Little change to Top Ten says Ti 30 Transport Intelligence’s


annual report, Global Freight Forwarding, lists the top ten leading world freight forwarders – in revenue, teu and airfreight tonnage terms. What’s perhaps most interesting, says report author Cathy Roberson, is that the list of top forwarders hasn’t fundamentally changed much in the past few years. Some forwarders have moved up or down the table by a few places, and there has been a little movement further down the rankings, with companies leaving or entering the top 15 or so, but fundamentally very little has changed, she says. “Ever since Ti has been doing


this report, it hasn’t changed drastically. The large forwarders – the DHLs, the Kuehne & Nagels and so on – have a large global presence and today’s supply chain is also global.” It can be hard for a newcomer to develop a global network and put sufficient volume into it. A few companies have


entered the freight forwarding market with the avowed intention of becoming a top global player, although none has grown its forwarding business sufficiently to break into the top ten. French and European logistics giant Norbert Dentressangle is one of the more notable, having recently completed its purchase of US- based Jacobson and earlier, in 2010, bought out US-based Schneider Logistics’ freight forwarding business. US-based CH Robinson is


another logistics company that has turned its attention to the international forwarding market of late, buying up Phoenix International in 2012. CH Robinson doesn’t have a particularly high profile in the UK in the moment, but that could change as it has ambitions to raise its international game. Australia’s Toll Group – a very


big player in its home market – has also entertained the idea of buying a major US or other player. But the lack of new entrants


to the top echelons does not mean that forwarding is a static,


changes


fossilised market. Many are


bubbling away


beneath the surface. Perhaps one of the most significant shifts in the last few years has been


the rise of the emerging markets – something that many of the major forwarders have taken on board in their strategies. “DHL has made a big splash, UPS has even created a specialist department. Asia and Africa are seen as huge opportunities despite the evident risks in these markets,” says Roberson. The global forwarders may


not have much of a presence at the moment in markets such as intra-Asia or between, say, Turkey and South America, but they do service flows between developing countries and developed world markets like Europe or North America. And they could join up some of those developing world dots and start serving those markets, Roberson believes. “They’ve got the network and the infrastructure – it’s relatively easy for them.” Forwarders are banking a


great deal on the intra-Asian market in particular: “It’s a growing


market, but that


is almost all we know – we don’t know by how much it’s growing,” she states. True, some of the rates


in the intra-Asian and intra- developing world markets aren’t enticing, so forwarders may need to be selective in what business they take on, though in fact this is true in all markets. In any case, says Roberson, forwarders are led by their customers, and if they are entering developing world trade lanes, presumably their service providers will follow them. There has been a major shift into the developing world since the Great Recession choked off much of the growth in Europe and North America. It is just possible that a


developing world forwarder may emerge as a new giant on the global scene, but there is scant evidence of it yet. Sinotrans is indeed a major player on trade lanes to and from China, but it has made little if any impact in non- Chinese markets. Its dominance is partly due to historical factors – before China joined the World Trade Organisation, Chinese government rules forbade foreign forwarders from operating independently in the country and instead forced them to work in partnership


2013


Note: All revenue amounts are best available data from 2013 Reports & Accounts. Both Kuehne + Nagel ‘turnover’ and ‘net of inter-segment’ figures are depicted. Averager annual iechange rates for 2013 have been used.


with a Chinese company – and state forwarder Sinotrans was the forwarder of choice, more often than not. It’s not only Chinese-owned


forwarders that find it hard to shake off national ties – Japanese forwarders’ business tends to involve Japan or Japanese-owned companies. In the case of Nippon Express, 79.1% of its revenue comes from this single country, according to Ti, and even for a more globalised forwarder like Kuehne + Nagel, Europe accounts for just short of 60% of total revenue, although it does have a big involvement in other parts of the world, notably the US. It can be hard to escape your history. Agility is an interesting Kuwait-


company. headquartered, it can claim


a particular advantage in emerging


markets and is


doing a lot of work in Africa, in particular, says Roberson, although it is also active in Europe with several big contract wins to its credit. On the downside, the company has had a few issues recently, notably being banned from the US defence market and it could yet be affected by instability in the Middle East. DHL is another major player


in developing world markets. Could - or should - the freight


forwarding market consolidate further? Robinson certainly thinks that there is scope for this, though most of the recent purchases by the top forwarders has been of small niche players in specific industry segments or


UPS’s takeover of TNT Express has dampened enthusiasm that any of the big players may have had to swallow up one of their peers, and there certainly hasn’t been anything on the scale of the Deutsche Post’s buying spree a few years ago. “I don’t see the takeover of a number one or even a number eight- ranked forwarder happening in the foreseeable future,” says Roberson. What the big global players do have some appetite for is in acquiring industry specialists


– including those


involved in food and drink and pharma. There was a similar rush to buy up high tech specialists a few years ago, she recalls. The top global forwarders


are also still buying out their local agents in some countries, particularly the developing world. Buying out local or specialist


operators can be a good way to quickly grow a business, although it may lead to issues of consistency and quality, not least in the IT department. Many a


patchwork of


Roberson, is the move of many of the big global forwarders into the less-than-containerload segment. Until


recently, LCL


consolidation was seen as a specialist function carried out by NVOCC and similar operators, but in the last couple of years forwarders have started to market these services in their own right, she says and in the US, at least, all the top ten forwarders advertise an LCL service. What no one knows, of course, is the extent to which these services are actually operated by the forwarders themselves or whether there is a degree of co-loading with an established NVOCC. Over the years, forwarders


have offered a wide range of other added-value services. There was a time when UPS repaired laptop computers although such direct involvement in the customer’s activity is rarer these days. Big forwarders


Issue 7 2014 - Freight Business Journal


///GLOBAL FORWARDERS


often talk about


forwarders still have different


regions of the world; the European Union’s vetoing of


computer systems that they have inherited over the years from their constituents and creating common systems can be complex – more difficult and long drawn out than some would have you believe. Meanwhile, the top ten


global forwarders’ share of the total market remains roughly stable, at around the 40% mark – perhaps it has slipped a bit lately, but only by a couple of percentage points. That, at least, is Roberson’s guess, as forwarding is a very hard market to get a handle of. It’s a bit like a comet, with the large companies as the head, followed by the medium-sized players and then the myriad number of tiny companies, down to the ‘mom and pop’ organisations handling perhaps one customer on one trade lane making up a long and ill-defined ‘tail’. As the pie chart to the left shows, “Forwarding is still a very fragmented market,” says Roberson. Freight forwarding is not a


static business, and companies are constantly looking for ways to grow their business. One noticeable development, says


‘leveraging’ their ocean and airfreight volume, by which they mean using the fact that they are moving the customer’s freight


to offer additional


services like warehousing or pick and pack. Ostensibly, the idea is to increase profits, although Roberson ventures that such added value activity may not always be profitable in themselves and that the boot may be on the other foot. The motivation is to differentiate from their forwarder rivals and thus increase freight volume and earnings. Some of the big global


forwarders also have sizeable domestic logistics businesses. In FBJ’s part of south London, a Kuehne & Nagel truck is much more likely to be delivering beer to the local pubs than carrying international airfreight, and this can cloud the picture when comparing companies freight forwarding business per se. Indeed, the definitions of forwarder, logistics operator or express parcels company have become very blurred of late. “It’s really gotten very muddy,” says Roberson. “In the US we’ve had companies buying trucking brokerage


and in


Europe to, you have companies trying to be all things to their customer. It’s not as neat and tidy as it used to be.”


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