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Today, global shipping organizations are struggling with a variety of challenges, including long bid cycles to gather rate quotes, unreliable annual freight forecasts, error-prone manual processes such as emails or phone calls, and little to no visibility of shipments in transit. These challenges prohibit shippers from enhancing their value propositions to customers because capital must be redirected to combat rising logistics costs from market volatility.
Technology-based digital forwarders address these shipping challenges by leveraging instant price quotes, streamlining communication through automation, providing real-time shipment visibility, and increasing available carrier capacity. Even though digital forwarders started operating a little over five years ago, they're primarily overlooked and underutilized. With extreme market volatility gripping the global freight market —e.g., ocean transportation rates are up, over four times historical pricing — shippers need to identify forwarding partners that are agile and can respond effectively to these present challenges and future market changes. These challenges will not go away anytime soon, as the global freight forwarding market is forecast to grow at a CAGR of 4% between 2021 and 2027 —the growth stemming from strong cross-border demand in e-commerce and the rise in trade agreements between countries.1
So, how can global shipping organizations, whether a distributor, producer, or direct manufacturer, employ digital forwarders to expand and streamline theirlogistics networks to navigate today's market volatility?
Use dynamic instant rate-quote marketplace for transportation rates to cut bid cycle times
Use dynamic instant rate-quote marketplace for transportation rates to cut bid cycle times: Most global shippers gather pricing from traditional forwarders by requesting quotes on network lanes through a request for proposal, quote, or mini bid. The turnaround time to receive a quote is unpredictable, and traditional forwarders that provide quotes manually take an average of five days to return a bid request. In comparison, digital forwarders, whichleverage API technology for their booking platforms to gather price quotes, will provide a quote instantly or within 24 hours.2
In this volatile market, where transportation rates for critical ocean and air lanes are continuously changing, instant price quotes provide far more transparency into infrequent lanes and sporadic lanes with a volume of less than five to ten annual shipments that appear in a shipping organization’snetwork. Historically, shippers notoriously overpay ~10-15% on these routes and are taken advantage of because of the lack of data and rate transparency. Now, with real-time quotes, it’s possible to compare offerings and find savings opportunities with a more cost-effective provider.
Automate manual processes to improve stakeholder communication and prevent additional surcharges: Digital forwarders can automate communication to stakeholders in the forwarding process, store shipping documents electronically, and track freight in realtime during transit. With this technology, shippers can set automated alerts to trigger service events, such as notifications when an order is delivered or picked up, an ETA is compromised, or a Bill of Ladingis received at delivery. By automating these service events, many of the accessorial costs incurred by shippers due toinefficient planning can be significantly reduced, providing immediate savings. These costs include demurrage, border delays, and late delivery fees. By our observations, these variable charges, on average, can account for an additional 5-7% of the total shipping cost. In some situations where the organization experiences more shipping errors, they can account for 10%+.
Improve shipping strategy with access to real-time transportation rates and market data: Shippers struggle today with poor forecasting of container capacity and low visibility into freight rate fluctuations. In global ocean shipping, carriers have become more stringent in terms of giving only the containers that shippers ask for when they say they are needed. Carriers are often unwilling to add container capacity unless they can pass on substantial surcharges in addition to historically high container rates. As a result, shippers are turning more and more to the open spot market. According to Chris Cassidy, EVP at Trax, 60-80% of shipments are presently on the spot market as shippers struggle to secure capacity. Instead, shippers should leverage digital forwarders’ market data to determine when spot rates are more competitive than contract prices and vice versa. Traditionally, shippers would use requests for proposals to gauge market rates and decide whether to continue with a full bid or wait to go to market. That process can take months and results in wasted resource time should the shipper choose not to go to market. Instead, use the real-time market data to benchmark rates and determine if you should consider a full bid within a couple of days versus months.
Slash carrier onboarding time by integrating digital forwarders with Freight Audit and Payment (FAP): Onboarding traditional forwarders to a FAP could take days or weeks depending on the complexity of a shipper's carrier network. GEP has found that 20% or more of all freight invoices are incorrect, so carriers must be onboarded as soon as possible for anFAP system to begin flagging and correcting invoices from new carriers. With FAP providers delivering single-digit percentage savings on all invoices, quick onboarding will prevent months of overpayments. Digital forwarders streamline the onboarding process by sending FAP providers normalized and enhanced carrier data, which reduces the number of manual onboarding forms that need to be completed. A 2019 Gartner survey shows that 48% of shippers currently have FAP providers and another 32% plan to partner with one in the next two years.3Becauseofthis growth, it is an opportunity that shippers cannot overlook.
Although global shippers may find it difficult to adjust their long-standing partnerships with traditional freight forwarders,because of high switching costs or required infrastructure investments, they must start introducing digital freight forwarders to their networks. As traditional forwarders struggle to react to the current market environment and global transportation costs continue to rise, digital forwarders are the solution. The path to digital transformation within freight forwarding is no longer wishful thinking. It is essential to survival. As companies compete for best-in-class global supply chains, shippers who make the adoption will persevere.