Freight Forwarder Survival Basics

Don’t Base Growth Strategies Solely on Statistics

On October 13, 2022, a Business Wire article stated the global third-party logistics market is valued at USD 1.05Tn and will be USD 1.92Tn by 2028 for a very healthy CAGR of 9.10%. However, IMF, in its November 12, 2022 “Chart of the Week” report, adjusted its world economic growth rate to show a slowing down from 3.2% in 2022 to 2.7% in 2023. Global logistics revenues can grow in a stymied economy if shippers are paying more for the same shipping volume, thus these market projections are not mutually exclusive. The main question is, who wins and who loses as a result of economic downturn?

Below is IMF’s list of advanced and emerging marketing economies with economic activity indicators confirming the gloomy outlook.

Beware of Turbulent Waters for the Average Forwarder

If we look strictly at projected trade volumes, global business is slowing, but only by a few percentage points. Similarly, there are major markets, like APAC and India, as well as Saudi Arabia showing continuing progress and international growth. Some safe harbors to head for if you’re not already there.

However, let’s step back from assuming that the market projections aren’t that bad and that surviving is not going to be that difficult.

The logistics and forwarding forecasts have yet to fully account for pending recessions in Europe and the USA. Nor do they reflect growth obstacles other than less trade growth. So, the future lay of the land for forwarders is yet to be determined and understood. Additionally, it’s not only the market size estimates the forwarder needs to consider. There are other important factors to take into consideration; factors that distort and intensify 2023’s global forwarding market heated competition.

Regardless of what the statistics indicate, the topic du jour is the perfect economic storm we are sailing through. Collectively, inflation, recessions, high energy costs, wars, droughts, floods, and political turmoil create logistics market turbulence within a hard-to-predict business environment.

The second factor for consideration is the changes taking place in the logistics competitive landscape. They are not as evident as the rise in the price of food or petrol, but they leave a significant impact. Much like a rogue wave that compounds the risks of an already stormy sea.

Apart from that, the forwarder’s future marketplace challenges are elevated with new pressures.

Some of the more relevant ones include:

A highly fragmented marketplace with falling freight rates, levelling of the playing field and more players reducing revenues and squeezing margins.
The demand for shipment visibility, driven heavily by E-commerce, is accentuated by extended peak season purchasing and disruptive supply chains.
Usage of core Logistics IT applications (WMS and TMS) are becoming commonplace and ineffective as a USP. More advanced technologies are being used for integrated data optimization, a key service differentiator.
Transport Intelligence estimates that 81% of all shippers book online, however, a PWC study shows 50% of global freight forwarders lack an understanding of digital culture and this is the biggest industry challenge.
Shifts in traditional trade lane volumes bring about dismantled and rebuilt supply chains for entering new markets and managing near-shore or on-shore sourcing.
Cash-rich shipping lines and some airlines are buying their way into the forwarding and 3PL world, and they know your customer details.
Global investors are funding digital-based freight forwarding start-ups, $1.2Bn in 2022 versus $100,000 in 2020. Flexport received the bulk, but a lot went to China digital forwarding start-ups.
Higher customer expectations and logistics workforce shortages challenge a forwarder’s ability to perform day-to-day tasks, let alone implement efficiency measures.
Before one believes that focusing on the relatively stronger APAC market will be the way through the storm, it should be remembered that China forwarders still hold the lion’s share of that forwarding market, around 50%.

In summation, it appears that small, yet nimble forwarders with solid niche markets and distinct service specialties should, with a lot of hard work, hold their own or inch ahead digitally with simple technology. And, the major 3PLs have revenue, efficiency, IT, and market reach buoyancy. However, the middle of the lane forwarder, seemingly focused on riding one wave after another, using the same competitive strategy, probably needs to map a new direction.

How to Weather the Storm with Better Protection?

Cash flow and good credit buy market share, advanced digital tools and a lot of marketing and branding, but without that kind of investment capability, what’s the best survival play for the struggling forwarder?

Here are three suggested course corrections for a forwarder to remain in the game, carve out a resilient niche market, and make good headway.

Create A New Technology-Driven Strategy:
Adopt the essential IT tools for efficient and scalable operations, optimum on-time delivery performance and real-time visibility. Moreover, pay-as-you-go, cloud-based logistics software applications are at your disposal. Apart from that, data integration with clients is much less complex and more affordable. Advanced cloud computing will arm the forwarder with new levels of transparency, fast identification of root causes and actionable data for better decision-making.
Transform And Enhance Partner Relationships:
Through this strategy, you can get into new markets and build more creative logistics solutions through coopetition initiatives with trusted fellow forwarders who complement your offering. Add to this the number of air and ocean carriers for a better selection of spot market quotes and services.
Make Customer Service Your Key USP:
Prioritize customer service and upgrade the support team’s skills, especially as it concerns customer care. Address every client touch point to simplify and speed processes such as quotes, online bookings, real-time shipment tracking and alerts.

Conclusion:

Surviving in a volatile market with heightened competition is tough going. Statistics and new strategies can point a firm in the right direction, however, getting the right kind of help from fellow professionals could be the key to staying ontrack. Aamro is well-positioned to help you sort out the key challenges and create new, innovative solutions for sustainable growth. Get in touch with us to learn how our tailored logistics solutions can underpin smooth sailing in all types of weather.