- The Next Leap in Freight Forwarding Efficiency
Freight forwarding is an industry with thousands of moving parts. Success requires the ability to balance people, processes and information for ensuring efficient transportation and storage. In a globally connected world, customer demands are driving freight forwarders to provide fast, highly accurate information about every aspect of cargo's journey. Whether it's bookings and container stuffing or trip monitoring, customs clearance, bank financing, unloading, and hinterland transport—manual and paper-based processes simply cannot meet the needs of today's connected customers.
This paper will discuss how digital platforms enable freight forwarders to efficiently manage complexity. From improving the customer experience to saving time, reducing costs, and minimizing risk, digitalization is an essential next step for freight forwarding survival.
One Giant Balancing Act
The average international cargo move involves 25 entities, 35 documents, and applicable laws in the sending country, the receiving country, and for land, air, and ocean transportation. An international shipment also can potentially involve multiple financial standards and accounting practices. When a cargo shipment is booked, there are actually three sets of processes that must be harmonized for successful transport:
• Physical flow of goods: Processes related to the physical flow of goods include negotiating freight charges, booking cargo space, choosing the best means of transportation and routes, consolidating and distributing shipments, tracking inland transportation, and warehousing.
• Flow of information about the goods: Information flows include preparing shipping and export documents, such as export declarations and bills of lading, as well as acting as the intermediary in customs processes.
• Payment flow: These processes include creating commercial invoices, paying for cargo insurance and filing any necessary insurance claims, ensuring customs duties are paid, and facilitating payment to all parties involved.
Every shipment also relies on hundreds of people. Freight forwarders need to be able to easily coordinate with the customer, shipping lines staff, fleet managers, dispatchers, drivers, financial institutions, customs officials, and so on. Traditionally, processes were manual and paper-based, and even today many still are. However, these methods are labor-intensive and lack the levels of visibility and accuracy needed in today's global logistics environments.
Digitalization for Process Optimization
Technology and digitalization are instrumental to all freight forwarding processes. Supply chain and other systems deliver unprecedented insight into the physical flows of goods. Digital information flows save time, increase accuracy, and provide better security. Online financial services, government portals, and claims management capabilities accelerate approval and payment flows while securing sensitive data.
Digital information is only the first step. A second critical component of digital freight forwarding is automation. Companies that automate processes in shipment planning, carrier booking, document handling, and invoicing can significantly improve their bottom-line results. For example, automated cost analysis enables sales staff to quickly determine profit margins on shipments and maximize earnings. Digital transformation in freight forwarding can reduce operational costs by up to 40%.
Digitalization pays efficiency dividends in every area of the business. Efficiency gains across the organization help increase the value of a freight forwarder's services for a stronger competitive advantage.
Improving the Customer Experience
High-quality customer service is the backbone of successful freight forwarding operations. Digitalization enables freight forwarders to deliver timely, reliable, and accurate services. For example, digitalization can provide real-time or near-real-time shipping, container, sales, contact, billing, and status information—enabling rapid response to customer queries.
Digital quoting and booking capabilities can accelerate revenue. In traditional paper-based processes, shippers often wait days to receive a quote and then must negotiate through more interactions to reach a final price. A shipper who asks a forwarder for a quote can wait as long as 100 hours, according to a recent study. Today's sales automation software can generate customized freight quotes in seconds and automatically email them to customers. Self-service portals can provide customers with anytime-anywhere access to shipment information, improving the customer experience while increasing staff productivity.
Eliminating mundane, repetitive processes through automation reduces costs and maximizes profit margins. A study from BCG estimates that automating manual processes can reduce back-office and operations costs by up to 40%, while digitizing significant parts of the sales process could reduce related direct costs even more. Digitalizing finance and human resources processes can reduce headcount requirements, yielding up to 30% cost savings in finance and up to 20% in human resources. At the same time, digitizing hiring and onboarding processes can accelerate hiring and ensure that new staff members are ready to work when needed.
Digitalization helps accelerate purchase order reviews, reverse transport processes, and cash collection efforts. By automating these processes, freight forwarders can improve cash flow, minimize late payments, and improve profitability while minimizing staff effort.
Risk is a freight forwarding fact of life. With more than 23 million TEUs being shipped around the world in over 5,300 fully cellular container ships, there is always the risk of cargo loss, damage, abandonment, or fraud. In these instances, it's the freight forwarder who must manage the consequences. Risk assessment software enables freight forwarders to assess the risk exposure of shipments and take proactive security measures to reduce risk. In the event of an incident, secure digitalized information flows and real-time visibility into cargo containers give freight forwarders undisputable facts needed to file claims.
Route optimization software gives freight forwarders immediate insight into the fastest, shortest, or most cost-effective routes for any given shipment. It can provide real-time container status and Expected Time of Arrival (ETA) while taking factors like port congestion or traffic delays into account. Smart routing algorithms also can offer alternative routes, minimize risk exposure, and reduce fuel and vehicle costs for overall operational cost reduction.
Increasing Service Reliability
Even the best planning cannot always guarantee reliable delivery times. Weather, vehicle capacity, congestion, improper documentation, or global pandemic can throw a wrench into logistics. One box of product that is delayed or temporarily lost might simply represent an annoyance for a customer, or it can delay an entire project. At those times, being able to quickly assess the impact of a delay and proactively take action can mean the difference in retaining a customer or avoiding fines and penalties.
Maintaining a Competitive Advantage
Digital transformation not only delivers new capabilities, it creates new opportunities for innovative business models. In the freight forwarding world, organizations are leveraging technology to meet customers' demands in new ways. Digital forwarders, such as Agility’s Shipa Freight, Kuehne + Nagel and Damco’s Twill Logistics, are digitizing their go-to-market strategies to reinvent the customer experience and boost growth.
Carriers are adopting digital transformation efforts to better meet customers' needs. For example, Maersk line and Hapag-Lloyd plan to offer instant quoting services to accelerate bookings. As carriers increasingly sell directly to shippers, traditional freight forwarders can be left behind. Brand-new startups like FreightHub and Flexport are digital-first businesses, able to quickly adapt solutions to customers' needs and deliver better visibility into the supply chain.
In some cases, customers are becoming competitors. Large customers with strong technology capabilities, like Amazon, seek to gain complete control over the online customer experience. Their technology and financial muscle can totally change the freight forwarding industry. And from yet another perspective, integrators like UPS and FedEx are taking advantage of their end-to-end IT networks to expand their presence in logistics.
Forward to the Future
The freight forwarding industry is entering an exciting time of transformation. Digitalization, automation, and the advent of new data services like Traxens are opening the door to new levels of efficiency and opportunity. The organizations that take advantage of these new capabilities and turn them into strong differentiators will have what they need to confidently make the leap to the future.
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