DSV - Global Transport and Logistics

What will the shipping world look like in 2030?

Although currently supply chains are worldwide under enormous pressure with no further signs of any improvement, it might be interesting to take a good look ahead. In this context I would like to look at one of the most important components in the global supply chains: the freight forwarders.

A very simple look at the market tells us that it is the shipping companies that transport goods from one port to another, and they do so on behalf of the cargo owners. Between these two actors we often find the freight forwarders, who act on behalf of the cargo owners to arrange sea transport. And, yes, there are many different shades in this industry of freight forwarders, logistics companies, freight forwarders, 3PL, 4PL, NVOCC and many similar, all of which do something a little different. But as a generalization, all of these will simply be called freight forwarders in the following.

Do freight forwarders have a future?

Asking such a question on a website published by a freight forwarder may seem a little strange. But the current situation will lead many companies to reconsider the way their freight is handled. And this will play a role in the future of this industry. In this context, the pandemic is not particularly relevant. It simply accelerates a development that was already under way.

Digitalisation of the freight industry is a key element to be very aware of. At this point digitalisation is often a lose component such as, for example, computerized booking and documentation systems, online purchase platforms, tracking systems, electronic waybills and other similar systems. The various shipping companies and freight forwarders are right now at very different levels of maturity in this field.

But if you look a few years ahead to 2030, this overview changes significantly. Our industry will reach the point where all information exchange is fully digitalised. Flawless shipping of cargo from A to B without further human intervention is within reach. Meaning that everyone who offers shipping solutions must be able to handle this level of automatization in order to keep offering a relevant product. At that time, it will be a service that will be taken for granted, therefore customers will not be willing to pay extra for that service.

But as any experienced freight user knows, a shipment does not always move as planned. Customers' cargo will still be exposed to port strikes, hurricanes, railroad tracks being washed away by landslides, trucks breaking down, and a endless list of similar events. Furthermore, some users have special wishes for their freight, which is therefore not easy to automate. So in the long run the competition between the shipping lines and freight forwarders will focus on dealing with these exceptions – or in other words: customer service.

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Now we come to the core of the question: do freight forwarders still have a future?

We are moving towards a market where some shippers with relatively ‘simple’ freight needs will use online self-service solutions directly from the shipping lines. 

This is the easiest to compare with consumers buying flight tickets directly from the airlines. There are many consumers wo do so nowadays, and as long everything goes to plan, it is unproblematic. Problems arise when the flight no longer goes as planned. The service level in the last kind of situation varies greatly between the various airlines. If you not only need a flight ticket between two destinations, but also a hotel booking, a planned safari and a balloon flight, many consumers will still use a travel agency. These components can be easily and separately bought online by consumers, but this also increases the risk that something will go wrong along the way. The assessment of whether you want to go directly to the supplier itself (the airline) or whether you want to use a travel agent, depends on whether you are willing to handle the domino effects that can occur when the hotel turns out to be overbooked, or your flight has been cancelled due to COVID-19. 

This basic mechanism is the same for freight. Some shipping companies and freight forwarders have already come a long way with their digitisation. They are considered first movers now, but their services will just be the normal expected standard in a few years. Shipping companies and freight forwarders who do not go down that road have a predominant risk of no longer existing when this decade runs out.
And with that, we are back to dealing with exceptions: customer service. Shipping companies and freight forwarders have different strengths and weaknesses in relation to each other in this regard. The shipping lines control the networks of ships at sea and can use this position to gave some customers more priority. For example, in terms of space availability, available containers but also with the diversion of cargo via alternative routes. The freight forwarders have the advantage that they can send cargo on the combination of all shipping companies' networks, which gives far more opportunities to find a "plan B" when something does not go according to plan. 

Seen in this light, there is certainly a future for freight forwarders in general but not necessarily for everyone. In order to remain competitive, there will be large expenses for the development and implementation of new digital and automated systems. And it will clearly be an advantage to have as many physical alternatives available as possible in order to make the best "plan B". It will be crucial to invest in systems that can anticipate problems before they occur and thus launch "Plan B" before the problems grow large. All this will favour large freight forwarders, who can share the digitization costs on a much larger load, and who, all other things being equal, have access to a larger physical network.

At the other end of the scale, you will find highly specialized niches in the freight market, which are handled by small, specialized companies. It can be certain types of cargo, special geographical conditions, legal requirements for special certification etcetera. To the extent that these niches have a right to exist, freight forwarders operating in this segment will certainly have a future as well. This leaves an extremely large middle group of small and medium-sized forwarders, who today compete in an extremely fragmented market. Realistically, we will see a consolidation in this middle group, and as we approach 2030, the number of freight forwarders in this group globally will have fallen considerably. The remaining successful freight forwarders will be the ones who have been best at attracting, educating and retaining the employees who have the best skills to handle exceptions - coming up with a "Plan B" when all else fails. 

So is there a future for freight forwarders? In general, the answer is yes, but they all need to move forward strongly, both on the digital front and in terms of their ability to train and retain customer service staff. And while the answer is "yes" on a general level, we will also see many leave the dance in this decade. In 2030, we will still see small, highly specialized freight forwarders, we will see even larger global freight forwarders, we will see shipping companies that have regained some of the direct customer contact through digital platforms, and finally we will have the middle group of freight forwarders with significantly fewer players. But the ones that will still be there are the ones that are best for the customer service part. 

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