The digitalization of the freight forwarding industry: essential for its survival

Traditionally, the freight forwarder has been in charge of organizing the transport. Initially, as agent of the carriers or traffic commissioners or forwarding agents and, later, directly assuming the obligations of the carrier under the current name of freight forwarders.

The foundations of this profession have been based on knowledge, experience, international organization and the ability to resolve eventual incidents, based more on personal resources than on fixed asset management.

The function of freight forwarders has been to facilitate international trade operations, adding other services to transport within a global package (groupage, handling, customs procedures or storage and distribution).

Now, we stop thinking about documents to talk about data sets that allow us to adopt a new vision throughout the organization, integrating administrative processes with clients, selecting the most efficient routes, managing offers and transmitting information which connects with operations and financial flows.

The impact of digitalization

Digitalization changes the environment of the work carried out by freight forwarders, as well as that of many of their customers and suppliers. It affects key aspects of its added value: the grouping of several shipments, information on routes, prices and capacities, traceability of operations, management of the transport chain, and contracting.

Digitalization of the freight forwarding sector simplifies work dramatically by automating processes that previously required personal intervention. Naturally, all of this would not be possible without continued standardization and improvement of outsourced operations such as transportation, warehousing, customs clearance and other services. 

In this context, professions and activities that coexisted until now with the freight forwarder tend to invade its territory: shipping companies, airlines and digital platforms that offer information and reservations or other business models based on the digital economy.

In maritime transport, the concentration of companies and the efficient use of new technologies make it possible to contact the final shippers directly. Digital platforms are becoming more efficient and intuitive and also include the ship loader.

On the other hand, the growth of companies such as Amazon, which sell directly to the consumer, reduces the number of goods in the classic circuits to enlarge their own transport and distribution networks. These volumes are detrimental to the market managed by traditional freight forwarders.

The new digital native freight forwarders and their business models are very different from traditional ones. The irruption of meta platforms or platforms at the service of these new freight forwarders is also planned as a more sophisticated system that facilitates the meeting between supply and demand.

The evolution of the role of the freight forwarder

Information technologies allow, among other things, to operate with a much broader customer base than with traditional methods. Competition is much tougher than before, since the different market operators and new agents have all the options to work with their customer base, although the number of those entering the international market is also growing. As a result, the market for traditional freight forwarders is progressively shrinking.

Naturally, today's freight forwarders can evolve and adapt to an environment where information technologies play a fundamental role. But their professional knowledge and their organization are progressively relegated to a second level, while the contact and experience with the client is the protagonist of the information management. Their professional knowledge and organization are still there, somewhat hidden under this layer of digital management.

However, do not be deceived. The necessary evolution must be quite radical. If some compare the activity of the freight forwarder with that of the travel agent, we should analyze what is happening in this sector, excluding COVID-19. Do you remember the last time you went to a travel agency?

For a long time, the value of the freight forwarder has resided in their ability to gather knowledge and information about a multitude of connected services and their reaction to transport incidents. But the evolution of information systems and the progressive improvement of  transport quality and standardization radically change their function.

Efforts to digitize the freight forwarder's job should address the simplification and automation of tasks such as transforming your customer relationships; the automation of the quotation and reservation processes; the transparency of expedition data between suppliers and clients; the reduction of personnel costs in relation to the number of operations intervened; and, above all, a new look at the business without forgetting that it should now include not only aspects related to transport but also information management.