As I am reaching my 20th year in freight forwarding, it is clear the freight forwarding industry has gone through changes.
When I first started doing LCL Consol Boxes, we were using Microsoft Word documents and conducted 100 calls with everyone involved for shipping just one container with ten shippers. Additionally, we had physical drawings of a shipping plan. Today, all of this information can be transmitted electronically and people typically only use the phone for things that are really urgent.
Over the last 5-10 years, we had been hearing that technology companies are looking for a new Uber in the freight forwarding industry. Shipping is called “a technologically underdeveloped industry where there is huge potential for tech companies creating a big disruption.”
But, I do not expect a big disruption from technology companies in freight forwarding – why?
1. Shipping is a global business – and a simple transaction of shipping one full container from Chicago, IL to Chongqing, China, door-to-door – involves at least ten different parties being involved.
These parties include everyone from the trucker that picks up the container to the feeder operator that will unload your box to the terminal in Chongqing. So, the information has to be fed from different sources and each point of contact has the potential of having a problem. Below is the map of IMF GDP growth expectations by 2024, as the GDP of greener countries grows even more. As you see, growth will be coming from regions that have logistical and infrastructural challenges, complicated documentation procedures, and political issues.
2. Last-minute problems require last-minute solutions.
Technology models are usually based on cutting labor, relying more on algorithms to do the job, and providing more visibility to everyone. Today, even small to medium-sized freight forwarding companies can provide accurate and timely visibility from different sources. The challenge is not only about seeing, but also solving issues as they happen. For that, you need well-trained, experienced operations teams, companies with networks on a global scale, and people that are responsible for the work they do. In such cases, the last thing you need is a general email or a person replying to you without their name on their message. It is correct that if things go smoothly, you will not need to speak to someone, but how often do things go smoothly in shipping? Not often. From tariff changes to global political unrest, the supply chain is connected with day-to-day issues around the globe.
3. Customers want to feel special – just like us when we do any purchase.
Even in B2B transactions, customers want to know they will be taken care of when things go wrong. This is not possible without responsible, well-trained teams. Currently, the freight forwarding industry has a profit margin of 6% – 10% based on the vertical you are in. Labor is the main overhead cost. For a technology company to be profitable, they must reduce their labor costs significantly, and I don’t really think it is possible because those sales and operations people are the ones tackling issues, helping customers, and making them feel special.
I believe technology is very important for the freight forwarding industry, but technology companies that diminish the value of people in shipping will be making big mistakes for their business.
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