Will Platforms Ever Take Over the Logistics Industry?
On February 2nd, 2017 JoC.com published an article with the headline “Forwarders, NVO’s slow to embrace automation”.
This isn’t the first time we’ve heard this. In fact, it isn’t even the 100th time we’ve heard about a lack of automation in the freight forwarding and NVOCC business.
Now with enough people screaming about a lack of automation for so many years, you would think someone would step up and do something about it. And in fact, they have. Process automation has been available, and implemented, for decades through industry leading software providers such as Descartes, Magaya, Suntek Systems and WiseTech. Without them, the industry would still be using the typewriter.
Need to manage your rates internally and speed up quoting time to your customers? CargoSphere and Catapult solved this problem ages ago. Their solutions are robust and do a great job of meeting the needs of freight forwarders and NVOCC’s.
You say you need shipment tracking? CN Tracking, INTTRA and Traxon already offer it, and nowadays their data is bundled within the monthly cost of an industry software package.
How about the front end? Does your company need a website? Services like Wix and SquareSpace can give you a free one with a template that is relevant to your logistics business. Even if you wanted to pay for more customization and graphics, the job can be done with a quality website designer for under $1,500.
So, if all the technology exists, and has been adopted, then what exactly is everyone looking for?
The Ecommerce Drop off
The short answer is ecommerce. Cargo owners want an environment that makes shipping as easy as buying a book on Amazon, or a travel package on Orbitz.
And, since the customer is always right, we have to accept that there is value in meeting their demands.
Freight forwarders and NVOCC’s typically take this customer input and address it in one of two ways:
- They dismiss the customer’s opinion citing a lack of understanding of the complexity of the international shipping process.
- They accept the input, but ultimately can’t do anything about it since there’s no piece of technology that meets the customers’ needs.
Years of mulling this point has yielded a standard industry response: “It’s a relationship business and you can’t automate that”.
At CoLoadX we take a totally different view of this market problem. Nobody knows the freight forwarding industry like we do. We figured out that you can’t simply “apply technology” and miraculously solve an industry’s problems. We know, better than anyone else, that this is a “relationship business”. But we believe that you can automate that, if you deliver automation to the right users in a way that works for them.
When properly applied, technology actually gives freight forwarders the ability to enhance their relationships with customers and creates more high value, relationship based opportunities.
So, What’s the Problem?
In a word: Commoditization.
Many freight forwarders already have online pricing and booking portals for their existing customers and are using it to grow, as evidenced by the success of Kuhne + Nagel’s KN Freightnet. C.H. Robinson’s Navisphere is often cited as another successful example of a customer facing online presence. So, dismissing online sales and service offerings as incompatible with the relationship business just isn’t true. However, these examples also expose the inherent problems with being successful in taking freight forwarding online:
- It’s expensive. There’s a reason why we’re citing K+N and C.H. Robinson after all (and that’s mentioned in the JoC article too).
- It’s not our “thing”. Yes, freight forwarders and NVOCC’s excel at solving the complexities associated with international logistics and trade. Give them some capable staff, Microsoft Outlook and a smart phone and they’ll show you what “follow up” really means. But building software just isn’t a part of the industry’s skill set.
- It’s a closed loop. This is significant. Assuming you can afford the tech, and get the resources to build it in house, you’re only successful within the closed universe of existing customers or sales prospects. Your technology investment becomes a tool for customer retention, not growth. Why spend all the extra money on retention when your current personnel can achieve the same results right now?
Now go ahead and offer this industry a website that works like Expedia or EBay for freight, and all you’re doing is creating a “race to the bottom”. Instead of improving the industry, you’re driving down margins and setting up the industry to be picked apart by a third party who can just focus on the technology and simply sign a service contract with any carrier willing to offer the lowest rate.
Related article: How Will Your Business Lose Out from the AliBaba & Maersk Deal?
The Bottom Line
While there is a great deal of complexity involved in international logistics, and freight forwarders deliver tremendous value in managing that complexity, the fact remains that it’s not a hard business model to understand: buy capacity, re-sell the capacity and add value by making sure the capacity and it’s contents are delivered in a timely and cost effective manner.
Pretty straightforward, right? The key to bringing your business online then lies in your ability to use the internet to effectively manage the procurement process and refocus your best talent on solving complexity for a growing customer base. That’s how automation, data, e-commerce and all the technological advances other industries use will enable growth and boost your bottom line.
By: CoLoadX on Feb. 23, 2017, 2:15 p.m.