【Forwarder2.0】The age of the digital forwarder. How small and medium-sized companies will fight for the future

Hello, it’s IINO.

In this video, I would like to explain about digital forwarders including my thoughts on them.

What Digital Forwarder Is

First of all, let me explain the term digital forwarder to those who are not familiar with it.

Digital forwarder is a forwarder that uses its own IT platform (PF) to centralize management for immediately submitting quotes, bookings from shippers and cargo tracking.

Companies well known are Flexport in the U.S., Sennder in Germany and Shippio in Japan.

The Difference between Traditional Forwarder and Digtal Forwarder

First, let’s look at the differences between traditional forwarders and digital forwarders.

Traditional forwarders;
Quotations: Confirmed on a case-by-case basis, submitted via email
Booking: Bookings are accepted by email
Tracking: Sales or customer service check and contact customers

Digital Forwarder;
Quotation: Displayed in PF
Booking: Accepted by PF
Tracking: Displayed in PF

As you can see from this, digital forwarders are centralizing information in a platform, so that you can easily access the information you need.

Quoting, Booking and Tracking are the main functions at the moment, but I believe that the services will expand further in the future.

Expected Functions

Some of my own predictions for the future are included, but I think the future functions will be supposed the following.

B/L error check, which means AI to find errors from S.I, I/V, P/L
eB/L (system needs to be revised)
Display of remaining space on the vessel.
Display of congestion at each port (number of days offshore waiting)
Uploading photos and displaying HS Code
Enter HS Code and display the required documents (other laws and regulations)
Pre-confirmation of deliverability (mainly for DG cargo) by entering HS Code
Automatic calculation of import duties and consumption taxes
Send Arrival Notice electronically
QR coding of D/O
Display of on-time status of import declaration
Countdown to the expiration of free time
On-time display of demurrage costs
Calculation of trucking cost by inputting shipping address

I believe that all of this is technically possible by using AI and blockchain.

The Reason Why The Logistics Industory Has Not Gone Digital

If you are working in the logistics industry, you would like to have the above useful tools and functions.

Then, why hasn’t the logistics industry gone digital, even though the technology is already in use in other industries?

There are two main problems with this as following.

People in the logistics industry are old-fashioned (conservative).
There are many business processes and many different companies involved.

I believe that the former conservatorship will be solved by time, but the latter problem, which the business process is divided among the companies involved, is troublesome.

In many cases, forwarders, especially small and medium-sized companies like ours, basically do not have assets (their own facilities).

So, it is the reality that they outsource customs clearance, truck, warehousing and so on, including ships and airplanes, to multiple vendors.

Nowadays, each vendor or company has its own system. Without a system, it would be impossible to handle the huge amount of information on logistics arrangements but this system is a hindrance.

It is technically and rightly difficult to link the forwarder’s platform with each company’s system, because each company’s system is different for one transportation.

I have a think that the issue regarding system rights is particularly difficult.

From a system vendor’s point of view, it’s like, “Why do we have to work with that platform?”.

I think we need a technology that can connect to existing systems in a simple way.

How To Centralize the Management of Platform by Existing Digital Forwarder

Even though such different systems in each company, how do the existing digital forwarders centralize the management of their platforms?

In the case of companies that are creating cutting-edge platforms, I think they are well systematized and structured.

However, there are also companies that ostensibly do IT development, but end up with a system where the operations themselves are done by people.

Currently, shipping companies accept bookings on their websites and truck companies do by e-mail or fax in most cases.

In this sense, it is not impossible technically to create the below system.

1. Receipt bookings on the forwarder’s platform
2. Booking it automatically to each shipping company or airline’s website
3. Booking it automatically to the truck company by e-mail

However, if a company can only invest a small amount of money, they will end up using manpower to make booking and cancellation arrangements.

I, myself, am not inside a major forwarder, so it is just my guess.

In case companies such as Nippon Express and Yusen Logistics, which have recently developed platforms, if the top management says, “Let’s go digital!”, the systems of affiliated companies may be able to link.

Large companies also have their own assets, so it is easier for them to develop platforms that fit their needs.

In that sense, it seems that the bigger the company is the more conservative, but its strength is that it can use its power to change things when it wants to.

What Mid-Small Comapny Should Do When Digitalization Becomes Common

However, the international logistics industry is not so easy that Digital Forwarder can suddenly take over the market.

It is true that platforms are convenient and I believe that the trend will come and become more common in the future.

However, the prerequisite for the forwarder’s job who transports cargo overseas is to secure space surely to carry the cargo.

If you don’t have the space to handle it, you won’t be able to carry it no matter how convenient the system is for the quotation booking and tracking.

Currently, ocean freight rates are soaring to record highs due to the shortage of containers and vessel’s space caused by corona disaster.

Especially from Asia to the U.S. and Europe, it has been impossible to send cargo even if we wanted to.

Based on the current situation, there is a growing belief that this shortage of containers and space will continue until next year.

In addition, on July 1st 2022, the collective bargaining agreement for labor unions on the West Coast of the United States will expire.

This might cause congestion of logistics on the West Coast of North America and stagnation of containers.

What will happen to small and medium-sized forwarders in the midst of a greatly disrupted shipping market and digitalization?

I believe that the traditional analogue forwarder 1.0 which deals “only” with ocean and air transport will be eliminated as digitalization progresses.

It won’t be soon, but when all the major forwarders complete their digitalization and enter, the small and medium analog forwarders will not be able to compete with it.

As technology continues to advance, costs will fall. In addition, the big company will be able to secure space with their strong purchasing power and lower their labor costs by digitizing their logistics management.

When hearing stories like this, some of you might be worried that you have to develop your systems and it will cost a fortune.

However, please don’t worry. There are companies that develop platforms for forwarders and I personally believe that more and more companies will allow us to use their platforms on a subscribed (monthly) basis in the future.

To Survive in Digitarized Logistics Industory

With the advent of digitalization, prices can be easily compared and the company who be chose will be the one that can deliver the cargo at the lowest price.

Or it will be one that offers a one-stop service at a reasonable price.

This is important point. International logistics does not only arrange ocean and air transportation.

Before and after that there is land transport, customs clearance, packaging, etc. and depending on the cargo, it may be necessary to change the way it is transported.

However, total logistics (one-stop service) alone will not be enough to survive. Of course, major companies will also offer total services.

The key here is the existence of overseas branches and agencies.

International logistics involves arranging freight transportation between two countries. Major companies often have their own branches overseas, but this can be a hindrance in some cases.

Having overseas branches is one thing, but having good service of overseas branches is quite another.

I heard from someone who worked for a major forwarder, that they are bound to use their overseas branches even if their service is poor.

Most of the small and medium-sized forwarders don’t have branches in various places, but agency contracts with local forwarders.

So, being able to choose a good agent among them is sometimes an advantage.

Finally, the atmosphere has been changing in the international logistics industry. Digitization which was technically possible but had been slow to take off due to structural problems is now a reality.

The trendy word “DX” made this conservative industry move.

Companies that cannot change here will definitely be eliminated in the medium to long term.

Our group has not changed yet, so I personally feel that we will be in trouble if we continue like this. However, what is important is the will and action to change.

Even if it takes a long time to go digital, I believe that we can survive if there is strong cooperation between small and medium-sized forwarders and related companies.

If there are any companies that can cooperate with us regarding logistics in Thailand, we would be happy to hear from you.

That’s all for today. I’ll see you in the next video.

Thank you very much!

Contact to IINO san

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