Is freight finally ready to go online?


2


Freight could be on the cusp of going electronic, says an industry IT specialist. Dr Zvi Schreiber, chief executive and founder of online freight quoatation specialist Freightos says that his company’s latest research suggests that, after decades of inaction, there are small but significant signs that the industry is at


beginning to grasp the nettle of automating freight booking. In an interview with FBJ, a few days before Freightos


last


was due to publish the results of a major survey of online freight quotation and booking activity in the industry, he said: “This is a very big but very conservative industry, and in many ways it is 20 years behind the passenger travel business. But suddenly last year several companies made significant moves towards electronic quotation and booking.” The traditional forwarding industry could


even face something of an exisential


threat, he adds. Moves such as Maersk Line’s deal to selling container slots to traders through the Alibaba online retailer, forwarder Kuehne & Nagel’s move to offer


some


products through their website and Delta’s move last year to become the first airline to offer online quotations all point to an industry that is on the brink of fundamental change, says Dr Schreiber. He pointed out: “In 1997 a few brave souls were booking


Forwarders slow to move quotes online says report


There is much talk of moving freight quotes online by the forwarding industry, but relatively


little action, according to a new survey by IT specialist, Freightos. In late 2016, Freightos repeated


its 2015 ‘mystery shopping’ survey of 20 top forwarders, to see how much the talk has been backed


Time for a more


sophisticated approach to freight procurement?


Shippers should reconsider their freight procurement strategies, argues Dominic at EnVista. McGough, who is managing


partner for the EMEA and APAC regions and associate at the European arm of finance and IT firm, say that freight procurement requires a different approach than, say, office supplies. Effective freight procurement needs good, ‘cleansed’ historical data for the specific trade lane if it is to give the client an accurate picture of what comparable competitors are paying. It also needs to be adjusted to take into account factors such as the volume of freight being procured or the date of shipment.


“Without good, cleansed data,


going to market can be labour intensive,” asserts McGough. “However, the only parameter that many shippers have is what they are spending today.” Even today, there are


many large shippers who do not properly benchmark against their peers, he says. Rate information is no longer made publicly available, as it could be under some national jurisdictions in the conference era, but freight audit companies such as EnVista have access to data that they can anonymise and average, allowing them to provide an “apples with apples” comparison, says McGough. Freight procurement is also


complicated because it isn’t just a matter of finding the lowest price. Factors such as quality of service, whether or not rates will be maintained during the course of the year or two years or even the financial stability of the shipping line can all come into play. The procurement process must


also take into account


applicable Incoterms. The shipping


also possibly unique in


industry is that


different service providers can offer space on the same ship, but with widely different pricing structures. Also, with the recent spate of line mergers and the ever-changing shipping line alliance landscape, keeping track of which lines are offering


Issue 1 2017 - Freight Business Journal


airline passenger seats online; it


took ten years for the


majority of airline seats to be sold online and I think it could be a similar sort of timescale for freight.” Some forwarders could even


find themselves cut out of the loop altogether if they fail to embrace online booking and quotation, he believes. “In the past carriers have tended not to sell direct to smaller shippers, but online booking could start to change that.” Certainly, the Maersk-Alibaba ventures appears to be aimed at smaller shippers. The forwarding industry


could in any case be ripe for a shake-out. While around two thirds of the world’s estimated


up with results. It submitted identical quote requests for an LCL shipment from China to Chicago, purportedly


from a rapidly


growing mid-sized US-based wholesale company. The survey found that Kuehne +


Nagel was the first major forwarder to instantly quote multiple modes


which service on which ships is a fearsomely complicated task. Last year’s Hanjin bankruptcy brought home forcefully to many shippers that the line they had booked space with was not necessarily the one whose ships were carrying their cargo. The picture is further clouded


by the existence of NVOCCs, freight forwarders or freight management companies, all of whom can offer an alternative way of buying freight capacity – and which may or may not be more cost effective for some or all of the shipper’s volume, depending on circumstances.


It


might be better to give all your volume to a shipping line direct and enjoy a volume discount; on the other hand, it could be better to take advantage of a freight forwarder’s own buying power. Another possible strategy is to mix and match – get a contract for a portion of the business and use the forwarder and/or spot market for the rest.


$300bn freight market is controlled by forwarders in the top 25, the rest of the market is handled by the approximately 100,000 smaller operators, says says Dr Schreiber who adds: “By any standards, freight forwarding is still a very fragmented industry.” It has been argued by some


that, unlike passenger travel with its ‘one passenger, one seat’ model, freight booking with its need to cater for hazardous or temperature controlled goods, is too complex to put completely online. Forwarders though have tended to exagerate the difficulties, Dr Schreiber believes. While multimodal shipments using a mixture


on their website without a paywall (meaning that no user account was necessary to book the service). But it also found that most


forwarders’ processes are still manual. It


took on average 101


hours to provide a simple manual spot quote, 11 hours longer than in 2015.


“There really isn’t a one size


fits all solution, and if you haven’t got the right data to put into your procurement tool, you will have problems,” says McGough. “The problem with standard


procurement tools is that they’re just not designed for freight services,” adds EnVista associate Alastair Cairns. “Remember, in shipping you get what you negotiate, not what you deserve.” McGough adds that


procurement should not be carried out on the basis solely of an automated procurement tool. Rather, such tools should be used to whittle down the number of prospective freight suppliers before concluding a deal on the basis of, probably, face to face negotiations. The freight element of total


landed cost in the UK is not insignificant, he further points out, taking into account that VAT and duty are calculated as a percentage of the total cost. Moreover, the price of many


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of land and sea transport or groupage traffic does pose some challenges, 90% of freight


is simple port-to-port


full containerload traffic that would be relatively simple to handle online, he argues. If freight does go online, it is as yet unclear whether it will be handled by existing practitioners who have embraced the new way of doing things or start-up companies. In banking, the traditional banks have largely held off the challenge of pure-play online banks, but in retailing it is much more mixed, with dedicated e-tailers stealing a large part of the market from bricks and mortar businesses.


It also took an average of 15


hours to personally follow up a quote request (compared with only seven in 2015). Only 9 out of 20 forwarders provided a quote (the same number as last year), and only three subsequently followed up (one less than in the previous survey).


goods has been dropping more rapidly


than typical freight


rates, so the freight element has become relatively more important. EnVista can also provide a similar data service for airfreight, which has the added complexity of different levels of service depending on whether it is an express or a deferred shipment, and also for express ‘integrators’ – whose pricing can be just as variable as the ‘traditional’ freight industry’s. January is the time when most


shippers traditionally do their freight procurement – it falls conveniently aſter Christmas in Europe and before the Chinese New Year rush, though there is no fundamental reason why the exercise could not carried out at other times of the year. In the case of former Hanjin shippers, the process had to be hurriedly carried out again following that operator’s bankruptcy at the end of August last year.


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