E-commerce growth and Covid-19 push to need to digitise
02 / 11 / 2020
By Scott Sangster, VP Global Logistics Network, Descartes
In the last several years alone, the freight forwarder and customs broker marketplace has experienced significant change.
Driven by everything from the incredible e-commerce boom to new customer expectations, historic operational models in the sector no longer fit the bill in today’s digital world as they had decades ago.
Compounded by the unprecedented disruption from a worldwide pandemic—these challenges have only been further exacerbated—and the race is now on to quickly adapt or risk losing out to burgeoning competition.
As we head into the final months of 2020 and enter the New Year, several trends will continue to impact the industry and should remain top of mind for leaders, along with best practices that organizations can apply to address the challenges head-on and find success along the way.
Expanding demands of an online world
In decades prior, freight moved at such a slower rate than today that the majority of air forwarders relied on and often preferred manual processes.
But with the explosion of e-commerce and interconnectedness of global trade even prior to Covid-19, the way the world consumes, the delivery practices used, and overall expectations around customer experience have completely changed.
Now, with the added complexities from Covid-19, including country lockdowns/restrictions and a disrupted global supply chain, the ripple effect on the market has been substantial.
The dependency and preference for purchasing goods online has and will only continue to put pressure on the transportation providers actually moving the goods.
Changes to declared value allowances, including de minimis in the US, have also allowed more shipments to enter the country duty-free and, with more automation and quicker transaction times, shipment volumes have dramatically risen.
Forwarders and brokers who previously did not participate in the e-commerce community and supply chain have now been thrust into the environment and their need for technology solutions has become paramount to success.
Great (customer) expectations
The “Amazon Effect” that once predominantly influenced the B2C sector has since permeated B2B industries and customer expectations around experience and delivery/last mile are no longer reserved for everyday consumers.
Customers today don’t just want but expect certain services that make working with forwarders and brokers easier, provide greater value, and demonstrate the value of the partnership between forwarder/broker and end customer.
This includes greater visibility around total shipment costs, the ability to compare rates, the option to book and track shipments in real-time, and proactive alerts/notifications about shipment status.
Industry leaders that have elevated often-lackluster experiences by introducing digitization into their operations are getting a leg up on competitors.
According to a Freightos study, only five out of the top 20 forwarders surveyed sent automated confirmation emails. In the company’s 2019 State of Online Freight Sales report, 63% of forwarder-provided quotes were not instant and those who manually quoted took an average of 122 hours to complete
Additionally, 60% of digital quote requests across air, LCL and FCL simply went unanswered—all unfortunate indicators of the dated systems within the forwarder industry and the slower adoption of new technology.
The fact is that forwarders and brokers aren’t just competing against themselves anymore and new entrants such as startups, asset-based logistics services providers (LSP), and integrators will continue to give traditional players a run for their money if they don’t step up.
Larger competitors are also quickly expanding their footprints internationally, and even big-name ecommerce companies are simply cutting out the need for the forwarder altogether by becoming their own NVOCCs.
With significant portions of forwarder/broker workforces also now remote in the wake of the pandemic, digitization on both the software and operational sides is becoming increasingly more important than before to execute work and deliver on speed, experience and value.
Paving the way to success
One of the most strategic activities forwarders can do is to automate processes. Companies today can’t simply cost cut their way to profit; they must invest in technology and solutions that help them perform more efficiently in the digital age.
By automating the more routine aspects of day-to-day workflows, forwarders can hone in much more on what they do best, re-allocate resources who are no longer consumed by tedious, administrative-intensive tasks, and in turn improve their ability to deliver on customer service and build stronger relationships.
Descartes’ 2019 Forwarder/Broker Survey found that using automation to drive agility was the top overall tactic used to improve margins (61%) from both small and large companies, followed closely by offering more high-value services (60%).
Web-based applications are also becoming more important to forwarders and customs brokers.
Customers want to be able to quickly log-in and access pricing, bookings, and manage entire shipments all in one intuitive and easy-to-use dashboard.
Best-in-class industry leaders are those that not only support customers with applications to find information; they also think about how they can truly differentiate themselves from the competition and reach customers in ways that are memorable. These kinds of experiences are some of the strongest differentiators available to a company, and things like modern user interfaces and unique branded portals that provide rating, tracking, and documentation and that integrate into back-office systems can help drive new customer service standards.
Moving forward, the expanded use of APIs vs. EDIs and cloud-based digital forwarding and brokerage technologies will continue to make integrations more streamlined as well.
By driving higher standards of sales and operating performance—as well as significant individual productivity gains—technology also allows logistics services providers to quickly scale their business without the expense of additional resources, which has often been the case in the past.
With an effective digitization strategy enabled by technology, companies can expect to drive greater success with existing resources without sacrificing service or the bottom line.
Even when the market begins to return to “normal” after the pandemic loosens its grip on the world, the industry will not resume exactly as it was before.
Forwarders/brokers will continue to be challenged by ecommerce demand and future supply chain disruptions that unfold.
It’s important that the industry take the necessary steps now and consider how to become more strategic and, through technology, remain agile in the face of future disruption and a competitive landscape.