Cargo Insights: Forwarders prove flexibility can overcome disruption
Like many travelers, I have become a rideshare convert from traditional taxicab transportation. The reasons for the switch range from increased ease and reliability for booking early rides, more competitive pricing, and my kids teaching me how to master the app on my mobile phone. But despite these benefits and my newfound preference, I still grab a cab from time to time. Cabs, like forwarders, will always have a bright future serving a necessary market niche – despite predictions of their impending demise.
The past few months have not been pleasant for the freight transportation industry, as various trade disputes continue to spark gloomier economic forecasts. Air cargo globally is sagging, eating into airlines’ profits. The International Air Transport Association has reported recently that airfreight traffic, measured in freight tonne kilometers, fell 3.6% in the first half of this year compared to the same period in 2018. International air cargo traffic from the Asia-Pacific region fell even more, coming in at an 8.1% y-o-y decline for the same period. Imports by ocean freight into the U.S. from China have fallen as well, down 5% in the first seven months of the year.
The traditionally asset-light forwarder has historically responded well to changing trade dynamics due to changing customer demands, specific industry silos, or global manufacturing shifts. For example, there was a time when U.S. exports to Asia exceeded imports, making westbound cargo space scarce, before cheaper trade changed the directional flow. Forwarders responded by staying nimble and adapting to quickly changing market dynamics. As demonstrated by the evolving environment today, change brings opportunity. Those forwarders that adapt and leverage that opportunity will likely thrive, while those that fail to respond may not survive.
Forecasting impending doom in our current economic slump is not the first time some doubted the future of forwarding. At times this pessimism came from within the industry itself, when seemingly well-heeled rail and trucking competitors including Southern Pacific, Consolidated Freightways and Roadway jumped into forwarding as a way to capture market share. Each promised a more efficient, advanced, technology-based solution – convinced that they were going to replace the traditional forwarding market dynamics. Unfortunately, these efforts and companies failed, while many conventional forwarders continue to thrive.
Truckers and railroads have come to the realization that their future success was not in forwarding but improving their product internally. The previous lack of traceability, specific service reliability, and inefficient customer relations gave way to technology investment, resulting in delivery efficiencies and an increase in overall performance quality.
Predictions of forwarding’s extinction were also common when the integrated carriers opened for business using their own planes and trucks. These closed-looped express giants such as FedEx, UPS and DHL certainly have been successful in delivering a significant portion of the cargo. Yet despite this success, each firm still believes in the forwarder role and owns a thriving, independently operating forwarding division that contributes substantially to the company’s overall profits. Indeed, express integrated carriers continue to achieve success not at the expense of the forwarder, but from postal authorities globally as the e-commerce megatrend forces post offices to struggle in an aggressive war against them.
Forwarding has seen significant changes throughout its rich history, and yet it has managed to survive through change. For example, most once depended on unionized labor forces that have become a rarity today. Some transported garments on hangers in igloo-style containers aboard freighter planes flown by airlines including American, Delta, Kitty Hawk, Northwest, TWA United and Zantop. The recent anniversary of the 9/11 attacks reminds us of how freight forwarders responded to and survived unprecedented and devastating change. While manufacturing processes have shifted, airlines have gone out of business, and security protocols are forever changing, forwarders have always reacted in-kind, and survived by finding alternative ways to satisfy the shipper and get the job done.
Our industry has learned invaluable lessons thorough many years of change, and now forwarders are not only agents of freight transportation, but an integral part of the trade security ecosystem. We now know that risk mitigation includes much more than the weather or earthquakes.
One constant in the industry is that people are our greatest asset, having been tested as never before. Forwarding employees play a crucial role in assuring a secure freight transport system through continued government regulatory engagement and education. The personal and professional interaction serves as the foundation of our industry’s commitment to service and ongoing success for our customers. Doomsayers forecasting our demise perhaps should think about this dedication and proven resilience when passing the cargo facility from the backseat of their rideshare or taxi during their next trip to the airport.
