International freight forwarding is slated to become the latest sector to undergo a rapid transformation through technological innovations due to the rise of digital start-ups that are attracting billions in funding from venture capitalists. However, until a few years ago not too many tech focused funds paid attention to this age-old industry that has been the back-bone of international trade for many years.
What is freight forwarding and how is it changing?
Freight Forwarding is a trillion-dollar industry that represents the vast network of freight agents, truckers, carriers(airlines and shipping lines) and customs brokers that are responsible to manage different legs in an international cargo shipment. It is this network that makes it possible for consumers to get access to their favourite imported products or for export businesses to service global markets.
Over the last 4-5 years the freight forwarding market dynamics have been disrupted by carriers backward and forward integrating to offer more end-to-end freight services and by digital freight start-ups that are changing the game by offering transparency in pricing and shipment visibility via online platforms. These competitive forces are putting pressure on traditional freight forwarders (i.e. the middle-men).
Carrier& freight forwarder dynamics:
Maersk, the largest shipping line, invested in a trucking tech platform to further integrate its services while CMA CGM, another top carrier, has started operating smart containers that transmit real-time data on container position and condition. Airlines are digitizing rapidly too. For instance, Lufthansa has tied up with an international freight tech firm to launch an online instant price and booking system. In 2019, carriers will continue to invest in online price quotes and end-to-end capabilities to further optimize their service offerings.
On the freight forwarder side, most multi-national companies are looking at making acquisitions in 2019 to increase their market-share and improve their tech solutions as they look to benefit from the wave of digitization. Most other small to medium forwarders will need to tie-up with digital freight market-places to ensure they can accelerate into the future or be risked being left behind.
The digital disruptors:
Digital Freight tech start-ups have developed cutting-edge freight management platforms for supply chain teams to manage their entire rate procurement, make optimal data-backed freight decisions, track shipments real-time and analyze logistics expenditure and performance online.
As these start-ups grow larger, amass their own customer data and the freight community creates more interest groups to benchmark industry-wide performance, the range of tech-enabled services will improve resulting in more efficiency across the freight industry. Moreover, as carriers further digitize their service offerings we expect to see more integration between digital freight start-ups and carriers on instant pricing and bookings.
Lastly, we can also expect more successful roll-outs for new age technologies like block-chain as the industry begins its journey towards paperless shipping documentation.
In 2019, customers will adopt new technologies more rapidly as the value proposition strengthens and they better understand the potential productivity improvements and cost savings. It will be pivotal year for international freight tech and there is now serious momentum building that will see massive moves by carriers, forwarders and heavily funded tech start-ups to take freight digitally forward into the future.