Another day, another headline – forwarders under threat! Death of the middleman! Automate or the industry won’t need you! Kate McCauley from Tuscor Lloyds takes issue with some recent reporting on the digitisation of the freight transport sector.
It’s not the kind of Monday motivation we look for. But it’s true, we should be worried. We’re under attack. New tech start-ups, ‘game-changing’ market entries from the big guys, aggressive competition from our long-term suppliers, all chipping away at the market share we work so hard to maintain. In truth we’ve been fighting a competitive and saturated market since our freight forwarding business was founded in 1994.
It’s been a while since I read any industry news and felt a sense of positivity about the global freight forwarder. With some articles recently feeling more like a smear campaign than an ‘opinion piece.’
Is the only way to promote your new venture to attack existing businesses and forwarders in the market?
Shipping is not just about moving containers from A to B which is the premise some of the new tech start-ups rely on. A flat rate, inputted to a system, to quote a container from one destination to another. On the desk we all know it is so much more. Daily we experience customs clearance issues, customs brokerage, police escort arrangements, specialist handling, extreme weather conditions, and short shipments… the list goes on. Are we expecting a machine to process these considerations and make the same arrangements a human would?
When I tell my friends that I work for a freight forwarder they look at me blankly. I guess if you’re not in the industry you’d be forgiven for not knowing the term. I explain that we help importers and exporters transport their goods in a safe, efficient and cost effective way. By our own definition a freight forwarder has specialist knowledge to prepare the types of documents required for moving goods via sea, road, rail or air. There’s pick, pack, storage, distribution, warehousing, trucking considerations that need to work in sync for harmonious supply chains. So let’s say AI takes our place, how long would it take the machine to find the root of a problem, in one single part of the chain.
It’s not that we have anything against new tech start-ups, any entrepreneur developing software designed to make shippers lives easier is welcome in our office. When the right online platform comes along we’ll happily embrace it if it would add value for our customers.
Up to now I’ve tried three of the very publicly heralded freight marketplaces promising to revolutionise global shipping bookings. I entered a FOB 40ft container from Shanghai to Felixstowe, one of the biggest trade lanes in the world. I was hoping for a plethora of choice and super competitive rates. Quaking in my boots (thinking about my redundancy pay-out) I waited for the results to load only to be greeted with “your route cannot be found, sorry no rates found, no results found.” I couldn’t even enter a destination on one site. Was I doing something wrong? And if I’m feeling like this imagine what a first time importer would think? Maybe they should change their slogans to “making global freight rates so transparent they can’t even be seen.”
We’d all welcome a Skyscanner solution to the movement of global freight. It would certainly make our lives easier but I feel it’s living in a dream world. And even if we replaced people with amazing digitisation I would like to hope that the future of our world is not based on faceless online encounters. We visit a car dealership for the experience, the satisfaction of selecting the right product, the trust built from the test drive and the bargaining with the salesman. All these tangible aspects of a sale are still crucial for purchasing decisions. People still value people. They appreciate knowledge as value in the supply chain and lean on expertise… this is something technology can never really replace.
We love Andrew Craig-Bennett’s article in Splash “War has been declared on forwarders.” Well if it’s a war they want try fighting us with the right weapons. We’re fighting back.
Thank you Kate McCauley, both for your kind words and for a good contribution to the discussion. I have had a superficial acquaintance with the dreadful complexity of Customs Clearance in the UK – an issue that is almost certain to become nightmarishly complicated if Brexit goes ahead, and EU rules are replaced – or not – with home grown ones, and with the not-so-simple issues of haulage. And those are just two of the issues that a forwarder must cope with all the time.
As you say, it isn’t so simple, and the presence at the other end of a phone or a text or an email of a cheerful expert is something that most people will pay for. Particularly when that cheerful expert is actually saving them money and time…
Am I a Luddite because I still occasionally use a travel agent? No, I’d argue as sometimes it helps to have someone to help fix complex arrangements
Sam – unfort, and i mean this nicely, i think you may be a bit of a luddite! 😉 I haven’t been into a Travel Agent since I was a student back in the early 90’s. Skyscanner + Expedia + Eurocamp (i do have to talk to someone on their site!) etc do the job for me!
Kate does touch on what could be the crux of the scenario – where a market has complexity to it a ‘machine’ cannot necessarily take over this process.
However, not being a container expert, my experience is in dry (and to a lesser extent wet), the process can be broken down into Price Capture + contract negotiation (The Fixture) followed by the many complexities/variations that then appear thereafter in the Operational side of the equation – The Post Fixture.
My hunch is that the Price capture + contract negotiation in Dry and Wet for the ‘vanilla’ type trades – can/could be done by a machine/exchange – look at what BHP Billiton are introducing via their Auction platform. The operational/post fix elements not so much. Added to this that not all shipping – dry+wet – are ‘vanilla’ trades and the requirement for an intermediary/ship broker to facilitate and smooth the process will still be required.
Intermediaries/Ship Brokers won’t disappear – they merely have to evolve and add value to the process to substantiate their commission. They do this. The good ones will continue to do this and the good ones are, and will continue to do so, evolve and adapt to the new market as time progresses.
Simon — stay tuned for the next installment in the ‘digitisation/middleman’ debate with a top shipbroking contribution due out tomorrow
I am afraid that the hype behind the sharing economy [e.g. uber or airbnb] was really about working without a license. My 2c is that this unfortunately cannot happen in shipping.
And it really depends what we discuss here: selling is one thing but packaging the solution and/or even designing/producing the service, are two completely different things.
My take is that digitalisation advocates discuss selling, whereas forwarders discuss servicing.
BHP is no pioneer here, they could have done the same thing 20Y ago with a simple auction/competition with sealed bids, advertised in a newspaper.
It is for granted that booking space on a vessel is by all conceivable measures, way less than designing and delivering a complete service of transport. Thus in my opinion, big liners are clever enough to create additional channels of selling their stuff [e-platforms or shipping facebooks] yet, to get the job done would still take a forwarder. Now if you want to discuss an oligopsonistic setting where amazon will be able to squeeze the profit of the forwarder due to size and resources, that’s in a different channel.
cordially
g
I agree with George.