With over $10 billion in venture capital and corporate investments thrown into digital logistics over the past four years, we are witnessing a lot of innovation and disruption playing out in the market. Some projects more groundbreaking than others, and whilst we saw a lot of big headlines in 2018, many projects came and went only to be remembered exactly as that; a headline.
But a lot of stellar projects and businesses have also proven their business models and given us a glimpse of how the future of freight forwarding will look. Let’s take a look at the 10 biggest signs telling us that the digital age of freight forwarding has already begun, and what we can expect in coming years.
1. Surge in Online Bookings
A massive surge in online freight bookings has happened in recent years with top ocean and air carriers, freight forwarding conglomerates, and digital freight forwarders all introducing online booking and quotation solutions. Within a single year Hapaq Lloyd saw their online sales grow to 6 percent of total sales with the introduction of Quick Quote, and DSV grew their number of e-bookings to 250.000 monthly bookings since the introduction of My DSV in the Fall of 2018. The online freight market remains fractional in size relative to global freight volumes, but it is the fastest growing segment with 15 percent of bookings expected to be carried out online by 2023, corresponding to 30 million TEUs. The biggest ocean freight forwarder, Kühne + Nagel, is well on the path to handling 20 percent of all their ocean container volumes online by 2022, according to CFO Markus Blanka-Graff.
2. Traditional Forwarders introducing Digital Solutions
Though the digital transformation has been led by digital startups disrupting the industry and market conglomerates investing millions in customer-facing technologies, traditional small- and medium-sized freight forwarders have started introducing online solutions of their own. On a global scale, we are seeing traditional freight forwarding companies moving beyond mere Request-For-Quote (RFQ) tools to full-fledged online booking capabilities with instant quotation. The quickest adoption is happening in the US, Central- and Northern-Europe and Asia, and according to a study by PwC, we can expect to see more and more logistics companies doubling down on technology and improving their digital fitness in coming years.
3. Shipper Expectations
We are seeing a big shift in the behaviour of shippers who are now demanding for more transparency and accuracy in less time. As shippers get more and more used to digital services in all aspects of their lives, they start expecting to have the same quality and flexibility in logistics. This new consumer attitude known as liquid expectations will become increasingly prevalent with the rise of the next generation of shippers, who all value convenience and expect a user experience where quotation and booking is online and instant. A paper by Boston Consulting Group further argued that the digital rush is indeed being driven by shipper expectations, while stressing that time-consuming manual processes and traditional offline quotation and booking processes are lengthy and cumbersome, often necessitating several interactions to reach a final price.
4. Last Mile & Ocean Carriers are already digital
As stated by Sameer Patel, Senior Vice President at SAP: “Who owns the audience, owns the last mile. Closest to customer, closest to disruption”. This holds true for logistics as well, and last mile logistics has been on the forefront of digital solutions for years with over $2 billion having been poured directly into startups since 2012.On the other side of the spectrum, online bookings and instant quotations is also nothing groundbreaking for ocean carriers. Customers have been able to receive rates online, book online via the shipping line’s own system or integrated systems such as INTTRA, and print bill of ladings directly from the shipping line’s system for a very long time. But the freight forwarding segment has fallen behind in all of this if you look beyond the Kühne + Nagels of the industry. This is bound to change in coming years as all dots along the value chain have to be connected to make a lasting impression, and that means having a digital process from end-to-end where data flows are automated and instant.
5. Networks & Agents require Instant Quotation
Freight forwarders collaborate worldwide for good reason: No one can cover the globe on their own without local expertise and local presence. That is why we have countless freight networks and agents in far-away countries asking for quotations daily. The most important question to consider for seamless collaboration is “how quickly can you quote?“. With digital solutions that make live quotations available around the clock possible, phone calls and emails across time zones are becoming an unnecessary hassle. Faster collaboration heavily affects win rates with shippers, which begs the question: can you afford to wait for time zones in today’s market?
6. Digital Freight Forwarders
Digital freight forwarders are seeing a massive rise in traction with Flexport now handling roughly 120.000 TEUs annually, making the startup the 20th largest provider on the transpacific eastbound route. The surge is happening primarily due to high convenience and user-friendliness along with increased visibility and control for shippers, all resulting from leveraging technology throughout their operations. The increase in traffic is not earned lightly though with the increased business coming directly from traditional freight forwarders with decades of hardcore freight forwarding experience. To maintain momentum, the inflow of institutional capital has gone through the roof with Flexport recently securing $1 billion in their latest investment round led by the SoftBank Vision Fund. Collectively, digital freight forwarding startups Flexport, Freighthub, iContainers, Zencargo and InstaFreight have raised just shy of $1,4 billion in investments. These digital freight forwarding startups are here to stay, and they are playing an incremental role in showing what is possible in a digital freight economy.
7. The Birth of LogTech Software-as-a-Service Company
An entire sub-industry has emerged consisting of businesses whose sole service is to help traditional logistics companies digitise their customer-facing services. Adoption is happening quickly as companies in all regions are exploring ways to compete with digital entrants and the convenience of the digital solutions introduced by conglomerates in recent years. Especially freight forwarding companies in the Nordics, Central-Europe, US and Asia are increasingly on the search for digital innovation, and Software-as-a-Service remains a popular choice due to the low costs and implementation times in comparison to in-house development or running a project with an external IT company.
8. Google Search Results
Google search trends are a great indicator of whether a digital market is on the rise and at what pace. A study by McKinsey in collaboration with Google & KLU revealed that the number of Google searches for terms related to ocean carriers and freight forwarders on average grew by 8 and 14 percent a year respectively between 2014 and 2017. Surprisingly, 23 percent of all logistics-related searches are being conducted through smartphones. This underlines the importance for freight forwarding companies to adopt a “mobile first” mindset from day one when they introduce new digital freight solutions.
9. TMS Providers are introducing Shipper-facing Modules
The classic TMS used by freight forwarding companies has always been mostly concerned with the after-sales process and internal operations. This is now changing; while the TMS continues to be the backbone of freight forwarders, the scope is slowly growing beyond internal processes to include a selection of customer-facing modules such as shipment tracking, booking capabilities, and shipper dashboards displaying past activities, contractual rates and schedules. Pre-sales activities remains a rather untouched area for now, but it is only a matter of time before we start seeing TMS providers introducing modules for pre-sales activities revolving around instant quotation and real-time rates. Whether they launch these modules on their own or integrate with third-party software providers, the story line remains the same: shippers are requesting more convenience and visibility, and TMS providers will be one of the sources to offer these capabilities to the freight forwarding industry in coming years.
10. IOT, Blockchain & Logistics 4.0
We have seen a lot of exciting announcements of projects and partnerships revolving around deep tech in logistics in recent years. Internet of Things (IoT) is an example where physical objects like trucks and pallets are being connected to the Internet for accurate tracking, theft prevention, and real-time insight into temperature conditions. Another one is the application of blockchain technology with projects such as the Blockchain in Trucking Alliance (BiTA) pushing for global adoption of blockchain in freight, CargoX developing the world’s first blockchain bill of lading, and of course Maersk partnering with IBM to launch the TradeLens platform to reinvent how logistics providers share and view data. These technologies will solve countless of the challenges that exist in today’s market, but for these technologies to play out a certain level of digitisation and standardisation is required. Despite of all these headlines and groundbreaking projects, the majority of the industry remains in the early days of data- and tech-driven operations. When the adoption of online solutions becomes more widespread, that is when we will truly start to see new and existing deep-tech projects flourish.
All those signs are telling us that digital freight forwarding is here to stay, which will greatly improve the efficiency and profitability of those companies that manage to leverage technology to their benefit. But in the end, the biggest gainer stands to be the shippers: they will have the best options to choose from in the market and will reap the benefits of an agile, instant, convenient and transparent freight forwarding industry.
The next decade will separate those companies that claim to put their customers first from those that actually do and show it through execution. Listening to your customers is how you can stay ahead in the market – what are your customers telling you?
ItsMyCargo is a Software-as-a-Service provider helping logistics companies digitise their services and partake in the online freight market.
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