trend 3: New opportunities for independent operators
Freight forwarders often complain about how the fully integrated carriers, those that own every link in the chain, have been stealing their business. Additionally, the large logistics organisations have become even larger global enterprises as they have bought competitors and specialist service providers to provide an end-to-end service. Big was the way to go.

But more recently, like the coastal edges of glaciers, specialist freight forwarding agencies have split off to create waves in the worldwide logistics industry. Now, the smart ones make investments in highly affordable logistics application suites to successfully fight back with new levels of profitable customer service.

These start-ups are flourishing and not only because they have some of the best management and logistics experts. The more agile independents, operating with cloud-based computing, can do everything the big boys can but better. They’re freed from ageing legacy systems and unwieldy corporate structures.

While the big guys have their hands on global reach, a seamlessly connected virtual network can be just as successful. An agency arrangement can sometimes be more effective than a subsidiary that doesn’t have the versatility or staffing to provide full service offering. A network of switch on/switch off agents can provide specialist customer services on an as-needed basis.

Independents can turn their personnel investment to specialist customer-facing staff and value add using the fingertip advances of customized, real-time reporting built from accurate data.

Trend 4: Internal cost cutting
We’ve heard for years that we have to be able to work smarter, not harder.

Forwarders are the best negotiators on the planet. They’ve bled the last dollar from air, sea and road carriers but now have to turn the same intensity on their own operations.

They really shouldn’t be trying to build and maintain IT when their core competency is moving freight. Having 100 IT people on staff was once a bragging right but is now viewed as a weakness and a costly overhead. The OPEX and CAPEX is now unjustifiable.

Somewhere around the world today there will be a carrier meeting being held to talk about controlling costs. They’ve tried offering preferred partners national contracts and waiving documentation fees to convince them to use e-data to lower everyone’s costs, but what’s next?

The trick is to find a way to move more files per person, more cost effectively. It’s about your people and giving them the right tools so they can efficiently build your customer base.

The introduction of current cloud-based technologies is making it so much easier to work smarter. With their scalable, pay-by-user or use-fee structures, they provide access to the latest, fastest versions of end-to-end computing infrastructure.

Trend 5: Creating customer loyalty
The growth of global trade has seen supply chain management and tracking becoming an ever more complex process. Customers now require a higher level of service and increased visibility from their forwarders. It’s not so much about the burden of controlling costs any more, but providing customers with an integrated and stable system that minimizes risks at all stages of the chain.

Thankfully, SMEs can now compete with the giants of the industry without having to cut the bottom line time and time again. An integrated electronic data interchange not only offers customers efficiency and visibility, but provides them with operational stability. And for the forwarder, stability is rewarded with loyalty.

Yes there is downward pressure to control costs, and there are competitors that will offer rock bottom pricing, but the wise and loyal customer will choose a forwarder who provides more than the bare basics.

Trend 6: eTail and emerging opportunities
The best defence is a good offence. eTail represents an excellent opportunity for the smaller operators to chip away at the Integrated Carriers.

In an already huge but still growing trend, consumers are seeking the convenience, better prices and greater variety offered by online eTailers. This e-Tail supply chain often means shippers at origin now control delivery direct from the wholesaler or from a site that ships direct from the supplier.

If the cost of bricks-and-mortar retail and the cost of multi-level ship/store/move supply chain overheads are removed, it is cheaper for the bulk logistics purchasers to ship from an early point in the supply chain, direct to the consumer.

Because they are categorized as high volume low value (HVLV) consignments, these transactions pass without formal customs clearances in most countries—effectively lowering costs to both forwarders and customers.

eTail has traditionally been handled by the express courier companies but due to the volumes, traditional freight forwarders are now moving in and selling this lower cost option. They are also optimising their logistics costs by mixing HVLV freight with traditional freight.

Australia provides a great example of these new market opportunities. Due its high retail costs, Australian consumers have become some of the world’s most prolific online shoppers. And its parcel delivery sector, particularly for players like Australia Post, is seeing massive growth as it benefits from consolidated freight passing through customs with no-touch entries.

Shippers are seeking lower delivery prices to help increase their margins and volumes and are looking for a greater range of service levels. Opportunities abound for forwarders to take advantage of the huge range of sophisticated web portals and package tracking tools.

Trend 7: Momentum of Change
What we learnt through the Global Financial Crisis is that we’ve got to keep moving and we’ve got to continuously innovate: There’s an unaffordable cost to standing still. Now you have to be agile just to keep the lights on, let alone prosper.

The Single Source of Truth automation of management, information and customer relationship processes is making this easier. When it comes to better decision making within business, the process of re-engineering and continuous improvement must be seen as a positive and instilled as a cultural and management norm.

And so, to a single source of the truth
Rather than 30 countries and 30 systems, you need 30 countries and a single file from a single system. Bolt-on, standalone applications do not equate to a solution.

Data integration is where the opportunities lie, be it for origin and destination efficiencies, across vendor trading partnerships or customer retention.

Just consider this convincing set of statistics: Automated data exchanges between destination and origin agents removes 90% of duplicated effort and by extending that real-time flow of accurate information through agents, partners and customers, you’ll reduce operating costs by as much as 70 per cent. Whether you’re a multinational or a smaller operation dealing with a partner network, your productivity gain is the same.

By investing and integrating new technologies into their systems, the prospects for the SME forwarding industry is very bright. And the independent organisations, operating with agile, scalable, virtual global networks, will play a fundamental role in its worldwide sustainability. It all comes down to IT and access to that single source of truth.

Boxout

Seven trends leading forward thinkers to switch to single-line data integration and Single Source of Truth practice for productivity gains and customer retention:
1. Slowing volumes, tighter margins
2. Pain of compliance
3. Independent agility
4. Internal cost cutting
5. Creating customer loyalty
6. E-Tail and emerging opportunities
7. Momentum of change

From spider webs to straight line customer service: How partner networks are leveraging technology

Simon Clark, Vice President of Business Development, Europe at CargoWise, explains the challenges that come with creating simple networks of independent forwarders

Attempts to create networks of independent forwarders could, until recently, be compared to spider webs—intricate systems with a hidden trap. Companies trying to spin a successful global network to share trade and enjoy volume increases could instead find themselves snared in a web of inconvenience and unforeseen challenges.

These challenges are the barrier to becoming globally competitive and they can be as simple an issue as time zones. With a customer in Europe, dealing with an agent in the US and looking for the status of a container sitting somewhere in Asia, it’s not hard to find yourself with a 24-hour delay while you wait for the right people to respond to the customer. And you’ll probably find yourself trapped into employing people just to make the tracking phone calls.

If two agencies commit to the development of a costly system and then one builds an add-on or changes to something different, it’s frustrating at best and chaotic at worst.

So what’s blown the cobwebs away?

The availability of affordable, straight line customer service, with no sticking points.

The shift to cloud-based, single systems is definitely on. Most of the industry’s leading lights are advocating these latest strategies and that a single version of the truth approach is the way to go.

These offerings come from the same virtual backbone: Everyone is on one secure system, on the same version of the same application at the same time and with the same connectors. Each agent can switch functionality on and off from the cloud, as required by their individual businesses, while being linked for the sharing of common data.

As an example, IFLN members in Asia, Europe and the US use enterprise-to-enterprise messaging of automatically triggered notifications and the generation of relevant reporting. With this seamless information chain there’s no delay, no misinformation and no unproductive labor costs.

Each agent operates in their own world—each the masters of their own business destiny—but linked in a single line for mutually beneficial customer relationship management.

And most importantly, it’s a straight line from your customers’ perspective: Whether it’s agent at origin, agent en route or agent at destination, your customers have the right information at the right time with real time visibility into the whereabouts of every parcel and every container.

The key to streamlining partner network communication is to find an IT partner that is 100 per cent focused on international logistics technology innovation. Their products must scale to provide integrated, enterprise-grade solutions, irrespective of a logistics provider’s size or geographic spread.

Individual network members, and the network as a whole, are released from the productivity constraints of double entry, errors, delays and ageing IT hardware and software. Timely access to accurate and complete data is there for the taking, along with immediate cost savings, data integrity and retention of satisfied staff and customers. Cloud-based application delivery, messaging and data integration delivered from a secure global network provides access to standard industry interfaces, all data exchange formats (UN/EDIFACT, ANSI X12, XML, CSV) and the various communication protocols (Web Services, FTP, POP3, AS2).

With the majority of members in a network appearing as a single, trusted supplier to customers, SME operators can confidently knock on the door of the largest multinationals and offer them unprecedented levels of differentiated service.

The challenge, always, is in overcoming the lag between forwarders proving the cost benefit analysis and the commitment to change. Even a mix of cloud and on premise delivery is not an inhibitor to the building of a resilient, reliable SME network. Just remember that you’re not stepping into the unknown or the unproven, but into a single, smarter solution to sharing data with your global partners. It’s all about the single system.

www.cargowise.com