Several top air freight forwarders are now rolling out end-to-end digital offerings, as they bid to meet the needs of SME shippers – and see off the threat from digitally driven ‘disruptors’, reports Will Waters
Top freight forwarders’ ability to provide instant or rapid online quotes for new business is still limited, in the face of emerging challenges to their business model from digitally driven ‘disruptors’, but the number that can is growing, according to the third annual ‘Mystery Shopper’ report by logistics technology company Freightos.
In previous years, the report focused solely on the world’s top 20 freight forwarders’ ability to provide instant less-than-container-load (LCL) ocean freight quotes – a figure that has risen from 0 to 25% in the past three years. But this year, there were two additional surveys: to measure progress in instant online air freight quoting; and to measure the experience among those using so-called ‘digital freight forwarders’.
Commenting on the progress in online air freight quoting, Freightos observed that the first online airline passenger booking service launched in December 1995, and more than twenty years later, just three of the surveyed ‘top 20’ forwarders offer instant door to door air freight sales online. The three were DHL Global Forwarding, Kuehne + Nagel, and UPS, with two more stating that they would launch this capability soon: Agility and Panalpina. Since the survey, conducted in early 2018, Geodis has also launched instant quoting and booking, both air and ocean, for existing customers, Freightos noted.
Analysing the online air freight quotation capabilities of DHL Global Forwarding, Kuehne + Nagel, and UPS, Freightos said their respective sites were “clearly designed to enhance user experience, and all provide good coverage and ancillary services, although one limited users to TSA ‘known shippers’. Quote prices ranged from $8,804 to $10,869, a price difference of $2,065.”
Meanwhile, in April, Agility launched its ‘Shipa Freight’ platform, also offering both air and ocean freight bookings. Indeed, Agility joined Kuehne + Nagel to become only the second major forwarder to provide instant LCL quoting and the first for full-container load (FCL) ocean freight bookings, Freightos said.
Agility said its semi-standalone online freight booking platform, ‘Shipa Freight’, was designed for use by small and medium-sized enterprise (SME) cargo owners, describing it as “the first fully integrated online freight service that allows users to get rate quotes and book, pay and track ocean and air shipments around the world”.
Agility explained to CAAS that Shipa Freight “is an ‘internal start up’, with a dedicated team, and separate funding”, but using the Agility network “as its operations or delivery capability”. It will become the group’s “online sales channel for the smaller customer segment and allow a larger number of smaller customers to be reached and served in a more efficient manner” − businesses “trying to take the complexity out of their international shipping. It gives them the transparency, flexibility, competitive pricing and customer service that the industry offers only to multi-nationals and high-volume customers.”
SME vs. major shippers
This is a key point often lost in the discussions over whether, or to what extent, freight forwarders are vulnerable to technology-driven ‘disruptors’ coming into the sector. Although freight forwarders have, arguably been slow to respond to the needs of SME or ad-hoc shippers looking for instant online quotes and bookings, a large proportion of the freight forwarding business involves regular, long-term shippers that already have long-term partnerships with their preferred air freight forwarding agents. As Freightos notes, “traditional forwarders are increasingly leveraging sophisticated technology for in-house use, often also availing it to approved customers”.
Looking at the Agility example, Freightos’ VP for marketing, Eytan Buchman, told CAAS that Agility is “one of the examples of how top 20 forwarders are rapidly adapting to a new reality. I’ve seen two patterns for how this is done − core changes to the underlying platform (for example, K+N) or by creating in-house digital forwarders (similar to Damco’s Twill Logistics).” He noted that “shipper customer expectations are evolving” and it was encouraging “to see logistics providers evolving with them”.
Steve Walker, a former DSV board director and founder of SBS Worldwide, and now the founder of forwarding technology specialist SWG Global, believes the idea that ‘digital’ freight forwarders will take over the market is a delusion, despite the millions being invested into them by investors. He notes: “It is a mistake, often repeated, to believe that legacy forwarders are not innovative. They have been implementing, adapting and evolving technology for decades and will survive this latest turmoil.”
He says many forwarders already have the capabilities that the ‘digital forwarders’ are offering “with online quoting and booking, track and trace, and supply chain analytics”, adding: “They should leverage their legacy systems’ latent capability and up their marketing effectiveness” in order to counter a perceived “early-entrant advantage enjoyed by the digital forwarders”, thanks in part to their early success in marketing their digital forwarding capabilities.
Walker argues that by building systems from the ground up, digital forwarders claim to gain operational efficiencies − and consequently reduced costs − that traditional forwarders cannot emulate. “But such ‘innovations’ increasingly look like exploitation of a perceived advantage, rather than real disruption.” He also argues that “digital shipping portals that may offer a channel to attractive rates when supply is high are not so effective when space tightens and deals are required to secure capacity”.
He continued: “Shippers are likely to be wary of committing to these channels in uncertain times. They may be attracted by the allure of lower rates, but the potential lack of operational capability may leave them in trouble if something goes wrong with a shipment.”
However, Flexport, regarded as a leader among a new generation of self-declared “digitally driven” forwarders, stressed that Flexport “is not a portal”, describing the company instead as “a full-service global freight forwarder and customs broker”. A spokeswoman added: “Flexport combines groundbreaking technology with personalised service to deliver a user experience traditional forwarders don’t offer.” Indeed, Flexport has progressively expanded its physical footprint as its business has grown, opening several major warehouses around the world and also its first regular chartered freighter aircraft to secure transpacific capacity.
Freightos is itself involved in two main ways in digitalising freight forwarding: technology helping top-tier forwarders digitise sales and operations; and its own “digital freight sales marketplace that provides logistics service providers with new sales channels”. It divides the current “digital freight sales spectrum” into carriers, freight forwarders, and marketplaces, subdividing freight forwarders into ‘online legacy forwarders’ – such as K+N, Agility and DHL – and ‘digital forwarders’ such as Flexport, iContainers and FreightHub.
The full package
And in its latest assessment of digital forwarders, Freightos indicates that they are still far from offering the full package. Assessing only their LCL ability, Freightos concluded: “It’s still early days for digital forwarders, which is why they cannot yet compete on capacity, price, personnel, or global coverage. Between Flexport, FreightHub, iContainers, Instafreight, Kontainers, Twill Logistics, and ZenCargo, two had the required coverage, but none could provide an instant door-to-door quote.”
It noted that “the integration of quoting, shipment management, and chat in their customer interface means that those small business customers who switch will get a superior customer experience. Top forwarders should be wary of this key competitive advantage.”
But if few can yet compete on capacity, price, personnel, or global coverage, their offering seems not yet to be a serious threat to traditional freight forwarders. And with a growing number of those traditional freight forwarders now rolling out their own end-to-end digital offerings, the pace of digitalisation may now, increasingly, be controlled by these players.