A freight forwarder is considered to be the epitome of experience and knowledge for the simple shipper in this complex logistics environment. This freight forwarding industry and its corresponding services have developed as the logistics sector has expanded.
As a freight forwarder, finding new customers and moving goods from A to B is no longer a simple matter in today’s fast-paced, global marketplace.
A forwarding agent needs to remain agile and flexible, adapting to customer requirements, technical advancements, financial requirements, and logistical complications if he wants to remain in business.
This article explores some strategies that have worked well for many freight forwarders and helps understand how these strategies can be integrated for better efficiency.
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Freight Forwarding Market Growth and Numbers The global freight forwarding market grew $176 billion in 2024. In 2029, the market is projected to reach the size of almost 216 billion U.S. dollars. The United States has the largest number of forwarding agents, estimated at 91,849 in 2023, with a yearly increase of 2.4%.
This means that the forwarding market is comprised of numerous small-time brokerage firms that specialize in one offering, as well as a few thousand larger firms that have a global network and international appeal.
Market Penetration for Freight Forwarders Shipping in today’s world has its difficulties. There is an increase in global merchandise trade and shipping, volatility in demand and supply, alongside perpetual social, political, technical, legal, financial, and environmental complexities.
This makes it hard for the shippers to be able to ship effortlessly and create networks with the liners and port authorities. Hence, they turn to experienced brokerage firms and logistics professionals.
As a result, the complexities in shipping continue to increase, and the competition in the forwarding industry will proportionately rise.
Entering such a competitive market requires additional know-how and internal stability – both of which are hard for early start-ups.
Typical Challenges that a Freight Forwarder faces Apart from the difficulty of finding customers and making a mark in the competitive forwarding market, a freight forwarder has to deal with various unknowns and variables that could be risky for their business if not mitigated quickly and efficiently.
Some of the most typical challenges that a freight forwarder would face include:
1. Freight Rate volatility Contracts could be set when rates are down, and at the time of shipping if rates increase, the forwarding agent is burdened with additional costs.
2. Demurrage and Detention Charges These are levied by ocean carriers and continue to cause last-minute additions to the freight rates, which forwarders need to advise their clients about in advance.
3. Changing Laws and Regulations Numerous global organizations monitor and administer the supply chain industry regulations. Keeping up with such changes is imperative to advise clients appropriately.
4. Volatile Supply and Demand Situations True to any market, these laws are market-driven and hard to identify upfront, making it hard for forwarders to plan effectively.
5. Adapting to new tech advancements As digital prowess evolves, forwarding agents need to integrate these solutions into their existing processes to maintain a good standard.
5. Shortage of competent workforce It is hard to train and retain skilled staff in a complex industry that runs on know-how and expertise.
2024’s upcoming events and outlook Vulnerability is inevitable within this industry. In fact, per the SCOR report , in 2023 alone, there has been a 245 thousand supply chain attacks.
Current trends at the forefront of the logistics industry are sustainability, last-mile delivery, adaptability, digitalization, and climate-related disruptions. Global customers are also becoming more aware of their purchasing actions, and their behavior tends to change depending on how the purchase affects the environment.
In line with sustainability norms, customers prefer to purchase locally and monitor the carbon footprint that they are leaving. This could mean a reduction in large international shipments. However, political and COVID-related disruptions could make procurement channels less fluid and more unstable.
Seven strategies to differentiate oneself as a successful freight forwarder Building a successful business in a competitive environment is not straightforward. However, one can stand out from the crowd by differentiating their operations. Some robust practices that successful freight forwarders tend to implement are listed below:
1. Competitive Pricing Customers tend to play by the pricing rulebook when they choose a forwarder to help them. Usually, the lowest bid or the most competitive price wins a new business. Keeping this in mind, freight forwarders will have to price their services depending on how their direct competitors have created their pricing models.
At the same time, the price should not be extremely low and unreasonable, which leads to excessive losses as low prices may also state a lack of expertise. Value-adds and differential services come at a premium, and this fine balance should be identified carefully to win new business and retain old clients.
2. Cost Effectiveness One way to increase profits is to increase the selling price, but the more effective solution is to reduce costs and maintain larger profit margins.
To accomplish cost-effectiveness, a freight forwarder must understand the nuances behind every operating and overhead cost they incur and identify which of these they can reduce either by elimination or through modernization and digitization. Processes can be made effective to reduce costs, and ultimately, the bottom line will increase.
Cost-effectiveness can be sought through RMS and CRM implementations as well as through better contract negotiations with key liners and stakeholders.
3. Vast Expertise and a Global Network Customers approach Freight Forwarders to ease their shipping process through a vast network. The expert advice they receive from forwarders is what adds value and helps retain clients. Hence, this aspect is very important in building a successful reputation.
A freight forwarder cannot work in silos, and his forwarding affiliates need to be trustworthy and reliable. As every day can throw up new logistical challenges, expertise can comprehend and mitigate these risks resulting in sustainability and success.
4. Multi-modal solutions Today, the same shipment can reach its end destination through various modes. A freight forwarder should be flexible enough to provide their clients with multi-modal solutions and advise them on what might work best for them.
It is also important to have multiple options as backup plans in case the main route faces a disruption. The forwarders need to develop flexible solutions that range across various modes and timeframes.
The usage of multiple modes provides cost-effectiveness, reduces time and effort, increases efficiency, and creates a cohesive and smooth transportation option right from the point of pick-up to final delivery.
5. Financial Stability Logistics is expensive, and a solid balance sheet with a profitable income statement is one of the first things clients look for when onboarding new vendors. With multiple delays in the freighting world, a forwarder with financial stability can offer a buffer for the larger set of stakeholders and players in the supply chain.
This, in turn, helps build stronger logistic networks, and the credit facility that could be provided only increases the forwarder’s credibility in the market. This keeps shipments on track and ensures that the supply chain does not get disrupted or broken due to payment issues.
6. Technical Advancements Manual processes tend to slow down the supply chain network, and digital innovation can help eliminate manual intervention. A user-friendly website, a comprehensive TMS and RMS system , and an interactive CRM solution can set up the base for a successful forwarding agency.
These platforms ensure that data remains safe, encrypted, accurate, reliable, and timely. It supports easier delivery in a fast-paced global environment and can be accessed easily by all stakeholders. Additionally, the visibility that a technology platform can provide adds value for both the forwarding agent and the customer.
7. Streamlined Customer Experience Typical of any business, the customer is always king. A customer-centric experience where their issues are solved, and they receive a distinctive advantage will help increase the customer base and add to the forwarder’s market share.
Customers prefer a solution that addresses their concerns and provides accurate and reliable information at their fingertips. Visibility is also key to ensuring that the customers remain in the loop concerning the whereabouts of their goods.
How can a freight forwarder integrate the above solutions effectively?
Implementing these strategies into an already existing business setup might be difficult, as change can be hard to accept. However, a slow incorporation strategy can allow for a change management routine where staff and technical capabilities are built on and solidified.
A clear business plan that includes these strategies would be the first step toward success. Simple mistakes like losing focus on the end goal, ignoring the customer, and not leveraging technology or imparting expertise would need to be avoided.
Freight forwarders differentiate themselves from their competitors by prioritizing their client’s experience, managing their resources effectively, tracking their shipments constantly, and increasing their agility.
Concluding Notes Each of the above strategies can be developed and customized to meet each freight forwarder’s requirements. Specialization and value-added services can attract a premium price within a competitive market if aided by good labor and the right technology.
The Freightify suite of products offers scalable solutions for most forwarding concerns ensuring that reliable data can be accessed by all stakeholders. This ensures customer satisfaction and builds successful forwarding ventures.
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