If you were first exposed to the internet in the ’90s, chances are it was because you got an AOL CD (or, gasp, a floppy disc) in the mail. And the disc strategy worked. As the AOL CEO at the time, Steve Case, said:
When we went public in 1992 we had less than 200,000 subscribers; a decade later the number was in the 25 million range”
The internet has moved on from AOL, the loud connecting noises and slow loading pages. It has now exploded from 25 million users to over three billion active users.
Today, you can instantly reserve a flight from a wide choice of airlines online (thank you, Expedia and Priceline). You can live stream movies (cheers, Netflix) and instantly book hotel rooms and apartments online (yes, we see you Airbnb).
Same goes for books, groceries, taxis, banking, canoe and even B2B purchases. But not so much searching for online freight rates.
So we asked ourselves (and some logistic professionals)…
So what kept freight rates offline?
Shipping rates and fees are complicated.
Let’s start with the sheer complexity of rate management.
A typical mid-sized freight forwarder has dozens of ocean contracts, over 50 airline contracts and over 100 trucking contracts. These 200+ contracts will be in different formats, ranging from PDFs and Excels to simple emails. And many of them are constantly changing.
One tariff with 10 different surcharges and pricing rules is complicated. Five tariffs are daunting. 400? Well …
Tariff formats and contracts aren’t standardised
One man’s BAF is another man’s BAC..or even IFP. In fact, forwarders often have three or four different names for the exact same fee. The result is a complicated mess of acronyms that can make life difficult for a forwarder, more-so for a novice shipper.
Prices originate from multiple countries and different agents
Forwarders may be able to automate freight rate management at their own offices. But international shipping is, well, international, creating dependencies on other branches, offices or companies.
Full door to door quoting depends upon external rates, from either agents or overseas company offices. Not much incentive to automate when the result is partial at best.
Freight is one of the oldest industries in the world – the Australian continent was first settled over 30,000 years ago by people who had to travel globally. Trade lanes have been around for at least as long.
Combined with a plethora of rates, no standardisation of fees, and a myriad of agents and overseas offices, it’s no wonder that 3PLs rely on personal networks.
Those relationships have kept the freight industry up with the frenetic pace of the growth of world trade. So if automation meant burning those relationships, well that sounded like madness.
Freight as a big-ticket item
There’s a huge difference between shipping a book and shipping a 40′ high top.
Early online selling started with smaller consumer goods. They were low-priced, pricing was easier, and parcel shipping was far easier. Amazon started out with books. Freight, as a complex big-ticket item, naturally missed the first waves of automation.
But today, you can buy a boat online. You can buy house-sized power generators. Heck, you can buy a house. Things are changing.
The stakes are high in freight. How secure is the payment mechanism? How protected is the company’s supply chain, especially the security protocols of each and every agent? Getting freight rates online clearly means being connected to the internet. And that rightfully leaves 3PLs nervous.
Culture of conservatism
All together these make for some high hurdles. And with literally hundreds of thousands of freight sales managers globally in a similar situation, there has been a sense that it is just too hard.
So are these concerns still valid?
The sheer complexity of rate management, tendering and rate quoting beg for automated solutions.
Courier and parcel shipping are a great example of a predecessor for online automation. FedEx and UPS have taken advantage of online sales to increase revenue during periods of online sales growth.
FedEx and UPS Revenue show how revenue increased as online E-Commerce sales and fulfillment increased.
Automation brings order from potential pricing chaos. It’s happened in other industries. And a few intrepid freight pioneers are leading the online freight rates charge today, especially in domestic trucking. But it’s only been in a piecemeal fashion.
As for the personal relationship, modern IT platforms can actually be an enabler of interactions, rather than an alienator. Alibaba, for example, connects foreign manufacturers with importers, helping to forge new relationships, rather than replacing them with only digital transactions.
And although there are still legitimate concerns with online security, the E-Commerce revolution now has two decades under its belt. Airlines, banks and trading companies have long since taken the plunge.
Is it time now to move to online freight rates?
So for the most part, these problems have now been resolved. This is timely, because today there are actually several drivers working in the opposite direction – toward online freight sales. Pioneering forwarders are gaining the first-to-market advantage and will be reaping huge benefits.