Freight Forwarders Need to Tech Up – or Risk Shutting Down
As consolidation among freight forwarders continues at a fever pitch, companies are being forced to expand their range of services to remain competitive – and avoid being gobbled up by larger competitors. No longer can they simply consolidate loads, find the cheapest carrier for their customers, and call it a day.
Today’s freight forwarders are expected to deliver more than just the goods. They need to offer extras like warehousing, distribution, and customs and compliance administration – the same sort of tasks that larger companies rely upon sophisticated software to orchestrate.
Because of this intense competition among forwarders and the growing capabilities of cloud-based supply chain solutions, small- and medium-sized companies can now benefit – indirectly – from many of the same tools as their well-heeled, tech-savvy brethren.
In short, SMBs can hire a freight forwarder to provide what amounts to a transportation management system (TMS) as a service. But to do this effectively, forwarders themselves need versatile software that can aptly handle the basics—consolidating orders and finding the best carriers—and deliver the end-to-end shipment visibility customers demand. And to offer the value-added services that customers are coming to expect, forwarders need to go a step further and consider add-on software that can manage a warehouse or handle customs requirements.
But here’s the rub: Forwarding is a tight margin business and many of the smaller players are reluctant, or unable, to invest in the technology required to offer these value-added services. While retail and many other industries long ago embraced technologies like electronic data interchange (EDI), the logistics realm has lagged behind.
Need proof? Walk into the reception area of any freight forwarder’s office and you’ll see a hole cut in the wall where shippers are expected to drop off the requisite paperwork to process a transaction.
It shouldn’t be that way. And because of initiatives like the Automated Commercial Environment (ACE) in the United States, it soon won’t be. In just two short months, ACE is going to force the hands of many in the supply chain network. If they’re not willing or prepared to transmit information electronically, then they’re simply not going to be allowed to do business in the U.S.
Pushing them from the other side are their customers. With visibility growing more important to the folks who are paying them, forwarders need to embrace the tools that give customers real-time information on demand.
The good news is that the cloud has lowered the cost of these solutions for forwarders. Even small outfits with only a handful of employees can get up and running with robust, feature-packed software in just a few short months.
While taking the plunge into new technology might make some forwarders nervous, the results will be invigorating. Customers will be thrilled with their enhanced visibility, and the new value-added services will transform the transactional nature of forwarder/customer relationship to one that’s a true partnership, thus fostering loyalty.
Jim Hoefflin is president and chief operating officer of Kewill.