Five Challenges Facing Freight Forwarders Today

Freight forwarders need to be as concerned about the future as any other type of company—there’s a lot happening in the shipping industry these days. In fact, it’s hard to think of another industry facing more uncertainty considering the number of macro-trends happening with global supply chains right now. These challenges include everything from the pandemic fall-out to the impact of technology.

Macro and global issues aside, there’s also plenty going on within the industry that freight forwarders should be watching.

Here are five important things happening right now.

Competition Is Fierce and Growing

Freight forwarders are facing stiffer competition than ever. Part of the reason is that many logistics service providers that have defined themselves as something else (such as an ocean carrier, or even a warehousing company, for example) are also providing forwarding and NVOCC-type services.

It seems even Amazon is getting in the game—which leads us to:

Commoditization Is Unavoidable

Shippers often view transportation as a commodity. All most care about is that deliveries are made. So, they place a small amount of value on service and a lot on the price. This makes it hard for logistics service providers of any type to differentiate themselves from others—especially when there are typically a few who’ll simply try to win on price alone. Some forwarders are learning they can better compete by offering new or better technology that improves the customer experience.

Ocean Freight Market Volatility

Ocean shipping is a central part of what forwarders do and the value they provide to customers. As the last year has shown, ocean freight is also a very unstable business. It’s based on complicated rates and contracts, that in some cases, take an actual expert to understand. The result is that even forwarders find it hard to understand their cost structure—which, in turn, makes it even harder to provide customers with accurate and reliable quotes. And the seemingly random nature of price increases and surcharges only exacerbates the challenge for all companies.

Bid’s and RFX’s

Many forwarders also rely on tenders as a source of new business. Because the volume of these bids can often be extremely high and complex, tenders take a lot of time and resources. Forwarders who are on the leading edge focus on improving their internal process to make sure they can bid accurately and quickly while placing the most attention on the best types of business for them.

Rates of Change

There are always new market challenges that providers need to be accounting for. An example that many could say has made the pandemic even more disruptive for supply chains is the trend for ocean carriers to form alliances. Today, with almost no notice, the rates and contracts forwarders have with the carriers can change, as well as their service.

The good news is that logistics technology, when applied correctly, can change how forwarders manage their business and service their customers.

As the industry sits today, freight forwarders need to work hard to make their company stand out. The leading NVO’s and forwarders know that competitive rates matter, but so does providing customers with more and better service options and technology that creates a positive customer experience.