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Is the traditional freight forwarding model obsolete?

A combination of the erratic global air and sea freight market, a growing shift in geographic focus towards the regional and the application of advanced technology and data analysis to the market is bringing the fate of the traditional freight forwarding model into question.

Indeed, Ti’s annual Global Freight Forwarding 2015 report provides a detailed review of these and other trends affecting the global freight forwarding market. Capacity excesses and declining rates describes a tumultuous sea freight market, while air freight celebrated a revival of volume gains in the last half of 2014, though rates remained fairly flat. On average, forwarders gained volumes but translating these volumes into profits proved difficult for some.

Meanwhile it appears the focus on global trade is shifting towards regional flows. The top three trade flows in terms of value are intra-regional within Europe, Asia and North America. Combined, these intra-regional flows comprised almost 50% of global trade in value terms for 2014. As such, we see M&A activity on the rise and growing introductions of new products such as multi-modal transportation to support these growing demands.

Finally the application of technology and data analysis is having a transformative effect on the forwarding market. Many forwarders are in the midst of upgrading and enhancing their individual systems. Some have been successful while others have struggled. As forwarders focus on their IT systems, e-commerce marketplace start-ups that provide shippers the ability to compare rates, book shipments, track in real-time and perform data analysis on results are on the rise. These have the possibility of disrupting the freight forwarding market. However, there are always pros and cons depending on a shipper’s needs.

In the midst of all these changes and potential disruptions, the freight forwarding market reversed its 2013 decline and improved for 2014. According to David Buckby, an economist at Ti-“Volume growth was actually robust in the year. For example, ranked by TEUs and tons, the top 20 in both sea and air forwarding saw average growth of about 5% in 2014. While the sea forwarding market was once again bogged down by year-on-year rate declines which meant another year of negative revenue growth overall, air forwarding rates on average declined only very slightly, permitting market growth for the first time since 2011.”

The future of the traditional freight forwarding model is indeed in jeopardy thanks to changing demand and enhanced technology. To survive, forwarders will need to plan, adapt and evolve or run the risk of becoming obsolete.
Source: Global Freight Forwarding 2015