Digitalisation is shaking up the world of logistics, opening the doors to greater visibility, connectivity and agility. For the freight forwarding industry, the application of these new technologies has shown huge potential to simplify operations. However, it also presents a strategic challenge and a delicate balancing of priorities, investment, customer demand and capacity. All while navigating the industry’s complexity and fragmentation.
Digitalisation is the use of digital technologies to change a business model and provide new revenue and value-adding opportunities. The COVID-19 pandemic, which brought massive supply chain disruptions and huge growth in ecommerce, accelerated digitalisation in freight forwarding. As the International Federation of Freight Forwarders Association points out, the pandemic exacerbated the need for simplification and supply chain resilience, which digitalisation helped achieve.
The pandemic also supported the growth of digital freight forwarders. Digital forwarders use technologies to organise and coordinate the movement of goods – everything from taking bookings, managing documentation, tracking shipments, and for quotations and invoicing. The digital freight forwarding market, which accounts for about 8% of the total freight forwarding market, is recording steady compound annual growth rate (CARG) of 23%, according to Allied Market Research. In comparison, the global freight forwarding market as whole is recording a compound annual growth rate (CAGR) of 4.2%.
The drivers behind digitalisation in freight forwarding
Supply chains are increasingly globalised and complex with rising customer expectations for faster lead times, expanded services and customised offerings. Digitalisation can help meet many of these requirements, at least in part, and offers the following benefits:
Visibility and transparency
Visibility and transparency – digitalisation allows for fast data sharing between carriers, suppliers and customers, offering unprecedented visibility and transparency. As Shipping and Freight Resource reports, customers today need “authentic and visual data to see how their products are moving, identify bottlenecks in their supply chain, and correct for where avoidable costs like demurrage, detention and storage are being incurred’. Having access to quality, near real-time data, tracking and monitoring enables better communication and collaboration and makes it easier to plan and complete any forwarding task.
Speed and efficiency
Digitised processes allow the transfer of goods to happen quickly and seamlessly. Any issues in the supply chain can be easily identified and addressed. Technology also means many repetitive, time-consuming processes can be automated to reduce errors, and improve efficiency. The Boston Consulting Group calculated that automating back-office and operations can help reduce costs by up to 40%.
Scalability
Digitalisation levels the playing field and allows freight forwarders, regardless of their size, to do more with less. Any human resources a freight forwarder has can be optimised and supported by the automation of back-office operations such as emails, freight tracking or quote generation. As the Boston Consulting Group points out, this is the case with digital forwarders who can more easily offer more services and cover a larger geographic area.
Flexibility and agility
Digitalisation allows for ad hoc planning and real-time responses to changes in demand or supply, or disruptions. Digitalisation improves end to end visibility, so any issue can be quickly identified or even anticipated, and the best workaround implemented. In addition, when the freight forwarders are better connected to carriers and customers, their capacity to act quickly and respond to disruptions is vastly improved.
Improved customer experience
The Cooperative Logistics Network, which represents freight forwarders around the world, states that good customer service in freight forwarding involves value-added services, timely delivery, and immediate response. Digital technologies ensure freight forwarders’ customers can easily search, book, amend and track bookings. For example, a quote that could previously have taken a forwarder days or weeks to prepare and send, can be calculated and issued almost immediately thanks to automation.
Sustainability
Freight transportation accounts for 8% of global emissions and is expected to become the highest emitting sector by 2030, according to the Intergovernmental Panel on Climate Change (IPCC). Digitalisation has the potential to help freight forwarders monitor emissions and identify areas where they can be reduced. Big data enables better decision-making and optimisation for more environmentally friendly operations and improving sustainability in logistics.
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