24/02/2021 by Ingo Erlenhofer 0 Comments
It’s easy to see the old guard of freight forwarders battling it out with digital forwarders over future market share. That battle has been playing out for years, but digital freight volumes no longer represent an insignificant chunk of the market. And, if anything, the pandemic has only sped up the rate of expansion that we are going to see in digital freight volumes over the next decade. That said, the core of the battle for market share continues to revolve around the following question:
Can digital freight forwarders build up their knowhow and proficiency quicker than traditional freight forwarders build up their digital platforms?
For digital forwarders the path is to accumulate as much investment capital as possible, aim for a steep growth trajectory and find the best talent in the market with corresponding long time shipping experience. It is a tough race to the top that requires willpower, endurance and access to significant funding as even taking a loss to close new business becomes a necessity.
That is one of the things that raising capital allows you to do; take short-term losses and ramp up market share today, focus on fundamentals and breaking even tomorrow.
In contrast, traditional forwarders often already have the required talent in-house and benefit from years of operational experience. They understand the market and have earned the customer's trust, but they tend to suffer from a plethora of IT systems that are equally old and are at risk of no longer matching increasing customer expectations.
Yet, the introduction of digital end-to-end platforms is often perceived as extremely risky and resourceful.
Innovating and digitising is therefore often a big commitment and not something that can be achieved overnight. But as costly and risky as it might be to participate in the battle for digital market share, the question is whether it is cheaper than not participating at all.
Many will choose to build these capabilities in-house, some will try to identify modern TMS providers that are able to tick as many of these boxes as possible, and others will collaborate with external software-as-a-service providers. One strategy is not better than the other as the only thing that matters is:
1) are you able to keep up with your customers' expectations,
2) does your customer-facing portal connect with your existing IT infrastructure, and
3) can you implement and introduce it to the market during your daily business without negating operational excellence?
It’s time to find out.