With the acceleration of globalization facilitated by the development of information technology (e.g. the Internet), companies around the world have seized the opportunity to build supply chains that span continents. Low transportation costs have made it attractive to source materials globally and seek the most economical value chain, regardless of the distance the goods must travel.
Many companies, driven by the desire to streamline operations and minimize costs, have adopted lean inventory management practices, aiming to reduce working capital tied up in stockpiles — unable to anticipate that logistics could be disrupted one day.
However, recent upheavals have highlighted the fragility of these supply chains: Pandemics have closed seaports and grounded the air cargo industry, cargo vessels have been attacked by pirates and missiles, wars have increased jet fuel or crude oil prices overnight, and a minor vessel accident in the Canal of Suez or volcanic eruptions disrupting air freight have disrupted global supply networks, causing weeks of delays.
In this turbulent era, freight forwarding is a critical key player in the smooth functioning of global commerce. The ability to swiftly navigate complex logistical challenges and ensure the uninterrupted flow of goods has never been more vital. Moreover, with environmental concerns becoming increasingly prominent (pollution due to transport) and the competition for skilled talent intensifying, the freight forwarding industry faces additional layers of complexity to an already challenging landscape.
The seamless movement of goods has become a paramount concern. In the context of the current global challenges, the role of information technology in freight forwarding has never been more crucial. Let’s dive into the details.
At the heart of this complexity is the freight forwarding industry, which is tasked with the organization and supervision of the physical movement of freight and related services, with the objective of ensuring that the goods arrive at their destination on time, without damage and at a low cost.
Yet, this task is far from straightforward. Freight forwarders must address a multitude of challenges, here a few worth to mention:
- Optimal Routing: Selection of optimal cargo routing in the context of hundreds of suppliers and volatile market conditions (price and available space). The fluctuating prices and availability of space necessitate a keen understanding of market dynamics and a proactive approach of securing available space.
- Real-time Visibility: Maintaining real-time visibility of shipments is crucial for effective decision-making and problem-solving. With customers in industries where delays can have severe impacts (e.g. pharma), the ability to track and monitor shipments in transit in real-time enables freight forwarders to anticipate and mitigate potential issues before they escalate.
- Technology Integration: Freight forwarding is serving and collaborating with many small companies lacking robust IT infrastructure, leading to manual processes and inefficiencies. The absence of global EDI standards further complicates matters, requiring freight forwarders to invest time and resources into developing customized data integrations to facilitate seamless communication.
- Compliance: Adhering to many regulations, standard operating procedures and customer preferences is a constant challenge for freight forwarders. Navigating a complex mesh of regulatory requirements and standard operating procedures is essential to avoid delays, fines, and other penalties. Furthermore, it is essential to maintain customer trust and competitiveness in the market.
- Cost Pressures: The freight forwarding industry is characterized by intense competition and narrow profit margins, which necessitates the continuous optimization of costs without compromising on the quality of service provided to customers.
In this context, information technology is a catalyst for change, influencing the way we approach logistics.
In the context of all these challenges, information technology is the enabler that provides solutions to streamline processes and drive efficiencies in freight forwarding in an ever-evolving global marketplace.
By embracing digital innovation, freight forwarders can automate manual processes to a high extent, freeing up valuable time and resources for strategic work.
Samples of how information technology can solve issues for freight forwarders
| Real-time operational visibility | One of the most important values information technology can deliver. If you want to manage something you need to know the current state, ideally in real-time. |
| Artificial supervisor | Information technology enables real-time monitoring of all shipments to verify compliance with standard operating procedures, customer operating procedures, or regulatory requirements. |
| Artificial operator | Manual tasks can be fully automated with sophisticated rules such as "send an arrival notice to the consignee 24 hours before estimated arrival for LCL shipments and before Friday 15h00". |
| Predictive analytics | With the right information technology in place, you can anticipate problems before they occur and take early corrective action to ensure a smooth and uninterrupted flow of cargo. |
| Human Task Engine | When manual intervention by an employee is required, information technology can assign tasks with due dates and monitor their timely resolution. |
| Smart Cargo Routing | Information technology is capable of finding the optimal route based on hundreds of different supplier contracts and schedules. |
| Artificial intelligence in data entry | Freight forwarders often receive inbound data that is incorrect, incomplete, or contained in PDF documents and emails. Algorithms can help by automating data extraction and correction, freeing up human resources. |
| Internet of Things (IoT) | Through the deployment of IoT devices such as GPS trackers, temperature sensors, and RFID tags, freight forwarders can gain real-time visibility into the condition and location of goods throughout the supply chain. |
With the appropriate information technology in place, freight forwarders can reduce costs and deliver superior customer experiences.
The importance of information technology in the freight forwarding industry grows exponentially, and the need for digital transformation will continue to accelerate. Information technology's transformative power is reshaping the future of freight forwarding, unlocking new opportunities for efficiency, resilience, and innovation to meet current and future market needs.
Forward-thinking companies recognize the imperative of embracing digital transformation and as a strategic priority. By investing in modern information technology solutions with a strong focus on delivering value to the business and its customers, they are able to stay ahead of the curve, anticipating market trends and customer needs before they arise.
This proactive approach enhances operational efficiency and fosters a culture of innovation, driving continuous improvement and sustainable growth.
In this rapidly evolving landscape, the ability to harness the full potential of information technology is no longer a luxury but a necessity for survival. Those who fail to adapt risk being left behind, unable to compete effectively in an increasingly interconnected and technology-driven world.
It is evident that freight forwarding is inextricably linked with the integration of advanced information technology. As previously discussed, this sector is confronted with a multitude of challenges — from navigating complex global supply chains that are disrupted by unforeseen events to adhering to stringent compliance demands and operating under constant cost pressures.
However, through the strategic application of digital solutions such as real-time tracking, automated data processing, and predictive analytics, freight forwarders are able to overcome these hurdles and achieve remarkable gains in efficiency and resilience.
