19th-century forwarders vs. millennial start-ups
The technology wave has finally hit the freight forwarding industry at right time. The e-commerce growth and its continuous disruptions are pushing this century-old industry toward a complete technological revamp.Mohammed Zakkiria
Forwarders and legacy systems
While most of the forwarders are still running their backend operations with 25 to 30 years old command-based systems, they need to understand that the biggest challenge with such systems is that it's really difficult to operate from a user's perspective because of its complex architecture.
Also, forwarders can't immediately migrate to a new system because they have been using theirs for years. Their system only performs basic data-in and data-out tasks.
In most of the cases, unfortunately, forwarders have to use multiple systems like CRM for sales, Operation Systems for shipment management and billing, Finance Systems for accounting and receivables, to perform different functions. And the worst part is, their systems are not interconnected. Their systems won't talk to each other or work in sync for better visibility and actionable insights.
Customisation of the existing systems can be painful, and often it could incur expenses that are higher than the initial installation charges.
What forwarders need is a single platform that can automate the entire process right from customer request to final billing with an intuitive user interface and data analytics?
Raise of start-ups as a digital forwarder
Over the last 5 years, thousands of start-ups across the globe have come up to solve the problems that exist in the forwarding industry.
Their approach is to build innovative solutions to solve those problems with a goal to disrupt the whole market.
While some traditional forwarders are seeing them as a potential threat to their business, others are not taking them seriously.
At the same time, we have to admit the fact that digital forwarders have already created an impact in the market. They’ve simplified the way shipments move from one place to another, they’ve found better ways to automate manual/repetitive tasks such as emails, phone calls, etc. and they’ve eliminated the communication noise with their codes (something the existing legacy systems have failed to adapt to).
A forwarder's industry expertise and customer relationship can help them survive, but to thrive and get a competitive edge they will have to rework their IT strategy.
(Below table shows the existence of traditional forwarders and tech startups in freight forwarding industry
We are in the digital era, and it's time the forwarding industry went through the similar transformation just like the retail industry did.
Retail giants like Walmart & Tesco had a number of suppliers, and thousands of customers but still Amazon and Alibaba found their way to disrupt the whole industry. While the suppliers and customers were the same, it was the platform and their user experience that made all the difference.
(Below table explains the growth of traditional retailers and amazon)
Digital or die
Until last year (2017) there was no online booking platform, but now almost all the top 5 forwarders built and successfully launched an online booking platform.
The reason for this move is to provide a better customer experience. However, they still depend on the same old legacy systems to perform the operations post online booking.
This 50% online - 50% offline approach won't help them achieve better results, retain existing customers, or acquire new customers.
Since the past year, we've heard a lot about digitalisation in the freight industry. Industry giants such as K+N, DHL, Agility, Geodis, and Panalpina have launched their online freight booking platforms to differentiate their service offerings.
Meanwhile, thousands of startups are already testing the waters with unique solutions, use cases, and pilot runs in order to simplify things, which have been manually handled for many years.
Blockchain has become most commonly used buzzword in recent days. Pilots and POCs from Maersk, ZIM, HMM, APL, DHL, DB Schenker, DSV, and FedEx are the indication that industry is shifting towards digital transformation. Most of the big names in the industry are revamping their technology and started partnering with innovative start-ups for co-invention/investment.
Forwarders still carry a perception that adapting to new technologies and digitally equipping their staff members is a herculean task mainly because of the time, cost, and effort. Often they compare technology cost with initial IT spends which is not correct. This is again based on their past experience where they may have taken a long time and burnt a lot on installation, customisation, training, etc. It is high time they reviewed their IT strategy and equipped themselves to outperform their competition.
About the Author: Mohammed Zakkiria is an experienced freight forwarding professional and Co-founder of FreightBro - a technology start-up which aims to revolutionise the forwarding industry by empowering forwarders to become digital and new-age forwarders.