Forwarders hold defense to digital upstarts

Forwarders hold defense to digital upstarts

ShipChain's Monarch: Established forwarders have a customer base, brand recognition, a network within their markets, and resources. How many digital entrants have all of those? Photo credit: Shutterstock.com.

The following is part of JOC.com’s The Industry Speaks series, highlighting new perspectives within the cargo shipping industry.

The news that digital forwarder FreightHub recently secured $30 million in Series B funding should leave more traditional forwarders in no doubt that their position is under threat probably like never before. With outside investment set to keep pumping into the sector, digital startups are going to be in an increasingly strong position to disrupt the market.  

It’s a nerve-wracking time for established forwarders. These new entrants are faster than them, and at the same time carriers are pushing more of them to go online with digital solutions. Yet with little standardization between carriers’ proprietary systems, a medium-sized freight forwarder could find itself having to upload the same data across multiple systems — an inefficient and resource-intensive process.

Yet should they be nervous? Or, as established operators, should they be excited by the opportunities available to control their own destiny?

The incumbent disruptor

Established forwarders have a customer base, brand recognition, a network within their markets, and resources. How many digital entrants have all of those?

So, what would happen if we took a traditional forwarder — with its customers, brand, and network — and added digital technologies? Suddenly there is an established business with the agility and flexibility of a startup — in other words, an incumbent disruptor.

The business can dictate its own terms and disrupt the market as it sees fit, rather than reacting to changes and playing catch up. It means not being afraid of technology, analyzing the opportunities, and identifying where customers can receive added value.

One perceived benefit of digital natives is being able to standardize; it’s how they can automate processes, increasing margins and moving quickly. The downside is a less-than-personal approach. 

As a traditional forwarder, there’s an opportunity to keep the personalized service that made them successful, supported by technology. So, it might be having dedicated customer service phone lines, supplemented by messaging apps, all delivered by a digital backend that pulls data in real time to ensure the agent can answer in a relevant way with a full understanding of the customer and even more importantly the customer’s business. 

The key is to understand what is going to support the forwarder to remain relevant, competitive, and deliver a better customer experience. There’s currently a huge amount of hype surrounding a variety of disruptive technologies — from artificial intelligence and machine learning to blockchain. These all have the potential to change how freight forwarders operate. 

With blockchain, for example, when deployed correctly it has the potential to deliver greater data security, visibility for all relevant parties, and break down data and information silos. Yet there are any number of blockchain solutions currently being touted that are, in effect, closed systems, and being built to change freight forwarding as we know it today but eventually will limit and restrict users rather than enable them. 

That’s why it's so important to pick the correct solution. Take blockchain again as an example. The technology is an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way. In the right environment, blockchain’s openness means even smaller forwarders can access the newest technology with lower upfront investment. Suddenly, they’re harnessing digital tools to their own benefit, rather than being disrupted by them — not only matching larger competitors and digital entrants but beating them at their own game.

Buy a solution, not a buzzword

The logistics sector as a whole is inherently conservative and skeptical. Those with enough time in the game will have seen numerous technology hype cycles. The key is to ask if it is something customers are demanding, either now or in the future.  

If the answer’s yes, then invest. If it’s no, it’s time to reconsider. The challenge is to make sure you’re buying a solution, not a buzzword. With more money set to flood the digital forwarder market, having a clear direction is vital. It’s the only way traditional forwarders can combine their strengths with the benefits of digital technologies, such as blockchain, and take control of their own destiny. 

John Monarch, CEO and co-founder of ShipChain, can be contacted at hello@shipchain.io