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PRELIMINARY FINDINGS JUNE 2016

BCO'S ARE INCREASINGLY WORKING WITH INDEPENDENT FREIGHT FORWARDERS

The preliminary findings from 'The Role Of The Independent Freight Forwarder In Global Logistics' report which is to be published later this year confirms that Beneficial Cargo Owners (BCO’s) are switching the management of their global freight and logistics requirements away from carriers and multinational 3PL's to independent freight forwarders.

In 1996, 75% of all sea freight volumes were booked directly with carriers, today that number has dropped to 59% and is expected to go below 50% by 2020. Even more remarkable is that it is independent freight forwarders that will enjoy a greater market share of this growth than multinational 3PL’s at 30%

The findings identifies three key drivers for this development:

  1. The growing complexity of global supply chains
  2. The increasingly commoditized nature of the carrier offering.
  3. An increasing ability by Independents to meet BCO's demands

1. Growing complexity in Beneficial Cargo Owners Supply Chains: the key drivers:

  • An increase in the number of manufacturing and distribution locations :In response to the need to combine off, near and on shore capabilities.
  • Demand from consumers for more rapid fulfillment.
  • External shocks to the supply chain: BCO’s are building resilience and contingency in to their supply chains in response to what seems to be a growing number of supply chain disruptions whether from “acts of God or Man”
  • E-commerce: The revolution in how consumers shop is being adopted by businesses also leading to more pressure on supply chains for greater transparency and flexibility
  • From Pallet to Package: Omni Channel has introduced the “package” as a unit of freight
  • Logistics is a differentiator: A growing understanding by BCO’s of Logistics as a tool for value creation and competitive advantage.

2. The increasingly commoditized nature of the carriers offering

  • Lack of service:
  • Carriers are abandoning direct relationships with BCO’s who don’t command very large volumes of freight.
  • Carrier’s sales and customer service teams have been slashed as the flight to the bottom on rates continues.
  • Super alliances between carriers has further eroded the personal interfaces between the shipping lines and BCO’s.
  • Schedule unreliability
  • Lack of capability:
  • Carriers lack the end to-end service supply chain capabilities, focusing instead almost entirely on cost.
  • Price volatility

3. An increasing ability by Independents to meet BCO's demands

    • Service
    • Independent forwarders offer personal local service
    • Independent forwarders that are members of global networks offer a world wide solution.
    • Independent forwarders leverage their relationships with carriers to influence reliability of service.
    • Price
    • Independent forwarders leverage their relationships with carriers to guarantee the best rates.
    • Independents are increasingly willing to work on an “open book” policy and manage freight flows on a fee rather than margin basis.
    • Value Creation
    • Independent forwarders provide integrated solutions across both supply and distribution networks
    • Thinking outside of the box, actively engaging in rethinking and remodeling processes in pursuit of added Value, Visibility and Velocity
    • Moving up the value chain to embrace E Commerce fulfillment capability and 3D Printing

INDEPENDENT FREIGHT FORWARDERS ARE PROGRESSING AND GOING GLOBAL

Complex demands from BCO’s affords independent freight forwarders the opportunity to offer customized services. Customized value-added services enable freight forwarders to be more profitable which is particularly important at a time when transportation is becoming increasingly commoditized and freight rates are at an historic low. Complex demands from BCO’s enable freight forwarders to develop expertise in niche verticals. Niche verticals by their very nature result in higher barriers to entry and enable the freight forwarder to differentiate themselves.

Traditionally, Freight Forwarders acted as intermediaries between BCO’s and carriers providing a failsafe when there were delays or interruptions in the transportation process by offering warehousing services etc. In the late 1990’s large freight forwarders expanded globally and began to offer contract logistics services to complement the traditional forwarding, warehousing and documentation offering. This gave rise to the third party logistics (3PL) industry. To stay competitive independent freight forwarders created or joined global networks and gradually moved up the value chain, so much so, that today the line between forwarding services and contract logistics services are blurring.

Initially IT capability was the key differentiator between the multinationals and the independents however over time as technology democratized the gap closed. Indeed legacy systems developed and sometimes inherited by the multinationals often proved to be a hindrance when global roll outs were being executed. Today, the playing pitch is level, and the opportunities for independent freight forwarders are more exciting than ever. The key is to evolve and BCO’s as discussed earlier are more than and willing to partner with the sector.
The rewards are compelling, complex demands from BCO’s affords independent freight forwarders the opportunity to offer customized services. Customized value-added services enable freight forwarders to be more profitable which is particularly important at a time when transportation is becoming increasingly commoditized and freight rates are at an historic low. Complex demands from BCO’s enable freight forwarders to develop expertise in niche verticals. Niche verticals by their very nature result in higher barriers to entry and enable the freight forwarder to differentiate themselves.

The demand for global coverage by BCO’s is also key to the evolution of independent freight forwarders. The more progressive are forming partnerships with other like-minded freight forwarders across the world and are joining global networks to establish these partnerships. Choosing the right network can be particularly challenging for freight forwarders as it puts them in a position with their customers where their network partners are expected to deliver to the same quality as they themselves do. BCO’s need to be confident that the level of service available to them locally is replicated around the world.


INDEPENDENT FREIGHT FORWARDING NETWORKS COME OF AGE

There has been very little in the way of research on how successful freight forwarding networks operate. As a result BCO’s and freight forwarders have access to very little information when evaluating the market place. The Institute will address this knowledge deficit in its final report.

BCO’s are global in their approach to sourcing and distribution and as a result outsource to freight forwarders who can provide global coverage. Therefore for independent freight forwarders, membership of a global network is crucial. Network membership enables freight forwarders to form relationships with other freight forwarding companies, gain access to their resources and link with their activities all critical in connecting BCO’s to international supply and distribution networks.

Combining their resources and activities with those of other freight forwarders will result in BCO’s materials moving faster at lower costs with superior customer service than competitors. However not all networks are the same and that is the challenge for freight forwarders, how to go about identifying the correct network to partner with and having chosen a particular one, how to make membership work for both the company and its clients.

There has been very little in the way of research on how successful freight forwarding networks operate. As a result BCO’s and freight forwarders have access to very little information when evaluating the market place. The Institute will address this knowledge deficit in its final report. Our approach is to first identify a benchmark network to research and for this the Institute has chosen the World Freight Alliance.

The report will explore:

  • The development of the WFA and provide readers with a unique insight into the development of an international network of regionally independent freight forwarders.
  • How the network operates focusing on the relevance of relationship and network theory to the behavior of medium and large sized freight forwarders in business networks.
  • The development of the freight forwarding network from the perspective of freight forwarding firms.
  • How a network comprising competing forwarders operates and will focus on the relevance of relationship and network theory to the behavior of freight forwarders in business networks.
  • How by leveraging the WFA platform, members have developed relationships with the aim of pooling their resources and activities to offer a freight forwarding service on behalf of other firms in the network.
  • How members have by connecting with freight forwarders in other countries and combining their resources and activities with those firms offer a more expansive service with a global reach greater than each individual firm would be capable of offering alone.

WORLD FREIGHT ALLIANCE: BENCHMARK FREIGHT FORWARDING NETWORK

The  World Freight Alliance (WFA) has been named the benchmark Independent Freight Forwarding Network globally.The WFA is an industry network where freight forwarders have developed relationships with the aim of pooling their resources and activities to offer a freight forwarding service on behalf of other firms in the network. Thus, by connecting with freight forwarders in other countries and combining their resources and activities with those firms, the network of freight forwarders offers a more expansive service with a global reach greater than each individual member would be capable of offering alone.

The World Freight Alliance (WFA) enjoy a very distinguished history in the development of global independent freight forwarding networks. While established in 2003, WFA’s roots go back to 1990 when Airborne Express the express delivery company and cargo airline, headquartered in Seattle, Washington developed the Overseas Express Carriers (OEC) alliance. The OEC, was an alliance of independent global express companies that functioned as a worldwide delivery network for its members to compete with larger companies.

In 2003, when Airborne was bought by DHL to gain a foothold in the US market, the other members of the OEC alliance with 13 years hands on experience of dealing with each other formed the WFA.
The WFA is an industry network where freight forwarders have developed relationships with the aim of pooling their resources and activities to offer a freight forwarding service on behalf of other firms in the network. Thus, by connecting with freight forwarders in other countries and combining their resources and activities with those firms, the network of freight forwarders offers a more expansive service with a global reach greater than each individual member would be capable of offering alone.

The WFA unlike the majority of other networks is member owned and operates on a not for profit basis. WFA has been developed by principles from freight forwarding companies who in response to a growing demand from large multinational shippers form global alliances with like minded independents across the world.

WFA, carry out an exhaustive verification process on the information provided by new applicants and of the references provided to assure that new company’s fit within the profile of the companies of the network. This approach to member recruitment guarantees that:

  • WFA is a trusted global network with local market knowledge.
  • Is comprised of dedicated members specifically chosen for their exceptional performance and customer service.
  • Demonstrate network standards which guarantee effective hands-on management and help build lasting relationships.

WFA members demonstrate commitment in relationships which over time has led to the development of interdependent activities, increasing the level of mutual productivity. WFA Network relationships are founded on strong conviction and mutual commitment to excellent service when dealing with the handling of a client’s freight. Personal relationships between WFA members have been developed through informal daily contacts, and through formal network meetings, which in turn has generated ties that contribute to the creation of a sense of belonging and commitment to the network.

To Read an in-depth report on WFA's Achievement Click Here

 

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