Will Digital Transformation of Freight-forwarding Fix Supply Chain Woes?

Every industry that relies on the global supply chain for their revenue has been busily implementing digital transformation programs for decades. Except one. The freight-forwarding industry has been notoriously resistant about being made fit for 21st century purpose.

When you try to organize the transport of cargo from one country to another, you’re more likely to be directed to a fax number than an email address. And you could be waiting days for someone to get back to you with an actual quote.

Digital transformation of freight-forwarding

This, finally, is beginning to change. According to a recent article in The Economist1,

“The freight-forwarding business alone is worth £475bn in annual revenues.”

And, when you add the associated “third-party logistics” market, which includes transport management and warehousing, that figure rises to $1.4trn. So unsurprisingly, it’s become the latest area to get targeted by venture-capital firms.

Last year, they report, more than $9bn was invested in freight-tech start-ups alone, creating more than a dozen ‘unicorns’, with valuations of over $1bn. Many of which produce software designed to automate all the activities that are still being done manually. Such as getting quotes, filling out and sending off forms and documents and coordinating with carriers and shippers.

This means that those in charge of physically moving cargo from one place to another can monitor milestones in real time. So they know exactly when a ship was loaded, when it left port and when it arrived at its destination. If there’s a delay because of, say, a road haulage strike on the other side of the world, they can take action swiftly and make alternative arrangements. Reducing costs and avoiding possible penalties.

Amazon and ecommerce

It’s not that there had been no investment in digital transformation across the industry before now. Everyone has had to respond to the massive changes that have come about because of the arrival of ecommerce.

The explosive growth of global giants like Amazon and Alibaba means customers today expect to receive what they buy within days not weeks or months, at a knock-down price, and regardless of where they are or what they were looking for.

So the global supply chain has gone through a radical change over the last few decades – and is going through another one now  – to meet those changed expectations and that increase in demand.

With the result that many of the biggest players in the freight-forwarding industry have already been investing in their digital transformation, and have been using transportation management systems (TMSs) for some time.

But the industry remains incredibly fragmented. Kuehne + Nagel and DHL, the two biggest players, command barely 6% of the market. And a large number of the smaller operators, and practically all the businesses they need to employ as sub-contractors, continue to operate in exactly the same analogue way they always have.

So the arrival of all these new entrants into the market, with the cutting-edge software they’re introducing, is very much to be welcomed.

Not that it’ll all be plain sailing. Established companies like Kuehne + Nagel and DHL can operate at scale, cutting deals with ocean liners and freight carriers in a way that no start-up could ever hope to, regardless of how well funded they are. But the industry is in dire need of being dragged into the 21st century. And there ought to be plenty of room for established operators as well as new entrants.

Using the right software

What needs to happen now is for the manufacturing sector to make sure it’s prepared for the changes that are going on in freight. After all, we’ve all seen how completely dependent manufacturing is on a smoothly running global supply chain.

Now that the freight-forwarding industry is turning to software to improve its efficiency, manufacturers need to make sure that the software they’re already using, or are about to start using, is compatible with the TMSs being used for freight and transportation.

Does your software integrate easily with other systems? If changes are needed, how easily and quickly can your software provider make them for you? Better still, would you be able to make any of those changes yourselves?

How easy is it to set up ‘What-if’ scenarios, to prepare for any of the road blocks your supply chain is likely to be faced with? And can you then set up a series of automated alerts and responses to the kinds of issues that are likely to arise?

The transportation and logistics sectors are in the midst of a much needed digital transformation. You need to make sure that the software you rely on will help you reap the rewards from a global supply chain that should start to function more smoothly.

Find out how Cora will help with your Supply Chain Sync with Schedule

Source

  1. The Economist, May 7th-13th 2022, p59 – https://www.economist.com/business/2022/05/07/a-flotilla-of-startups-wants-to-streamline-global-supply-chains

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