How Neutrality Will Save the Day For Freight Forwarders
For Freight Forwaders and NVOCC's the days of throwing more bodies at business processes are over. The rise of business platforms offers the industry a new path to growth.
When you hear the word “neutral” you generally think of Switzerland, which is nice. It’s a pretty country, with wonderful people, great skiing and an important annual conference on economic matters.In business, however, “neutral” isn’t what a company aspires to be. Businesses need to “win” and leave nothing behind for their competitors. Walmart didn’t become the world’s biggest retailer by thinking, “we need to be neutral and give someone else a chance at market share”.
And yet the very neutrality of the internet itself has enabled transformative outcomes for businesses. Communications tools such as Skype, WhatsApp and WeChat are all prime examples of success built on the neutrality of the internet. Retail businesses like Amazon, Ebay and Uber have realized exponential growth by harnessing the neutrality of the internet. Now, in the B2B world, we’re witnessing the rise of neutral, internet enabled platforms.
For platform businesses, the key to success is to deliver value to all stakeholders in an industry. This can only be achieved when the platform is neutral, having no interest in controlling the value unit, but rather in facilitating the interaction between the companies who trade those units.
In the logistics industry, the value unit is cargo. Logistics platforms, then, need to arrive at ways to match the buyers and sellers of cargo. Currently, the $150 billion annual freight forwarding industry “trades” cargo in a closed and fairly manual manner. RFP’s and RFQ’s are the channel for selecting vendors, while carrier contracts and service agreements are tools of price discovery, and manual methods like emails and phone calls provide access to spot pricing and promotional deals.
By contrast, a logistics platform analyzes market pricing & demand data to ensure freight forwarders are getting a fair (not necessarily lowest) price. At the same time the platform helps NVOCC’s get access to opportunities they couldn’t reach without opening up more offices. A platform centralizes shipment communication and processes which brings speed to pricing, booking, documentation and other key freight forwarding functions. And because platforms are internet based, they deliver these benefits with no deployment costs or investments in technology infrastructure.
But all this transparency and new technology is scary, right? I mean, who can you trust with your rate information and your customer records? And if you can’t trust anyone with this sensitive business data, then how do you get past the bottlenecks holding back the growth of your logistics business?
The answer: neutrality.
Neutrality is the key to growth
A successful platform needs to accomplish the following:
- The platform needs to support all its industry participants and not eliminate any of them.
- A platform MUST deliver customer value. In the logistics world, this means providing neutral tools that benefit all its participants. Functions like shipment tracking and digital document transmission should no longer be a barrier to customer acquisition for otherwise qualified freight forwarders.
- In order to grow, a platform must provide opportunity and visibility to its members without favoring any one over the others. Relationships, product & market knowledge are key value propositions of a logistics business. Typing emails and rate shopping aren’t..
- A platform must prioritize rate and client data security, something only possible when there is a neutral standard in place.
- A platform must maintain zero interest in the value unit (cargo). By doing so, platforms are incentivized to protect their customers, not compete against them. For freight forwarders, this means access to great rates and services and no risk of “backselling.”
Neutral, digital platforms and logistics
Think about this: you can buy 100 shares of Apple stock right now by calling a stockbroker. The broker submits the order and you receive a confirmation instantly. But nobody knows where those 100 shares of stock came from! They may have been sold by a pension fund in California, or your neighbor next door. Whom the seller of those shares was makes no difference as long as you got your shares at a fair price. The neutral platform here isn’t the broker, nor is it the buyer or seller of the shares. It’s actually a market like NASDAQ or a “market maker” who ensures that there’s always a seller for a buyer.
The value created by such trading platforms shows up in our savings accounts in the form of lower commission fees and transaction processing costs. It even allows individual investors to do things we never could have done before – you could actually buy and sell those same 100 shares of Apple every two hours and on a good day pick up a profit on each trade! This simply wouldn’t be possible if you or your broker had to manually search for a buyer or seller for every transaction request.
That’s the kind of outcome a platform can create for your freight forwarding and NVOCC business. No more wondering if you got the best rate or only finding out after you quoted and lost the business. No more back and forth of quotes by email. No more guessing how many of those quotes turn into bookings and what happens to those that don’t. And that’s just the beginning! Imagine having the tech tools to compete for the largest shipper accounts – business you have the skills to service but without the cost of infrastructure. It’s often said that freight forwarding is a “relationship business”. Platforms allow you to devote your best workers to building and growing those relationships instead of shopping for rates and typing documentation.
But none of it works without a neutral party who doesn’t compete, but rather supports the industry and your specific business.
So the next time you find yourself “turned off” by the concept of neutrality, remember: it’s likely to be the one thing that delivers the most empowerment to your freight forwarding business.
By: CoLoadX on March 1, 2017, 3:41 a.m.