Cargo Insights: Forwarders face stiff tech, regulatory and economic headwinds

Extinction is often triggered by a change in environmental conditions, which causes species with insufficient adaptive characteristics to perish. Forwarders continue to face a complex environment of changing regulatory requirements, shifts in trade, competitive technology demands and stiff economic headwinds. The challenging nature of the business has left many experts wondering if forwarders can adapt, or if they will ultimately suffer the same fate of the buggy whip business, disappearing forever from the industrial ecosystem.

Forwarders themselves are even beginning to wonder about the sustainability of the industry as it is today, thanks to the long line of hurdles they see ahead of them. Lingering factors such as stiff competition, high fuel costs, capacity concerns, and the need to balance freight rates are creating increasingly complex challenges for everyone in the business. Forwarders, traditionally viewed as the orchestral leaders of logistics, must now more than ever prove their adaptability, flexibility and resiliency to win and maintain customers.

The regulatory landscape is generating a plethora of new security requirements that show no signs of abating, including changing more cargo screening and preloading advanced data mandates. Given the complexity of the regulations and ongoing communication challenges with commercial and government stakeholders, forwarders need well-organized strategies to deal with the rules essential to staying in business.

Data technology and shipment transparency now play a critical and expanding operational role in winning new business and regulatory compliance. Though acquiring the necessary automation tools can be expensive, and highly disruptive if not integrated properly, avoiding the investment can be perilous for the forwarder choosing to ignore its importance.

As an uncertain geopolitical landscape unfolds, tariffs and trade barriers are making cargo flows between countries more difficult to predict than ever. Shippers, feeling the brunt of this highly charged trade environment, now depend on guidance from their forwarder as a reliable source. This means that forwarders today must not only be the experts on the movement of goods, but also competent advisors for customers in avoiding the adverse impact of government assessed trade taxes and duties.

With the seemingly endless string of requirements, are forwarders up to the challenge in assuring the industry survives? The answer, of course, is yes.

After deregulation more than 40 years ago, many experts assumed that only a handful of large forwarding companies would survive. The general consensus was that an environment absent of government oversight would favor the large companies that had the most leverage with the airlines, leaving the smaller ones to fend for themselves. However, today, small and medium-sized forwarders not only still exist but continue to flourish.

When the Federal Aviation Administration adopted the first cargo security programs in the early 1990s, their significance was lost on many within and outside of the industry. However, as tragic and unforeseen events unfolded at the turn of the century, forwarders found themselves at the core of the safety debate, meeting and helping to create the new policies while adapting to a new way of doing business with security as its primary consideration.

Contrary to what appears in the media, forwarders are automation innovators and have been investing in technology since the late 1960s. The adoption pace has certainly accelerated of late as have some of the tools, but don’t count the forwarders out of providing innovative electronic information products. Not only do they have the willingness to adapt to modern informational tools, but they also have the advantage of practical hands-on experience.

Forwarders naturally thrive on change, finding new opportunities, and creating paradigms. The entrepreneurial spirit within the freight forwarder still evokes substantial problem-solving creativity. Logistics challenges differ by the shipper, each requiring innovative solutions while leaving no place for cookie-cutter, one-size-fits-all solutions.

When the integrated carriers began operations with their planes several years ago, many predicted forwarders would no longer survive in airfreight transportation. On the contrary, forwarders adapted, gained market share, and now routinely fill the space on many integrator flights. Their freight forwarding customers manage much of the bulk imports and distributions handled by these carriers as part of a comprehensive product disbursement strategy for large shippers.

When cars started driving city streets, the horse carriage whip industry failed to adapt to a changing environment that reduced product demand and ultimately caused the business to perish. This won’t happen to the forwarding industry. Forwarders know that change is a constant companion that like a horse, needs care and feeding by providing flexible and adaptive services to a continually changing customer environment.

Brandon Fried is the Executive Director of the Airforwarders Association. He writes the Cargo Insights column for Air Cargo World.