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Shipping portal isn't death knell for forwarders

By Hpanchal on January 29, 2012

Whether or not the sun will rise on the first morning of 2013 has been the subject of wild speculation and debate, given a belief that ancient Mayans predicted an end to civilization in 2012. The freight forwarding industry is also considering what the future holds and has emerged with a few developments that are more frightening than the scenarios faced by John Cusack in the end-of-days movie “2012.”

These forwarders are trying to find out if a recent Dutch booking portal that connects shippers directly to airlines will bring the end of the industry as we know it.

It is an incorrect reading of the hieroglyphics to indicate freight forwarders will suddenly cease to exist at the end of the year. Forwarders may need to adapt to industry changes, but the industry provides so many services to shippers and airlines that a single technological innovation is unlikely to be a death knell.

Freight forwarders and airlines understand that success is achieved by working together. A few hundred air carriers depend on thousands of forwarders to coordinate the customer-management process. Forwarders routinely handle intricate shipping details, enabling airlines to concentrate on their core mission — on-time departures and landings.

The idea of online booking and purchasing portals is not new. Among other things, it has been successful in booking passenger flights and reserving hotel rooms. Since there are a set number of plane seats and rooms available, only a few decisions are left to the buyer, including time, date and preferred price. As such, these types of transactions tend to be rather straightforward.

Air cargo, on the other hand, is not a one-size-fits-all proposition; freight comes in many sizes, shapes and volumes. The process of pairing shippers and airlines may seem easily automated, but the process requires verbal communication and price negotiation in order to render the most beneficial solution for both parties. At present, portals are just one tool used by high-volume forwarders who require little ongoing instruction.

Generally, most shippers’ knowledge and expertise in the freight transportation process is limited, given their focus on other business pursuits. As such, many shippers require sophisticated assistance both before and after the flight.

Since forwarders manage almost 80 percent of the cargo flown on passenger airlines, it is logical to assume that such frequent business activity derives low rates and preferred booking arrangements. Therefore, it is doubtful that the new Dutch online portal could ever offer the low pricing earned by high-volume forwarders.

Industry players know that airlines have trimmed their sales forces over the years in response to forwarders handling the ultimate shipper relationship. The prospect of air carriers having to deal with hundreds or even thousands of inexperienced customers booking through an online portal would create a tremendous staffing challenge. It is also clear that due to the adverse economic climate, shippers are forced to depend on their forwarders as a source of lenient payment terms. Since the Dutch online portal requires payment at the time of booking, the portal enjoys cash-flow enhancement, while the shipper must pay before the cargo actually flies. Airlines will assuredly have to wait for their payment as well.

The Dutch online booking portal and other similar initiatives should not be seen as threats to forwarders, but rather as a call to action in the face of advancing technology. Now more than ever, forwarders need to emphasize that the level of service and creativity provided cannot be easily replaced by an online application. Finding ways for economically challenged shippers to cut costs will convince a shipper that successful freight forwarding is much more than a single click on a computer screen.

— Brandon Fried is the executive director of the U.S. Airforwarders Association.

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