2016 was the year the seeds of change were planted. We had more conversations than I can recall with corporate boards from logistics providers and carriers, all reaching out to test the waters. But 2017 emerged as the year when digital freight broke out and 2018 is set to be the year when it starts to take off.
Freightos has played a major role in making digital freight a reality. In the past year, Freightos powered over 300,000 searches across the Freightos Marketplace. Over 1,000 logistics providers and carriers generated over one million instant quotes with Freightos AcceleRate and Freightos WebCargo. But we’re not the only ones that are bringing freight online.
2017 saw a handful of top forwarders selling online. Kuehne + Nagel has offered some modes online since 2016, while UPS has offered air freight alone. In 2017 they were joined by Agility (all modes) and DHL Global Forwarding (air), while Panalpina has announced that they plan to sell online in early 2018. Maersk, CMA-CGM, and Hapag-Lloyd have all soft-launched online ocean container sales in 2017, joining Delta Airlines with air cargo.
The end of a year is a great opportunity see why freight digitalization is so complicated, how a dizzying array of players are taking on the challenge, and, of course, what role I believe Freightos is playing in this transformation.
Buckle up. This is heavy stuff.
Digitalization is Hard
Let’s call a spade a spade. International freight is incredibly complex. There are dozens of people involved in each shipment; Maersk estimates an average of 200 interactions from 30 people in shipping a single container. Visibility of a shipment is limited to the lowest common denominator of involved carriers, making even the most advanced provider struggle with real-time reporting.
Here are just some of the hurdles in fully digitalizing the supply chain.
Digital Freight Sales and Support Is Really Hard
Pricing and Routing
It starts with standardization and rate management.
Millions of truckers, hundreds of airlines, and dozens of ocean liners each use different formats for pricing. A dizzying array of surcharges and fees means that a typical door-to-door spot freight quote will have over 20 line items, all further complicated by archaic pricing rules.
Some attempts to solve this has caused even more problems, by companies using locale-specific rate management systems rolled out on regional or departmental levels (e.g. air departments in the DACH region) to manage specific rates. This makes rolling out rate updates a nightmare, cross-border/ cross-office coordination difficult, and it increases the likelihood of manual errors.
Lack of standardization isn’t a new problem but more agile supply chains certainly are. Transport Intelligence found that in 1990, 2/3 of global trade moved on the top 50 routes; today, that’s dropped to 1/2 of global trade. Shipping patterns change more often than they once did as product cycles speed up, consumer tastes become ever more fickle, and in response to unplanned events – whether a Hanjin Bankruptcy or a Hurricane Harvey. Today, shipping patterns must respond in hours or days, not weeks or months.
Hurdles to Freight Sales Automation
Even where rate management has been automated, freight sales largely remain offline, held back by cultural and technological limitations. Increasingly agile supply chains mean that sales and pricing teams need to quote far more often and on a broader variety of lanes. But poor standardization and rate management make it difficult to generate accurate quotes on-demand. And the sales processes themselves still lag, with international communication at the mercy of international time zones and holidays, and by slow dissemination of promotional rates or notification of changing capacity. In one example from 2015’s mystery shopping survey, a Top 10 3PL managed to quote port to door in just hours but adding origin charges loaded another three days on the turnaround time.
These challenges are magnified by changing customer expectations. The traditional sales model relies on account managers drifting from company to company with their book of business, relying on their personal relationships with shippers. However, BCOs are increasingly searching for reliability and price, not that handshake and game of golf. Millennials entering the industry prefer speed and transparency over relationship every time.
Even when sales are finalized, freight remains one of the only industries were business contracts are informal and regularly breached. Poor enforcement means that rolled shipments are common – hurting shippers. No-show containers are equally common – hurting carriers.
Unless these poor capacity management practices are eradicated, real-time booking of specific slots will remain elusive. Even in the more-technically advanced air sector, eight years into its lifecycle, only 13% of IATA member freight forwarders actively support XML booking messages.
Challenges in Scalable Freight Customer Service
Nearly 75% of all forwarders believe that customer service in freight is shifting towards full automation, with personal involvement limited to exception management and backup communication (much like self-service banks, backed up by human tellers).
That same research shows manual transportation management as being the norm, with some 50% of shippers relying on spreadsheets as their primary transportation management tool. Logistics providers are as loath to engage in phone calls about shipment statuses, as their customers. Yet millions of phone calls every year start with “Where is my container?”
The Offline Document Management Process
Documentation management continues to be a nightmare. According to IATA, an individual air shipment can require up to 30 (paper) documents, meaning there are about 7,800 tons of paper documents created each year. Eleven years since eAWB’s launch, industry penetration is still below the 50% mark. I was amazed to see a major airline where someone has the job of trollying physical airway bills from one side of the office to another.
On the ocean freight side, solutions like essDOCS and Bolero can push electronic Bills of Lading through the trade chain in only 3 minutes. But this method is struggling to gain traction. EssDocs, the market leader, can only count 17% of the global container line fleet as using their solution. Add in more complexities around POAs, import licenses, bonds, and more…and you’re left with an unholy, manual mess.
Several aspects of freight billing are frustrating. Take, for instance, when booking an urgent shipment is held up for several days while a credit check is completed on a new shipper.
But invoicing is a major can of worms. It’s actually quite rare for an invoice to exactly match the original price quote. That’s partly because ocean carriers base their charges on time of gating container, not on time of booking.
Sometimes shippers don’t help, as the actual dimensions and weight of a shipment often differs from what was provided at booking.
All this increases the incidence of manual billing adjustments and the risk of error. No wonder, then, that mistakes are commonplace. In fact, the magnitude of freight billing errors has spurred a whole secondary industry – freight invoice auditing – which annually corrects an estimated $684 million in errors.
But despite formidable challenges, the logistics industry has been anything but stagnant. In the conclusion to this article, Dr. Schreiber evaluates the digital freight sales ecosystem, from carriers and forwarders to other new tech companies.