Not surprisingly, Digitalization was one of the recurring themes at the transport logistic online 2021 on 04-06MAY21. “New vs. Old - Are platform providers the better freight forwarders?” was the discussion topic moderated by Prof. Dr. Ulrich Müller-Steinfahrt, Institute für angewandte Logistik (IAL), Hochschule Würzburg, featuring panel experts Nicola Rackebrandt, Managing Director at STERAC Transport & Logistik GmbH, representing traditional freight forwarders, Nicolaus Schefenacker, Co-Founder & Managing Director at sennder, representing digital forwarders, and Frank Iden, Managing Director at Hettich Group, on behalf of shippers.
Prof. Dr. Ulrich Müller-Steinfahrt, who has followed developments in logistics for a good three decades, including specific digital evolution in the industry over the last six years, provided the foundation for discussion by illustrating the challenges faced by the logistics industry today. He outlined eight areas which appeared focused on road freight in the first instance, though are in part valid across the entire logistics spectrum. They were: missing infrastructures (leading to inefficient journeys and delays), e-commerce developments (smaller shipments in increasing amounts, chaotic delivery structures, the need for more frequent services), a lack of drivers and capacities, the concentration of providers (consolidations such as DSV-Panalpina-Agility, and an increase in bankruptcies), regulatory restrictions and limitations (tolls, emission limits, driving hours, etc.), sustainability requirements (transparency, real-time tracking, CO2 monitoring, optimization), the need for greater flexibility (unforeseen circumstances such as Covid-19 requiring Plan B/C/Ds, and dynamic, swift adaptations), and finally, the one challenge that could, at the same time, offer the solution for the previous points: the need for greater efficiency and digital transformation. The final point is also a core one that is increasingly influencing investment decisions and used in auditing business models to see if they are future proof.
David and Goliath
Looking at Germany, the transport service industry has an annual turnover of around 73 billion euros, and consists of 14,800 freight forwarding companies. With the exception of a few larger companies, these are mainly medium-sized enterprises, and their number is shrinking. 10 years ago, there were roughly 16,500 active freight forwarding firms. In addition, Germany has around 45,000 road feeder companies, of which a good 50% is made up of just 1-3 truck fleets. In comparison, around 40 digital freight platforms currently exist – though these are not restricted to Germany. On the one hand, those digital freight platforms are growly rapidly, on the other hand, they are very varied in their offering and set-up. Some are expanding, whilst others are again disappearing – it is a volatile petri-dish and one that is not necessarily what it says on the packet. What initially began as digital freight exchange platforms developed into tender platforms, then transaction platforms with the addition of payment options, and subsequently grew into digital partnering platforms before the emergence of so-called “online freight forwarders”. A closer look at those firms marketing themselves as online freight forwarders often reveals that what they are in reality, are digital cargo agents that coordinate with traditional freight forwarding or road feeder service providers.
Digitalization is a key requirement
Speaking on behalf of shippers, Frank Iden clearly enunciated the growing importance and need of digital data, not only from the point of view of track and trace which is a core requirement for any shipper wishing to offer the best customer service, but also with regard to data transparency when it comes sustainability measures – another growing performance indicator – and process optimization, and lastly, from the perspective of the shippers themselves setting up a smart factory: digitalized data should feed into their own processes in future, too. He also pointed out that digital forwarders are excellent when it comes to standardized processes. The moment transport plans need to deviate from the norm, then this is where traditional freight forwarders come into their own. Both sennder and STERAC agreed on the last point. The forte of digital freight forwarders lies in the automation of simple, general cargo processes, whilst traditional freight forwarders are the experts in dealing with highly complex, often one-off transport requirements across all transport modes, and including value added services such as customs clearance, warehousing, and quality checks, for example.
Digital freight forwarder pros and challenges
Nicolaus Schäfenacker outlined the USPs of a digital freight forwarder. These included a) the reduction of errors through automation, b) the transparency of data between road feeder services and shippers, and that data enabling interactions to be better understood, thus leading to optimization and further development, c) the breadth of the network given that a number of small and medium size companies gain visibility on the platform, adding to a large, geographical offering and bringing greater flexibility in the choice of vehicle numbers and sizes, and d) being able to reduce costs, improve sustainability, and increase efficiencies and load factors on the basis of historical data and predictive analysis. Yet, the challenges are there, too: to best understand the freight forwarding business, digital freight forwarders which are often start-ups with a more technical than logistical background, need to learn from those experienced in logistics. Building an in depth customer relationship such as those enjoyed by successful traditional freight forwarders is trickier as an online platform, and – as Covid-19 also illustrated – the digital freight forwarder is reliant on the traditional service providers’ employees on the ground to be able to function smoothly. The influence on front-line staff is not there. The potential for multimodal is also still open. Whilst digital freight forwarders are mainly concerned with road feeder and/or air cargo, with a slight interest in rail services, sea freight is still largely untouched.
The future is hybrid
In 2016, at almost the same time as sennder was founded (2015), STERAC, like a number of other forward-thinking traditional freight forwarders, also developed a clear digital strategy to harness the benefits that digitalization brings, namely process optimization and interface connections to its own partner companies and service providers. Digitalization has brought with it transparency and new standards. All panellists agreed that the future will see hybrid solutions. Traditional freight forwarders will digitalize and continue to offer their USP as comprehensive transport solution consultants for complex shipment requests, whilst digital freight forwarders will continue to streamline the simple cargo streams on point-to-point routes, offering a wide variety of service providers to their customers. It was clear that traditional freight forwarders will not disappear, but that they will endeavour to automate their standard processes as far as possible. While traditional freight forwarders will strongly integrate digital solutions and become hybrid, the panellists did not foresee that digital freight forwarders will move towards also setting up their own, physical service solutions. They will remain purely digital. To answer the debate question, then: it is not that digital freight forwarders are better, but that better freight forwarders are those who incorporate digital processes.
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