Over the past few years, I have had hundreds of conversations with customers about the third-party logistics (3PL) industry. Who are the movers and shakers, which 3PLs are on the rise, which are on the wane and which emerging vendors should customers really take notice of? Advising customers how to select, negotiate and contract with 3PL service providers is standard stuff for an analyst covering the logistics and customer fulfillment space at Gartner.
More recently, as in the past couple of years, I have noticed an increasing interest in this notion of digital freight forwarders. The questions have ranged from, who are they, and which ones are any good to what makes them digital and how are they different from a traditional freight forwarder? It’s that last question that I have struggled with the most. How is a digital freight forwarder different from a traditional freight forwarder? As much as I have pondered that question, the conclusion I have reached is that there is no difference.
A good freight forwarder, or indeed even a mediocre freight forwarder, should strive to deliver two outcomes: the best customer experience at the lowest possible cost. Nothing contentious about that. The perceived difference is that a digital freight forwarder delivers those outcomes by using almost entirely technological means whereas a traditional freight forwarder is more dependent on tried and tested processes that are predicated on a high degree of human intervention. It’s that perceived difference that I don’t buy anymore.
Let me explain how I reached that conclusion. Figure 1 summarizes what I believe to be the biggest benefits I associate with digital capabilities in the freight forwarding sector.
I am sure that everyone working in the logistics industry would agree that digitalization has transformed the 3PL industry beyond recognition. Technology has been the great equalizer, enabling relative newbie freight forwarders to the industry such as Flexport and Forto to compete with the big market share behemoths like Kuehne + Nagel and DHL. From the outset, companies like Flexport and Forto with their entrepreneurial spirit grasped the opportunities presented by emerging technologies to establish themselves as different and new. As startups, their lean size made them more agile to change direction, fail quickly and try something else. Their ability to apply a digitized value proposition and approach to an age-old activity such as freight forwarding was refreshing and really challenged the status quo.
Initially, their long-established peers struggled with the digital revolution. Legacy technologies layered upon each other, often inherited through a series of mergers and acquisitions, not only constrained agility but often drained innovation. Thankfully, that has changed and continues to do so at pace. Perhaps inspired by or in fear of the new kids on the block, the freight forwarding community has raised its game. Digitalization is being implemented at scale by all manner of new and old freight forwarding companies, benefitting all customers. Companies like Kuehne + Nagel and DHL are today just as digitally dexterous as Flexport and Forto. Interestingly, it is the latter that are demonstrating more traditional freight forwarding behaviors such as expanding their global networks, investing in assets and expanding their service portfolios.
Whichever is your freight forwarder preference or definition, be it old, new, regional, global, digital or traditional, shippers should apply the following eight evaluation criteria as part of their assessment and selection process.
Too often shippers focus on assessing too few capabilities when selecting a freight forwarder. Companies tend to prioritize cost and service above everything else. While cost and service are of course important, companies must also consider a freight forwarder’s broader knowledge and expertise. For example, and relevant to the content of this blog, a potential freight forwarding partner must have excellent technological resources that will enable the successful delivery of the customer service. A rounded and balanced approach to freight forwarding partner assessment, selection and appointment will go a long way to ensuring a successful and mutually beneficial partnership with your freight forwarder of choice.
Gartner Supply Chain