Many companies are still lagging behind in terms of their transport performance and the use they make of the growing digitization in the transport sector. Too often, the complex administrative and physical process is still largely manual. Data are often retyped or relayed via phone calls. The result? Indifferent transport and high costs. Fortunately, there are many positive developments. From forwarders developing software through existing software players providing increasingly end-to-end and real-time insights to carriers engaging in forwarding. The market is in a state of flux and there are a variety of software development initiatives. As a shipper, now is the time to reap the benefits.
Wake-up call
A lot has happened in the transport world in recent years. Fuel prices have never been higher and container prices soared by as much as 10 times. Ports were closed due to the Covid pandemic, and the blockage in the Suez Canal caused quite a few problems. Affected shippers were left wondering where their cargo might be. On a ship just ahead of the blockage and about to arrive on time? Or stuck on a ship behind it, with a delayed delivery in consequence? Because of incidents like these, more and more shippers rightly expect to know at all times where their shipments are and when they will arrive. Unreliable deliveries and inefficient transport operations are less and less accepted. The market has a greater need than ever for more information and better collaboration between the different players. The perfect time to shake up digitization within the transport sector.
Another impetus comes from the rise of digital freight forwarders. If there's anyone still working the 'old-fashioned way', it's traditional freight forwarders. With phone calls, e-mails, and spreadsheets, they communicate with shippers and carriers as intermediaries. As a customer, do you want some information? Then you have to manage with a shipment number and booking code that allow you to check the status of a shipment manually. A process that doesn't enable you to anticipate exceptions and which yields little information even after much manual effort.
Platform and smart software
A number of logistics software providers and digital freight forwarders are driving the considerable digitization of the transport world. Excel sheets are being replaced by platforms. Emails and phone calls give way to automated communication using smart software. Collaboration runs more smoothly and customers have more information that allows them to respond faster to developments in the market. An additional benefit is that smart software eliminates quite a lot of paperwork and is able to fill containers more efficiently through consolidation. This digitization is transforming the transport market. But the question is: transforming it how?
In the long term, several scenarios are possible. The first is that there will be a couple of super digital forwarders dominating the market. The drawback is that shippers will be stuck, because the insights, the coordination, and sometimes the execution too will all be carried out by the same player. Like going to the supermarket and only being able to buy own-brand products. This scenario seems unlikely. After all, shippers want to maintain a degree of flexibility and be able to change forwarders and carriers without changing their entire way of working. It is therefore more attractive for large shippers to partner with an independent operator that offers the ability to control and assess forwarders and carriers through its software.
A second scenario sees a partial consolidation of the transport market but with many different players remaining active. In this scenario, we do expect shifts in the different business models of traditional 4PLs versus forwarders, carriers, and players offering several of these services together, whether or not combined with their own digital platform. In a third scenario, everything ultimately remains as it is now: very fragmented. With a vast number of forwarders, but also carriers that will do the forwarding themselves and everything in between. This is less likely as increasing digital asset development in the transport sector puts pressure on consolidation. It does not benefit the industry if each player individually starts to develop a complex and sophisticated platform.
Initiatives for software development
The second scenario seems to be the most probable. In other words, a market that is no longer hugely fragmented but still has many active players. On the digital side, there will be some frontrunners. Probably a number of digital forwarders that can be particularly relevant to smaller shippers, and several software players that provide larger shippers with the independent software capabilities to manage their transport most effectively. A diverse and hopefully more transparent market where software is developed from different angles and can significantly optimize transport. Where fair competition ultimately ensures that the best initiatives will survive. And that is exactly what you want as a shipper because then you will always have one of the best options within reach.
Toward a digitally-driven supply chain
Again as a shipper, it is important to make a move now. If you still work with emails and spreadsheets, now is the time to switch over and see what digitization can do for your business. After all, you want to understand your supply chain and meet customer needs in terms of visibility and flexibility. That means that you must move towards a digitally-driven supply chain, both in transportation and elsewhere.
If you are a small business, it may be interesting to experiment with a digital forwarder. Then you have the convenience of working with just one partner. For larger operators, an independent software provider with a more state-of-the-art product is the obvious choice. They are a sort of Switzerland. They don't mind which forwarder or carrier you book shipments through. As a shipper, that gives you the opportunity to collaborate more easily with a range of players. You also have more flexibility to switch. You are always sure of the cheapest price and often have a more flexible product that can handle different ways of working and provides objective insight into the performance of the various players in your transport chain.
Sunlit uplands
A collaboration like this is often something you enter into for the long term. Therefore, you should consider the challenges of emerging players in your decision-making. Their promises and ambitions tend to be high. They make hefty investments in their new business model with the idea that it will turn a profit in a few years. Whether this will actually happen is uncertain. Think carefully about the potential risk to your business. Getting different solutions to work well together can also be a huge challenge. If you choose several partners, each providing one component of the transport management software you need, it is wise to explore whether this is going to translate into the best results for you as a shipper.
Regardless of where the market is heading, it seems to me that the current experimentation is a good thing. There is momentum, development, and competition. Ultimately, the strongest will survive in a more digitized transport sector. Those who help shippers get what they really need: end-to-end visibility and control of their supply chain.
Elmer Spruijt, VP Transport Management at Descartes
INDUSTRY WHITEPAPER
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