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How Do Freight Forwarders Add Value to the Global Supply Chain?
A freight intermediary (also known as an OTI or Ocean Transportation Intermediary) is someone who assists an exporter or an importer in securing competitive freight rates while providing the most efficient routing for their cargoes and also preparing and processing the documents related to these shipments.
Freight forwarders and/or NVOCCs would fall in the above category. Their success depends on having a growing database of clients and the ability to secure and provide optimal pricing and cargo routing.
Sounds easy, right? In reality, however, managing the procurement and routing that comes with shipping goods is quite complicated. So what does it take to manage the complexity that comes with international shipping in a way that makes it easy for importers and exporters of goods? Here’s a list of key freight forwarding services that make the world’s goods move:
- Offer Comprehensive Solutions – Successful freight forwarders provide the best deals across multiple modes of transport – ocean, rail, road, warehousing, etc. This is essential in order to offer customers the best combination of services to meet their supply chain needs.
- Optimize Customer Value – Buying in bulk reduces costs. So does good old fashioned bargaining for the lowest price. And of course every transporter wants to offer freight forwarders their weekly discounts and promotions. Where freight forwarders add tremendous value is in managing the balance between price and value. The lowest priced option is rarely the best service option for a shipper or receiver of goods. There is a difference between price and cost. Forwarders manage this trade off daily.
- Understanding – Understanding a client’s business requirements and goals is the most important value added service a freight intermediary can provide. Knowing when “get it there now” means “now”, and what “later” truly costs a customer, is the hallmark of a successful freight intermediary.
- Transparency – Shippers always want need know 2 things: “where are my goods?” and “what does it cost me to get them to my customers?”. Freight forwarders answer these questions daily, and the ones who have the ability to answer accurately are the most valuable to their customers. Tracking & tracing, price forecasting and the timely delivery of such information is crucial to shippers and receivers. Great freight forwarders make this transparency a core part of their service offering to clients.
- Accountability – A lot of freight intermediaries will focus on “personalized service” as their competitive advantage. But what exactly does that mean? Customers don’t care about the “person” per se. What they are looking for is an understanding of their business needs and a solution to their problems. Successful freight intermediaries are the ones who realize this and proactively solve problems like price changes, capacity contractions, trouble spots and above all hold themselves and their vendors accountable for the results a customer needs to succeed in international business.
The common thread to all of these attributes is visibility. It takes visibility to recognize the value of each mode of transport. It takes visibility into market conditions to make the call between price and cost. It takes visibility to understand client business goals and to be responsive to those needs.
Technology is the enabler of visibility. Technology enables forwarders to move from a tracking spreadsheet emailed to customers daily, to a cloud based dashboard that enables real time status updates. Technology enables forwarders to stop sending multiple emails just to get a competitive rate or to keep NVOCC’s from re-quoting the same shipment over and over again. But in an industry where net profits are typically only 5% of gross sales, where’s the money to deploy better technology?
That’s where digital platforms come into play. Platforms enable visibility in vital freight intermediary functions like quoting, booking and tracking of shipments. They create visibility that benefits freight forwarders, NVOCC’s and their customers and vendors without actually trying to eliminate anyone’s profitability.
How does a digital freight platform work?
A digital freight platform provides access to competitive rates for FCL and LCL shipments, allowing a shorter turnaround time for accurate pricing. System checks allow detection and avoidance of duplicate quotations while the access to competitive rates provides greater cost savings and better integration with the clients.
The global reach of a digital freight platform allows a customer base to be significantly widened while improving product offering and minimizing infrastructure costs. Quite simply, a digital platform enables freight intermediaries to access more orders at a lower cost of customer acquisition. In fact, digital platforms can totally eliminate the cost of new customer acquisition. That means more business realized for less money spent on sales or marketing.
By combining core service offerings with the visibility and speed of a digital freight platform, a freight intermediary can make strategic and tactical decisions required to succeed at their core competencies. This frees up valuable time and resources to pursue new opportunities, grow business and perhaps even get back to building relationships through personalized service.
Interested in learning more?
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