Forwarders will play a pivotal role in supply chains of the future, with the threat to their middleman role coming from a failure to adapt to a new data-driven supply chain rather than from carriers extending services into landside logistics, according to Marc Meier.
The managing director of Hamburg-based forwarder Fr. Meyer's Sohn told JOC.com that digitalization was leading to a fundamental change in the way cargo was shipped around the world, with greater transparency of data and more use of online tools. Rather than leading to the elimination of the forwarder, Meier believed it was having the opposite effect.
“Who is driving digitalization and supply chain management at the moment? It is not the carriers and it is not the customers. At the moment, if forwarders can come up with ideas to improve the supply chain in the area of technology, then usually the bottlenecks are with the IT resources of the carriers and the IT resources of the customers,” he said.
“The main focus of carriers is on filling their assets at the moment, and the main focus of the customers when it comes to digitalization is to concentrate on their own model rather than looking into the logistics of shipment. Customers and carriers are actually slowing down the whole process because they don’t have the capacity to invest in and manage the technology themselves.”
It is a position carriers such as Maersk Line and CMA CGM would strongly disagree with. Maersk is vigorously pursuing its integrator strategy and CEO Søren Skou said he hopes to grow the carrier’s share of non-ocean services to account for half of its total business by 2021, up from about 20 percent today. CMA CGM took over CEVA Logistics earlier this year, opening a natural path for the carrier to sell packaged solutions to customers of both the shipping line and the logistics provider.
Most of the world’s global carriers are also involved in the two main blockchain projects, TradeLens and the Global Shipping Business Network, and the Digital Container Shipping Association, as they push toward controlling data and creating data standards within their integrated cargo networks.
By extending their direct control into an end-to-end supply chain, the carriers believe they will be able to offer higher-value and higher-margin services than the forwarders and non-vessel-operating common carriers (NVOs) they compete and partner with. This has led to much speculation about the need for forwarders in the future as carriers manage more of their customer shipments from factory gate to warehouse door, but Meier remained unconvinced.
“For carriers, a much better choice is to drive a strategy where the forwarders are part of the picture and of the cargo strategy the carriers are driving,” he said.
“I am not so concerned about the ambition of the carriers to create supply chain solutions, such as the acquisition of CEVA Logistics by CMA CGM, or the integrated container logistics strategy that Maersk is applying, or MSC’s investment in forwarding. I don’t see that as a threat, but rather as a completion of the offering of the carriers.”
Meier explained that the volume of containers handled by carriers and forwarders was approximately 50:50, and even if the carriers wanted to absorb just 10 percent of the volume of the top 10 global forwarders, that would be about 20 million TEU.
“They would need to increase their staff by at least 50,000 people to make sure they had the sales and customer service resources, and I don’t see that happening at the moment,” he said.
However, portraying the situation as a battle between carriers and forwarders would be to exclude the key common element for both service providers — the shipper.
“The choice is with the customer. If a customer chooses to work with a forwarder, it is not a question about whether a carrier offers the best solution, because we end up using the carriers anyway. For the customer, it is a pure outsourcing position,” Meier said.
“As a beneficial cargo owner [BCO], if you insource everything, you have to 100 percent rely on your own resources, but if you outsource, then you always have a fallback solution. We see customers that want a direct carrier relationship and insource all processes, while others keep us as a booking agent. But the main trend at the moment is outsourcing, and we are gaining business,” Meier said.