Insights

Do freight forwarders need to become technology companies?

Sep 21, 2022

The last few years have been a tough time to be in supply chain, for shippers, carriers and manufacturers alike – kicking off a range of technological innovation in the space. We’ve discussed these issues with a number of experts, but it’s also worth considering what it’s like to be a forwarder today, and what that means for the role they play in the supply chain ecosystem. 

We have to start with the obvious proviso that Zencargo is itself a digital freight forwarder and we face many of the same issues as the rest of the industry. To get a balanced view, we sat down with  John Smith, Global VP of Operations at Zencargo on our weekly podcast Freight to the Point. John is a 30 year veteran of the industry and has worked at leading businesses like Ceva and Damco before joining Zencargo a little over a year ago. 

As the freight market continues to throw up new challenges that require new systems and approaches, let’s look at how forwarders are dealing with them, and whether the technological evolution required will fundamentally change these businesses. 

The freight industry is running behind

Global digitisation is nothing new – every industry has seen huge technological change over the last two decades, but supply chains and freight forwarders have faced challenges in keeping up. 

‘Thinking of my first five or 10 years in the industry, [digitisation] was pretty slow. It was always behind other industries. If I look at industries such as banking, a lot of the automation, a lot of the digitalization, in that field was done many years ago,’ says John.

‘If I look back to when I started, [freight forwarding] was very, very admin heavy. There were a lot of manual tasks. It was very much telephone-based. We didn’t even have email back then, at the very beginning when I started.’

The middle-man nature of freight forwarding was always going to be a challenge for digitisation – forwarders have to engage with a dizzying number of stakeholders and external systems, from client-side ordering to manufacturer’s schedules. This meant that the task of systematic transformation was always a sticking point, as the cost of not changing wasn’t painful enough to inspire action. Until recently. 

‘Having paper files pretty much disappeared when COVID hit and people were working remotely, because you didn’t have the ability to move one paper file from one desk to another. So a lot of things have changed I’d say in the last three years,’ says John. 

But with plenty more to do on the transformation journey, it’s worth wondering why forwarders have struggled to change.

Transformation as a sticking point

At Zencargo, we started with the idea that the movement of goods and the movement of data should work hand in hand. But not everyone has this option. For traditional forwarders, the task of integrating technology into existing processes was always going to be a challenge.

‘If you look at the traditional forwarders, they’ve always been focused on supply chain, moving goods from A to Z. Some of them will have had products where they could work at SKU level and PO level and give a level of visibility on the platform. But tech hasn’t generally been the core of what they do,’ says John.

Now that technology is becoming a key differentiator in service, margin and efficiency, forwarders are being pushed to add new tools and update their working methods, but without developing their own solutions, many end up relying on a patchwork of solutions.

‘Since a lot of them don’t specialize in tech, they will then bring in platforms that can do certain aspects of what [they need]. But it’s a standardized product that many forwarders will be using. It’s not specific to them,’ says John.

Having a system that fits your business, and your customers’ needs is going to be ever more important, especially as disruption shows no sign of slowing. 

Applying technology in practice

Given the time and cost involved in technology implementation, it’s important to highlight the practical utility it can provide. Unfortunately, crisis points that require quick solutions keep coming up. One of the most recent examples was disruption at Felixstowe, where strikes have caused widespread disruption. John explains how Zencargo used our own technology to handle the incident.

‘Once it was confirmed, the dates of the strike, we took literally five minutes. We had the data of all shipments that were doing just before, during that period, and just after, which then helped us build a plan around how we manage that for our customers, how we can ensure that we keep the supply chains moving and we can make sure that we don’t get end up with stock on quay in Felixstowe.’ explains John.

It’s also important to highlight that forwarders don’t operate in a vacuum – as the rest of the industry embraces technology, from client’s cloud ERPs to carrier tracking systems, forwarders need to be ready to integrate with these solutions.

‘Hapag-Lloyd are now committing to putting trackers on all of the containers. That’s kind of a big leap forward and I’m hoping that other carriers will follow the same route because it then helps with that level of visibility….Maersk and MSC, if they start to follow suit, then we’ll see a large percentage of the shipping lines going down that route as well.’ says John

Technology alone isn’t enough

The role of data and technology goes beyond just moving containers – gathering insights about orders, production, transport and workflows has the potential to deliver long term, structural benefits for shippers as they solve bottlenecks and improve their processes. This is a progressive process, though, and needs consistent work and review. 

A digital improvement project requires a long term approach to relationships. ‘ I think it’s always beneficial to have one true partner that you’ve got in your supply chain that you’re working with. And I think that’s really important for both, not just in the general freight forwarding, but also in the digital freight forwarding side.’ says John.

The modern freight market is increasingly complex for shippers – freight forwarders have a key role to play in helping their customers navigate uncertainty and build better processes. While technology is a key part of delivering value, it also needs the right attitude and relationships. 

‘‘I think the right partner for you generally will come in and ask a lot of inquiring questions at the beginning and really want to dig deep into your supply chain and understand what has gone on, what does the future look like, where are you wanting to get to as well,’ says John.

Forwarding for the future 

Freight forwarders still have an essential role to play in enabling the global supply chain and supporting shippers. However, as the market evolves, those without the right technology will struggle to offer the service that customers expect and adapt to disruptions in the market. 

Zencargo’s digital freight forwarding service is based on quality data, planning and collaboration, giving your business the insight you need to keep your supply chain moving. If you want to find out more about how we approach supply chain, we’re offering no-obligation strategy consultations with Zencargo Co-Founder and CCO Richard Fattal. Book your own session right now and start moving your business forward.