What Are the Biggest Threats to the Freight Forwarding Industry?
Freight forwarding is a hard business. Companies in the space face a lot of competitive pressure from all parts of the industry. Worse yet, many of the challenges are simply outside of their control.
The inherent international nature of the business is a big one. Forwarders are squarely at center stage and exposed to the ups and downs of the global economy. Adding to the challenge are the nuances and headaches of dealing with country specific regulations and create a playing field that is constantly in flux.
On top of that, their reliance on carrier partners is itself a risk. The current instability of the ocean cargo industry being a prime example.
While each of these examples represent forces forwarders cannot control, it shows the necessity of being adaptable with how they manage their business – and makes it all the more important to place extra emphasis on what they can control. There are plenty of reasons that freight forwarders struggle that are within their own sphere of influence and exist within their own company. Here are three that forwarders are wise to focus on.
A Lack of Differentiation
A lot of shippers view the service forwarders provide simply as a commodity. They’ll commonly choose forwarders based solely on price which makes it hard for forwarders to differentiate themselves.
It’s common for suppliers of any type to claim that “service” is their key differentiator. But, if everyone says that can it really be true? Successful forwarders are able to differentiate with customers based on a proven ability to do something unique – as in specialize in specific industries or provide something actually unique about their service. This takes us to technology.
The Role of Technology
The logistics industry gets a lot of criticism (sometimes overstated, but also somewhat warranted) about being slow to adopt new technology. The technology to run better operations and provide better service to customers is out there – and it works. Successful forwarders find ways to use technology and use it to stand out from the competition.
Speaking of Competition
Forwarders are now competing against more than just other forwarders. Companies that were traditionally partners to forwarders are now selling forwarding services themselves too. Ocean carriers, 3PLs, even warehouses are now competitors in the space. They, like every other company, are working to deepen their relationships with clients and provide more services – this is an extension of that goal.
This is also NOT a discussion simply about rates. Smart forwarders know that competing on price alone is a race to the bottom. Of course rates matter, but so does service and your customer’s experience.
So what’s a forwarder to do?
The obvious goal is find ways to stand out. Having a niche or specialty, or market you are really good with makes this easier. Aside from developing the recognition, your company becomes the expert with that type of customer to everyone’s benefit.
Equally important is creating strong internal processes, including the best use of technology that can help you operate more efficiently and truly create value that differentiates your company from competitors.