Forward Thinking

The future seems bleak for those offering traditional freight forwarding services. Today, customers are demanding broader logistics services and 3PLs must re-connect with market demands.

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By  Issa Baluch Published  August 31, 2006

|~|issa222.jpg|~|Issa Baluch, chairman and CEO of Swift Freight International |~|The problem of supply and demand is a driving force in the human experience, and it is directly related to transport logistics: if we cannot produce the food or goods we want to consume or use, they must be transported to us from other locations. Today, the products we consume travel long distances along global supply chains to reach us. As these supply chains become more intricate, their success depends more and more on the expertise of freight forwarders and logistics providers. The role of the freight forwarder has expanded to such an extent that many have abandoned the perception of being mere agents for the transport industry. Freight forwarders have been condemned to extinction many times before, but today they handle more cargo, more efficiently than ever and are responsible for a vast array of services in the supply chain. Freight forwarders have learned that, in an era of global competition, outsourcing and the rapid movement of goods across international multi-modal networks, they must integrate themselves into their customers’ global supply chains and add value. Fewer and fewer companies need the services of a traditional freight forwarder, so simply moving consignments between supplier and consumer is not enough. It is entirely possible that, in some parts of the world, the freight forwarder as we knew him will be extinct in five to seven years. While all industry players have been affected by trends such as leaner supply chains, just-in-time production methods and outsourcing, freight forwarders in particular have been forced to evolve. Instead of acting as pure forwarding agents, who merely shuffle boxes through customs, they now offer value-added services, such as warehousing, distribution, labelling, quality control, pick and pack, consulting, maintenance, scrapping, assembly, repairs and inventory management. The top logistics providers and integrators have been so successful in their service offerings and buying power that we often wonder whether there is room for anyone else to grow. However, even small freight logistics providers can retain their market share, as long as they provide good service with modern logistics tools. They will, of course, have to deal with a number of challenges: the stakes are higher than ever before; 3PL-customer relationships are evolving; there is more dependence on the integration of processes; freight logistics providers (FLPs) will be required to provide broader-based solutions; and the value of information is increasing. But small to medium sized freight forwarders and logistics providers will be able to compete by positioning themselves for a changing marketplace and by following some basic steps. • Foster close relationships and offer the individualised service that comes from a company with a smaller scope and a dedicated customer focus. Be willing to specialise, individualise and personalise services according to customer demand. • Take advantage of globalisation. Global expansion, combined with the need to outsource all non-core competency supply chain tasks, means that there will be increased dependence on FLPs to reach far-off markets. • Be a part of strong alliances and networks of similarly-minded FLPs. These networks are an effective way for smaller players to provide global service and, ideally, maintain a foothold in the market in the long run. • Specialise in the business of information. Information management is the new face of the FLP, because real time, accurate, customised communication of information is paramount to the entire business. Logistics today is essentially the efficient management and handling of information at all points in the supply chain, just as much as the physical movement of goods. • Being in the business of information requires expertise in handling that information. There are many technological tools available to FLPs for use in engineering their customers’ supply chains, such as technologies that manage warehousing and distribution, track and trace, supply chain events, import and export, freight forwarding, customs clearance and transportation. In terms of providing real-time visibility to customers, shipment tracking is one of the most important services that FLPs can offer. In order to survive, FLPs must provide value-added services that comprise a significant portion of the customer’s total logistics costs. Quality, value-added service is based on consistently providing customers with ever-improving solutions to their supply chain needs. And supply chain participation is not an option for FLPs — it has become necessary in an age when there is such limited value in simply facilitating the customs clearance process. To survive, the freight forwarder must integrate his services into the entire supply chain system, making his expertise part of an integrated whole. Article written by Issa Baluch, chairman and CEO of Swift Freight International and Immediate Past President of FIATA. The above is an excerpt from his book, Transport Logistics, Past, Present and Predictions. ||**||

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