The Global Institute of Logistics “The Role Of The Independent Freight Forwarder In Global Logistics” report which is to be published in 2019, has come about in response to the increasing trend by Beneficial Cargo Owners (BCO’s) to outsource the management of their logistics to independent freight forwarders.

The independent freight forwarding sector is now more vibrant and successful than ever, despite the global economic woes of the past few years. The rise of the independent agent has now been borne out by a whole range of statistics and data that prove that far from shrinking, the independents are growing faster and taking market share from the multinationals.
Figures from Drewry show that 41% of all ocean freight is now controlled by 3PLs or forwarders and by the end of the decade analysts are predicting that the market share will rise to 50% – a remarkable switch in business practice by BCO’s over the past two decades. 20 years ago some 75% of all sea freight volumes were booked directly with carriers.
Even more remarkable is that it is independent freight forwarders and not multinational 3PL’s are expected to make up the lion’s share of this total at some 30 %
This trend by BCO’s to outsource the management of their container traffic to independent freight forwarders is being driven by increasing frustration with the lack of service, price volatility, schedule unreliability and onerous credit terms experienced in dealing directly with carriers in the sea freight industry.
Carriers due to the huge downward pressure on container rates (largely due to their own misguided strategies) are being forced to increasingly commoditize their product. As a result, carriers are increasingly incapable of meeting shipper’s needs through direct relationships as they lack the end-to-end service supply chain capabilities, focusing instead almost entirely on cost. Sales and customer service teams have been slashed as the fight to the bottom on rates continues. The advent of super alliances has further eroded the personal interfaces between the shipping lines and the end customers.
This move away from direct booking with carriers by BCO’s is a great opportunity for independent forwarders to gain significant new business and volumes. For the logistics industry, this is also a positive development and will help to further integrate the global supply chain.
So what exactly is the state of the independent freight forwarding market at this important juncture and more importantly how is the segment responding to this increasing demand from Beneficial Cargo Owners (BCO’s) for their services?
These are the questions that our research will answer and in so doing provide much need insight into what BCO’s can expect from the sector and more importantly what independent freight forwarders need to do to take advantage of these new more profitable opportunities.
The research program will take  4 years to complete (2015-19) with preliminary findings being published in 2016 and 2017. Interim findings are leveraged to give final direction to the research process and respond to intelligence gathered in the process to date.

The report will be structured using a Q&A format asking and specifically answering 3 key questions:

• What is the typical profile of the IFF that BCO’s are looking to?
  • Traditionally, the freight forwarder spoke directly with clients and warehouses around the world to arrange the movement and storage of freight. Today, the description of a forwarder has become far more complex. They now take this information and pass it along to the appropriate party whether that be the carriers, third-party service providers, Custom agents, or the shippers themselves.
  • Along with making certain that the freight gains entry into the country, a forwarder must now arrange for cargo to be picked up and delivered to the final consignee’s place of business. This requires contacting trucking companies, rail lines, or even sometimes exporting the goods to a different country for final delivery. This complexity has created new opportunities for the independent freight forwarder to upgrade their services and IT capabilities in order to keep up with growing demand.
• What do independent freight forwarder needs to demonstrate to attract this business?
  • Freight forwarders have to become smarter and more efficient – in an environment where manual data entry is still widespread – but they will have to enhance their commoditized offerings. For some, this means developing their levels of expertise in niche sectors in order to differentiate their services. Others will evolve from pure forwarders to fully developed logistics providers, increasingly serving customers with integrated logistics services. The technology systems they offer will be critical to their customer proposition.
  • The major market challenges that freight forwarders face today are becoming even more daunting as their basic services turn into commodities and the competition gets more intense. To become a best-in-class company in this environment requires thinking and performing outside the box.
  • The more services the forwarder provides, the “stickier “its relationship with the customer. Unless these industry dynamics are addressed and soon, freight forwarders will be condemned to competing in an industry in which slashing prices is their only competitive option.
  • What is best practice in customer interfaces, track and trace facilities, global partner networks and other value-add services?
• How are these services delivered?
  • The days of opening a generalized freight transportation business may be over in favor of a more focused and specific transportation approach, that includes offering additional services that complement the transportation of the box itself. These may include warehousing, local distribution, pick and pack, or some form of commodity assembly before shipping.
  • However, the sensitive, personal touch is always in demand and appreciated by customers who are not willing to be an anonymous entity with their freight company.
  • To ensure both medium and long-term survival the report explores several strategic imperatives:
    • How to Protect revenues with innovation—develop a “sticky,” differentiated offering
    • How to Maximize profits by adapting the offering to serve the most attractive customer segments
    • How to Win new business by attracting new customers in developing markets
    • How to Avoid commoditization by adding value-added services to the offering

The report will be set out against the following Table of Contents

• INTRODUCTION
  • Kieran Ring Global Institute of Logistics
• EXECUTIVE SUMMARY
• ABOUT THE INDEPENDENT FREIGHT FORWARDER INDUSTRY
  • Provides general information about the scope of the industry such as an industry definition and a list of the main activities of the industry
    • Industry Definition
    • Main Activities
• INDUSTRY AT A GLANCE
• INDUSTRY PERFORMANCE
  • Industry Performance chapter covers the following
    • Executive Summary: The Executive Summary section is a brief summary of the overall chapter.
    • Key External Drivers: The Key External Drivers section looks at the key factors outside the control of an individual business that determine the industry’s performance.
    • Current Performance: The Current Performance section provides analysis for the industry over the past five years with key performance indicators discussed.
    • Industry Outlook: The Industry Outlook section is a key analysis section of the report and outlines expectations for the key industry indicators over the next five year period, including forecasts.
    • Industry Life Cycle: The Industry Life Cycle section provides a discussion of where the industry is at in its lifecycle and how that is affecting industry performance.
• PRODUCTS & MARKETS
  • Supply Chain
    • The Supply Chain section lists the key buying and key selling industries associated with this industry
  • Products & Services
    • The Products & Services section lists the products and services the industry provides including percentage breakdowns by key segment
  • Demand Determinants
    • The Demand Determinants section provides an analysis of the determinants behind the level of demand for the industry’s products.
  • Major Markets
    • The Major Markets section gives an analysis of the markets for the industry’s products and how these markets may have changed over time.
  • International Trade
    • The International Trade section provides a discussion of the importance of trade to the industry
• COMPETITIVE LANDSCAPE
  • The Competitive Landscape chapter is a discussion of the characteristics of an average operator in the industry and who controls the market for the products of the industry. It includes the following sections
  • Market Share Concentration
    • The Market Share Concentration section discusses the level of concentration of the industry.
  • Key Success Factors
    • The Key Success Factors section looks at the key internal factors that contribute to the success of an operator in the industry.
  • Basis of Competition
    • The Basis of Competition section is a discussion of the factors that can give a company in this industry a competitive edge
  • Barriers to Entry
    • The Barriers to Entry section looks at the factors preventing new companies from entering the industry.
  • Industry Globalization
    • The Industry Globalization section provides an indication to which the industry is affected by global operations and trends.
• OPERATING CONDITIONS
  • The Operating Conditions chapter covers the following:
  • Structural Risk Index
    • The Structural Risk Index section provides an indicator of the level of risk faced by operators in the industry.
  • Investment Requirements
    • The Investment Requirements section is an analysis of the level of capital investment required to operate in the industry.
  • Technology & Systems
    • The Technology & Systems section discusses the key technologies used by the industry.
    • The development of stronger human – machine interfaces, has the potential to increase supply chain efficiency and reduce susceptibility to costly errors.
  • Industry Volatility
    • The Industry Volatility section looks at the level of in the industry and the factors behind this volatility.
  • Regulation & Policy
    • The Regulation & Policy section looks in to the regulatory measures the industry is subject to and the corresponding compliance burden faced by operators in the industry
• KEY STATISTICS
  • The Key Statistics chapter provides the key indicators for the industry. The statistics included are industry revenue broken down into trucking, rail, air, sea, warehousing, and value-added services.
• MARKET BRIEFING
  • The Market Briefing Chapter profiles each of the key markets around the world and provides the reader with an insight into the local independent freight forwarding industry.
• THE FUTURE
  • The Role of Networks
    • There are key differences in how various networks operate, largely driven it seems by their genesis and raison d’être.
    • Can networks of independent freight forwarders combine to provide global beneficial cargo owners with a single solution?
• CASE STUDIES
  • The report will include a series of case studies and profiles on leading independent freight forwarders. The collection of case studies will be drawn from a cross-section of regions and verticals.
• CONCLUSIONS
• RECOMMENDATIONS

The preliminary findings from the final report which is to be published in March 2109 confirms that Beneficial Cargo Owners (BCO’s) are switching the management of their global freight and logistics requirements away from carriers and multinational 3PL’s to independent freight forwarders.

In 1996, 75% of all sea freight volumes were booked directly with carriers, today that number has dropped to 59% and is expected to go below 50% by 2020. Even more remarkable is that it is independent freight forwarders that will enjoy a greater market share of this growth than multinational 3PL’s at 30%
The findings identifies three key drivers for this development:

1. The growing complexity of global supply chains
2. The increasingly commoditized nature of the carrier offering.
3. An increasing ability by Independents to meet BCO’s demands

1. Growing complexity in Beneficial Cargo Owners Supply Chains: the key drivers:

• An increase in the number of manufacturing and distribution locations: In response to the need to combine off, near and onshore capabilities.
• Demand from consumers for more rapid fulfillment.
• External shocks to the supply chain: BCO’s are building resilience and contingency into their supply chains in response to what seems to be a growing number of supply chain disruptions whether from “acts of God or Man”
• E-commerce: The revolution in how consumers shop is being adopted by businesses also leading to more pressure on supply chains for greater transparency and flexibility
• From Pallet to Package: Omni Channel has introduced the “package” as a unit of freight
• Logistics is a differentiator: A growing understanding by BCO’s of Logistics as a tool for value creation and competitive advantage.

2. The increasingly commoditized nature of the carriers offering

• Lack of service:
• Carriers are abandoning direct relationships with BCO’s who don’t command very large volumes of freight.
• Carrier’s sales and customer service teams have been slashed as the flight to the bottom on rates continues.
• Super alliances between carriers has further eroded the personal interfaces between the shipping lines and BCO’s.
• Schedule unreliability
• Lack of capability:
• Carriers lack the end to-end service supply chain capabilities, focusing instead almost entirely on cost.
• Price volatility

3. An increasing ability by Independents to meet BCO’s demands

• • Service
  • Independent forwarders offer personal local service
  • Independent forwarders that are members of global networks offer a world wide solution.
  • Independent forwarders leverage their relationships with carriers to influence reliability of service.
  • Price
  • Independent forwarders leverage their relationships with carriers to guarantee the best rates.
  • Independents are increasingly willing to work on an “open book” policy and manage freight flows on a fee rather than margin basis.
  • Value Creation
  • Independent forwarders provide integrated solutions across both supply and distribution networks
  • Thinking outside of the box, actively engaging in rethinking and remodeling processes in pursuit of added Value, Visibility and Velocity
  • Moving up the value chain to embrace E Commerce fulfillment capability and 3D Printing

To Read the Preliminary Findings in Full Click Here

Institute researchers will be in contact with many of the key actors in the global independent freight forwarding industry as part of their work. As a result, the final report will include a series of case studies of “Best in Class” Independent Freight Forwarders which will complement the report by presenting case studies which reflect the evolution of the industry. These reports will vary,  from region specific to vertical-specific and be drawn from what our researchers determine as the “first movers” and “thought leaders” in the independent freight forwarding industry. Those organizations invited to participate in the final report will be accredited with a “Best in Class”  designation and included perpetually in GIL’s  accreditation register.

JUNE 2016: WFA BEST IN CLASS INDEPENDENT FREIGHT FORWARDING NETWORK

The World Freight Alliance (WFA) has been named the benchmark Independent Freight Forwarding Network globally.The announcement comes as a result of the Institute’s preliminary findings from its research study Independent Freight Forwarding in Global Logistics.

In 1996, 75% of all sea freight volumes were booked directly with carriers, today that number has dropped to 59% and is expected to go below 50% by 2020. Even more remarkable is that it is independent freight forwarders that will enjoy a greater market share of this growth than multinational 3PL’s at 30%
This switch away from carriers to forwarders is being driven by two key factors:

1. The increasing complexity of global supply chains
2. The increasingly commoditized nature of the carriers offering.

The findings indicate that one of the key drivers prompting BCO’s to work with independents is their provision of personalized bespoke services combined with access to global independent freight forwarding networks. Therefore for independent freight forwarders, membership of a global network is crucial. Network membership enables freight forwarders to form relationships with other freight forwarding companies, gain access to their resources and link with their activities all critical in connecting BCO’s to international supply and distribution networks. Combining their resources and activities with those of other freight forwarders will result in BCO’s materials moving faster at lower costs with superior customer service than competitors.
However not all networks are the same and that is the challenge for freight forwarders, how to go about identifying the correct network to partner with and having chosen a particular one, how to make membership work for both the company and its clients. Such is the significance of network membership for BCO’s in choosing an independent, the Institute’s final report will include a comprehensive overview of how such networks operate.
To date, there has been very little in the way of research on how successful freight forwarding networks operate. As a result, BCO’s and freight forwarders have access to very little information when evaluating the marketplace. The Institute will address this knowledge deficit in its final report. Our approach was to first identify a benchmark network to research and for this, the Institute has chosen the World Freight Alliance. The alliance has agreed to collaborate with GIL in the next stage of the research process which will give our researchers unique access to the alliance and its members.
The framework for the research is as follows:
The research will explore:

• The development of the WFA
• How the WFA operates focusing on the relevance of relationship and network theory to the behavior of medium and large-sized members in the network.
• The development of the WFA from the perspective of member firms.
• How WFA comprising competing forwarders operates and will focus on the relevance of relationship and network theory to the behavior of freight forwarders in business networks.
• How by leveraging the WFA platform, members have developed relationships with the aim of pooling their resources and activities to offer a freight forwarding service on behalf of other firms in the network.
• How members have by connecting with freight forwarders in other countries and combining their resources and activities with those firms offer a more expansive service with a global reach greater than each individual firm would be capable of offering alone.

ABOUT THE WFA
The World Freight Alliance (WFA) enjoy a very distinguished history in the development of global independent freight forwarding networks. While established in 2003, WFA’s roots go back to 1990 when Airborne Express the express delivery company and cargo airline, headquartered in Seattle, Washington developed the Overseas Express Carriers (OEC) alliance. The OEC, was an alliance of independent global express companies that functioned as a worldwide delivery network for its members to compete with larger companies.
In 2003, when Airborne was bought by DHL to gain a foothold in the US market, the other members of the OEC alliance with 13 years hands-on experience of dealing with each other formed the WFA.
The WFA is an industry network where freight forwarders have developed relationships with the aim of pooling their resources and activities to offer a freight forwarding service on behalf of other firms in the network. Thus, by connecting with freight forwarders in other countries and combining their resources and activities with those firms, the network of freight forwarders offers a more expansive service with a global reach greater than each individual member would be capable of offering alone.
The WFA unlike the majority of other networks is member-owned and operates on a not for profit basis. WFA has been developed by principles from freight forwarding companies who in response to a growing demand from large multinational shippers form global alliances with like-minded independents across the world.
WFA, carry out an exhaustive verification process on the information provided by new applicants and of the references provided to assure that new company’s fit within the profile of the companies of the network. This approach to member recruitment guarantees that:

• WFA is a trusted global network with local market knowledge.
• Is comprised of dedicated members specifically chosen for their exceptional performance and customer service.
• Demonstrate network standards which guarantee effective hands-on management and help build lasting relationships.

WFA members demonstrate commitment in relationships which over time has led to the development of interdependent activities, increasing the level of mutual productivity. WFA Network relationships are founded on strong conviction and mutual commitment to excellent service when dealing with the handling of a client’s freight. Personal relationships between WFA members have been developed through informal daily contacts, and through formal network meetings, which in turn has generated ties that contribute to the creation of a sense of belonging and commitment to the network.
MORE ABOUT THE GLOBAL INSTITUTE BEST IN CLASS REGISTER

Dublin March 2015

INSTITUTE TO RESEARCH THE IMPACT OF INDEPENDENT FREIGHT FORWARDING IN GLOBAL LOGISTICS

The independent freight forwarding sector is now more vibrant and successful than ever, despite the global economic woes of the past few years. The rise of the independent agent has now been borne out by a whole range of statistics and data that prove that far from shrinking, the independents are growing faster and taking market share from the multinationals.
2014 figures from Drewry consulting show that 41 percent of all ocean freight is now controlled by 3PLs or forwarders and by the end of the decade analysts are predicting that the market share will rise to 50 percent – a remarkable switch in business practice by BCO’s over the past two decades. 20 years ago some 75 percent of all sea freight volumes were booked directly with carriers.
Even more remarkable is that it is independent freight forwarders and not multinational 3PL’s are expected to make up the lion’s share of this total at some 30%
This trend by BCO’s to outsource the management of their container traffic to independent freight forwarders is being driven by increasing frustration with the lack of service, price volatility, schedule unreliability and onerous credit terms experienced in dealing directly with carriers in the sea freight industry.
Carriers due to the huge downward pressure on rates are being forced to increasingly commoditized their product. As a result, carriers are increasingly incapable of meeting shipper’s needs through direct relationships as they lack the end-to-end service supply chain capabilities, focusing instead almost entirely on cost. Sales and customer service teams have been slashed as the fight to the bottom on rates continues. The advent of super alliances has further eroded the personal interfaces between the shipping lines and the end customers.
This move away from direct booking with carriers by BCO’s is a great opportunity for independent forwarders to gain significant new business and volumes. For the logistics industry, this is also a positive development and will help to further integrate the global supply chain.
The report will be structured using a Q&A format asking and specifically answering 3 key questions:

1. What is the typical profile of the IFF that BCO’s are looking to?
2. What do independent freight forwarder needs to demonstrate to attract this business?
3. How are these services delivered?

What is the typical profile of the IFF that BCO’s are looking to?
Traditionally, the freight forwarder spoke directly with clients and warehouses around the world to arrange the movement and storage of freight. Today, the description of a forwarder has become far more complex. They now take this information and pass it along to the appropriate party whether that be the carriers, third-party service providers, Customs agents, or the shippers themselves.
Along with making certain that the freight gains entry into the country, a forwarder must now arrange for cargo to be picked up and delivered to the final consignee’s place of business. This requires contacting trucking companies, rail lines, or even sometimes exporting the goods to a different country for final delivery. This complexity has created new opportunities for the independent freight forwarder to upgrade their services and IT capabilities in order to keep up with growing demand.
What do independent freight forwarder needs to demonstrate to attract this business?
                                                                                       
Freight forwarders have to become smarter and more efficient – in an environment where manual data entry is still widespread – but they will have to enhance their commoditized offerings. For some, this means developing their levels of expertise in niche sectors in order to differentiate their services. Others will evolve from pure forwarders to fully developed logistics providers, increasingly serving customers with integrated logistics services. The technology systems they offer will be critical to their customer proposition.
The major market challenges that freight forwarders face today are becoming even more daunting as their basic services turn into commodities and the competition gets more intense. To become a best-in-class company in this environment requires thinking and performing outside the box.  The more services the forwarder provides, the “stickier “its relationship with the customer. Unless these industry dynamics are addressed and soon, freight forwarders will be condemned to competing in an industry in which slashing prices is their only competitive option
What is best practice in customer interfaces, track and trace facilities, global partner networks and other value-add services?
How are these services delivered?                                                                                                                                                
The days of opening a generalized freight transportation business may be over in favor of a more focused and specific transportation approach, that includes offering additional services that complement the transportation of the box itself. These may include warehousing, local distribution, pick and pack, or some form of commodity assembly before shipping. However, the sensitive, personal touch is always in demand and appreciated by customers who are not willing to be an anonymous entity with their freight company. To ensure both medium- and long-term survival the report explores several strategic imperatives:
How to Protect revenues with innovation—develop a “sticky,” differentiated offering
How to Maximize profits by adapting the offering to serve the most attractive customer segments
How to Win new business by attracting new customers in developing markets
How to Avoid commoditization by adding value-added services to the offering