Digitalization in Freight Forwarding-Beyond the Platform Hype - Deloitte
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Digitalization in Freight Forwarding – Beyond the Platform Hype
02
Digitalization in Freight Forwarding | Beyond the Platform Hype
Abstract 04
The platform hype in freight forwarding 06
The platform prohibitors in freight forwarding 10
The platform derivatives in freight forwarding 13
03Abstract
Digital transformation showed platform-op- Our survey reveals industry-specific pro-
erated companies such as UBER, Airbnb or hibitors that run counter to a bare platform
Facebook to be digital disruptors. In many model:
industries, we state that, in the blink of an
eye, digital platforms dis-intermediate entire 1) s hipper's need for customization, guar-
industries. We can see the same platform anteed prices & loading capacity, and
hype at our clients from the transportation consolidated invoicing;
industry, where many players aspire to
disrupt a market of a multi-billion industry 2) r obust and rigid re-liability requirements
worldwide. Forwarders as intermediaries between different parties involved in
were expected to become redundant and a transportation;
bare platform model was expected to allow
for direct interaction between carriers and 3) n
eed for involvement of many different
shippers. Yet, despite numerous efforts, all types of parties in shipments;
platform wannabes have failed to generate
game-changing effects and the market is as 4) t raditionally analog mindset and a short-
hyperfragmented as ever. term investment culture at incumbents; and
This discrepancy calls for a qualitative study 5) s carcity of ambidextrous capabilities and
to better understand the reasons for plat- digital forwarder talents.
form failure in relation to freight forwarding.
This is why we have conducted guided deep Given these industry-specific prohibitors,
dive interviews with practitioners at incum- our analysis suggests that three platform
bents, startups, carriers, and shippers to derivatives will evolve as future business
find out why platform wannabes possibly fail models in transportation: niche platforms,
and to develop potential business models regional ecosystems, and digital forwarders.
based on our findings. Keeping these insights in mind, our Point
of View helps Deloitte's clients to navigate
through an increasingly competitive
universe by providing useful insights to
the leaders as they seek to address digital
threats and opportunities.
04Digitalization in Freight Forwarding | Beyond the Platform Hype
05The platform hype in freight forwarding
The freight forwarding industry is ruption. In contrast to the digital disruptors their company – with good reason. Looking
said to be a business model prone to mentioned above, the incumbents of the at the underlying business model of freight
dis-intermediation, with many players freight forwarding industry come from forwarders, a certain “platformization”
aspiring to realize its platformization analog times. Since medieval times, freight potential is evident:
potential in recent years. forwarders have organized transportation
Much has been said and written about the on behalf of a) shippers, by air, ocean or Their fundamental intermediary function
digital era we live in. It is a global phenom- land, and b) carriers, to get physical goods between carriers and shippers was the
enon that affects every aspect of both our from A to B. They have contracts with car- main reason freight forwarders were fore-
private and our professional lives. How- riers to move goods and guarantee loading cast to become extinct as a self-contained
ever, the most intriguing and challenging capacity at stable prices. They allow for business in the future (McKinsey, 2017).
aspect of this era is not digitization, which consolidated invoicing because shippers Digital connectors may have the potential
transforms existing analog processes into do not need to interact with all the carriers, to reduce the need for freight forwarders
digital ones (Schallmo & Williams, 2018), but ground handling agents, customs agents, to organize shipments for multiple parties
digitalization, which rather constitutes a etc. involved, but only with a single coun- manually. Direct interaction between ship-
restructuring of an entire status quo (Bren- terparty. In the process, freight forwarders pers and carriers is technologically feasible
nen & Kreiss, 2016). The most prominent have become supply chain, warehousing, with digital connectors (Deloitte, 2017) and
examples of such a restructuring of entire packaging, and documentation experts, makes economic sense if a certain platform
industries are the well-known platform too. This does not necessarily require is able to bring together a critical mass of
companies UBER, Tencent, Apple, Airbnb, assets in terms of ships, trucks or planes1. players in its realm. As a consequence, the
and Facebook. Their platform business As such, the traditional freight forwarder intermediary function of freight forwarders
models allow each type of participant to is part of the wider transportation market is threatened by dis-intermediation and
be a customer of the platform in some and serves as a manual platform between suggests that they are the predecessor of
relevant way as the platform enables direct shippers and carriers, optimizing time, a multi-sided (industry) platform without
interaction between two or more sides costs, and representing reliability. transport liability. Figure 1 compares this
(Hagiu & Wright, 2015). This is the true new platform to the traditional model.
power of the digital era – in the blink of an Indeed, recent studies confirm a huge
eye, platform companies can re-structure platform interest (with)in the industry On top of this, a polypoly market structure
entire industries, leaving longstanding and (DSLV, 2019). Half of the respondents of defines freight forwarding and exacerbates
well-deserved players lagging behind. the “Transport Intelligence” survey (2017) the platform potential of the underlying
have tested industry platforms. Of these, business model. Global market leaders
Freight forwarding is said to be a business 64 percent have gone on to use such a such as DHL, Kuehne + Nagel, and DB
model prone to precisely this kind of dis- system as a permanent solution within Schenker have a market share of about
06 1
This is why in ocean freight the term non-vessel owning carrier is also widespread.Digitalization in Freight Forwarding | Beyond the Platform Hype
one-digit percent each2. Obviously, there of freight forwarders become more and continuous demand for low-cost shipping
have been thousands of players in freight more commoditized, which fuels rivalry and (given alone the rise of e-commerce across
forwarding around the globe for decades price wars (Hofman & Osterwalder, 2017). the globe), still high demand for integrated
with very similar value propositions. There services, and an increasing trend of inter-
are no signs of any of them gaining any Given this fundamental dis-intermediation modal freight transportation (Allied Market
significant market share, with only singular potential in freight forwarding, the stakes Research, 2019). The economic potential
consolidation phenomena such as the are high for the industry. The transporta- that could be tapped with the use of a
merger of two industry incumbents – tion market is a backbone to a globalized platform would thus be significant, and the
Panalpina and DSV (Aircargonews, 2019). world economy but with margins often player to implement THE central industry
With the apparent absence of a unique highly volatile and under pressure. When platform would impact the global transpor-
selling proposition, the market seems to be it comes to the sub-segment of freight for- tation business extensively and profoundly.
calling for consolidation by means of a cen- warding, a market growth of 8 percent can
tral, unified platform. As such, the services be observed (MarketWatch, 2018). There is
Fig. 1 – Paradigmatic comparison of today's analog intermediary function of forwarding vs. potential platform model, allowing
for direct interaction between carrier and shipper [Own illustration based on Hagiu & Wright (2015), Schramm (2012)]
Forwarding an an (Analog) Intermediary Transport as a (Digital) Platform
between Shippers and Carriers between Shippers and Carriers
Intermediary Direct interactions
Shipper freight Carrier Shipper Carrier
forwarder
Affi
Forwarding Contract of lia ns
tio tio
Contract carriage ns lia
Affi
Platform
2
Market sizing figures vary depending on the source used because there are only estimates to what extent their turnover originates from freight forwarding
(Ojala & Jämsä, 2006). In addition, the terminology is not coherently used in practice. The statistics differ depending on what it is subsumed under/under-
stood by terms such as “logistics”, “supply chain management”, “third-party logistics”, “freight forwarding” or similar. This article is based on the definition of
section 93 of the German Commercial Code (“Handelsgesetzbuch”) for forwarding. 07Within the freight forwarding ecosystem, shippers. They are matchmakers and derive integrate these companies' capabilities into
players from all market categories have their profit from transactions for platform their digital unit and, in the longer term, in
already exploited the industry's digital usage while not having any transport lia- their core business. Even if these endeavors
potential. Of these, the digital leaders bility, for instance Freightos, uShip or Uber might not (yet?) fully constitute a true plat-
among the shippers (or customers of freight Freight. Other startups leverage their digital form business model, it could be the next
forwarders) are keenly aware of the digitali- capabilities in related fields such as virtual logical step for incumbents to prepare for
zation potential and have already started to supply chain management, real-time pricing the freight marketplace cannibalizing their
integrate backwards. Prominent examples or volume forecasting. Overall, startups own historically grown business model.
are Alibaba or Amazon, the latter acquiring predominantly target the asset-light com-
an ocean-forwarding license, and Google, ponents of the forwarding chain. They have These examples clearly demonstrate
which has held a patent for electronic ship- received much attention from investors the race among forwarding incumbents,
ping notifications for years. Both Amazon over recent years, with well over $11 billion startups, carriers & shippers to become
and Google are very well aware of their data in funding since 2007 and record sums THE freight forwarding platform. There is
trove, hold patents in the field of forwarding, especially in North America and Asia (Oliver only one problem: Not a single platform
and constantly promote new services. Wyman, 2016). wannabe has so far won a landslide victory.
Notwithstanding the platformization efforts
Equally, we observe that the freight Faced with this situation, most incumbents seen in recent years, none of the players
forwarders' suppliers, the carriers, have digit(al)ize to the best of their ability: DHL's has made traditional forwarding redundant
understood the digital game and actively saloodo platform connects shippers with as yet. Big players such as Kuehne + Nagel,
integrate forward. Freight forwarders are an FTL/LTL carriers in Europe and elsewhere. DHL, and Panalpina still make billions with
intermediary that impedes direct access to K+N's Freight-Net platform provides binding their traditional business model born in
the customer. Nowadays, these interfaces carrier quotations, direct booking, and medieval times. So despite the numerous
are getting easier and easier to create, which online tracking. With Connect4land, DB attempts of many players across the globe,
may increase margins for carriers. One of Schenker's European division for land digitalization has failed to exert its disrupt-
the biggest carriers in ocean freight, Maersk, transportation aspires to offer a state-of- ing potential and there is still no Airbnb of
partners with Alibaba's One Touch platform the-art online service for domestic and freight forwarding in sight. Figure 2 shows
to allow shippers to directly book vessel international network freight. Furthermore, that transportation including the forward-
capacity online and heavily invests in TWILL it offers immediate e-pricing, scheduling ing market remains a highly fragmented
and DAMCO. Such approaches probably details, and tracking information. With this, business with hundreds of thousands of
have the most potential with respect to full incumbents aim to make the shopping ex- companies operating in this market. Even
truck load shipping. perience for which the B2C sector is already market leaders have low market shares, low
known available to the field of professional bargaining power, and are far from generat-
Thousands of new market entrants to the in- B2B freight forwarding. Some of them have ing skyrocketing margins. If platformization
dustry are fueling this competitive situation, established separate entities for this, such is to take place anywhere, it must be under
with an estimate of possibly hundreds of as DHL with saloodo, hiring digital natives. the radar without a breakthrough being
startups offering digital platforms to initiate Others prefer cooperating with startups discernible to the general public.
interaction directly between carriers and such as DB Schenker and uShip, hoping to
08Digitalization in Freight Forwarding | Beyond the Platform Hype
Fig. 2 – Fragmented structure of the freight forwarding industry with selection of major players [own Illustration based on
ARMSTRONG & ASSOCIATES (2018a, b), BIFA (2018), BCG (2018), own sources]
Hellmann Worldwide Logistics – 2%
Agility – 2%
Yusen Logistics – 2%
Kerry Logistics – 2% DHL Supply Chain & Global Forwarding – 13%
CJ Logistics – 2%
Toll Group – 2%
Kintetsu World Express – 2%
Bollore Logistics – 2%
Panalpina – 3%
Kuehne + Nagel – 11%
Hitachi Transport
System – 3%
GEODIS – 3%
Dachser – 3%
DB Schenker – 9%
Expeditors – 3%
CEVA Logistics – 3%
UPS – 4%
Nippon Express – 9%
XPO – 4%
Sinotrans – 4% C.H. Robinson – 7%
DSV – 5%
09The platform prohibitors in
freight forwarding
Industry-specific prohibitors in About the research
freight forwarding run counter to the This Point of View is part of Deloitte's broader transportation practice Germany. It
landslide victory of a bare platform draws on in-depth interviews with designated experts in the field of digitalization
business model. in freight forwarding. The interviewees come from all five forces of the market
This empirical evidence suggests the exist- comprising:
ence of industry-specific prohibitors to plat-
form models which prevent forwarding from a) incumbents/traditional competitors;
being disrupted. These prohibitors explain b) startups/new entrants;
why none of the platform endeavors has yet c) shippers/customers;
won a landslide victory and are detailed in d) carriers/suppliers and asset owners;
the following: e) representatives from potential substitute products such as 3D printing.
The interviews were conducted between April and June 2019 either online or face-
to-face following a dedicated guide. This guide checks the interviewees' opinion as
to whether platform basics are fulfilled by the current platform wannabes or not.
If interviewees argued that these key factors did not apply, the objective was to
understand the prohibitors they see in this respect (see next pages).
10Digitalization in Freight Forwarding | Beyond the Platform Hype
1. Shipper's interest in customization, 2. Need for robust and rigid re-liability 3. Need for involvement of many differ-
consolidated invoicing, and guaranteed requirements in transportation ent types of parties per shipment
prices & loading capacity Many successful platforms often excel in Further platform wannabes need to know
Most multisided platforms have to offer quantity aspects compared to traditional how many and which sides to bring on
their services for free or at subsidized competitors. Yet, the interviews reveal board. However, our interviews show that in
prices to at least one side of the platform that in freight forwarding “an attractive many cases there appears to be an insuffi-
and derive their profits from the other platform needs to offer both quality and cient number of (different types of) parties
side (Hagiu & Wright, 2015). The interviews quantity” from the very beginning: “Quantity on the platform. This requirement is crucial
show that this is an aspect many platform is key for uncritical hinterland shipments, in the “very complex and frictional [freight
wannabes neglect and or even disavow. The while quality entry gates are required for forwarding] industry [that] can easily com-
most sophisticated strategy interviewees time-critical shipments of precious goods.” prise up to 16 different parties involved in
mentioned was to redirect inquiries from This quotation shows that quantity is a nec- an international shipment” such as trucking
traditional systems to the new ones in essary hygiene factor in forwarding, while companies, ocean carriers, air carriers, cus-
order to generate traffic and attenuate the quality is the decisive differentiator. Freight tom agents for various countries, warehouse
chicken-egg challenge. However, this seems forwarding is an industry in which players in operators, drivers, assurance companies,
far from being a sophisticated incentive for the supply chain control only a very limited ground handling agents, data providers, etc.
shippers looking mainly for “guaranteed part of the entire process. This means that a This underpins the huge challenge of plat-
loading capacity, customized processes, platform needs MANY carriers to be attrac- form wannabes. Particularly in the European
consolidated invoicing and stable prices – a tive for shippers. The same holds true for transportation sector, platform providers
service portfolio no bare platform can offer,” the attractiveness of a platform for carriers: do not offer significant added value to many
as one industry expert states. Without the higher the number of shippers partici- dispatchers because a single phone call or
guaranteed loading capacity and stable pating in the platform, the more attractive it email is still enough to touch a huge net-
prices, there are very few incentives to join is for carriers. Quality is important because work, whereas platforms rather imply typing
a platform. Moreover, time and again cus- of the high level of fragility of supply chains in the same information multiple times and
tomer-specific solutions call for meticulous that shippers do want “re-liable” (sic!) freight therefore do not deliver an efficiency gain (at
optimization of complex processes, deep forwarders taking care of. In contrast to B2C, most a saving in transport costs). This leads
customer knowledge, and tailor-made, in a B2B environment shippers trust freight to an uncritical mass of participants on the
consolidated services that run counter to a forwarders with their precious goods pre- platform, which again has a negative impact
one-size-fits-all platform. cisely because humans – rather than just an on convenience compared to incumbents.
algorithm – take care of them. Quality also
ensures a sufficient return on investment for
those who are licensed in highly competitive
markets, such as trucking (for instance Con-
nect4land by DB Schenker). This fine-tuned
balance of liabilities, the industry's trust, and
(re-)liability requirements prevent a pure
platform business model from developing
attractive governance.
114. Traditionally analog mindset with a 5. Scarcity of ambidextrous capabilities Summing up, our study revealed the indus- short-term investment culture at incum- and digital forwarder talents try-specific prohibitors to a complete and bents A successful platform requires a cutting- disrupting platformization of the industry. From a technology perspective, the right ar- edge user experience. However, the in- We might assume that the scarcity of digital chitecture and interfaces are key to building terviewees often mentioned convenience forwarder talents, the missing ambidextrous successful digital platforms. Yet, interviewees deficiencies in using forwarding platforms. capabilities, and the missing R&D long-term confirm that “there is no culture of embracing B2B freight forwarder platforms do their investment culture will probably be over- technology in the industry.” Incumbents best to imitate the B2C shopping experi- come simply in time; people can be trained rarely think long term when it comes to in- ence and have improved their frontends and corporate culture can be changed even vesting in technology. On the contrary: Either in recent years, but our interviewees from if it requires a lot of will, focus and energy. the customer pays for it directly or there is a shippers still expressed their “persevera- However, the successful realization of the clear business case justifying the investment. tive desire” for a smart platform and that business factors touches the very fragile Furthermore, incumbents struggle with the current platform wannabes “do not differ foundations of the industry because these optimal approach for absorbing cutting-edge significantly in their user experience.” Our are at the very core of the forwarders' selling technologies, miss intellectual property re- interviewees put this weakness down to a proposition: Incentives to substitute for gimes, and prefer to focus on the support of scarcity of “digital forwarder talents” who guaranteed loading capacity and prices will external experts such as research institutes. are competent in both digital technologies remain limited as they run counter to the Such cooperation increases transaction costs as well as the forwarding business. This basic idea of a platform. The same holds and slows down innovation processes; so the becomes apparent when looking at the true for the rigid reliability requirements successful street scooter example of DHL in process of data exchange in ocean freight at prevailing in the industry and a regulatory this context is the exception rather than the many forwarders as it stands today: There environment prohibiting the integration of a rule. Moreover, given the many frictions with- are easily four to five players and an equal critical mass of qualified partners on a plat- in the industry, incumbents already seriously number of middleware providers involved. form. These factors will prevent one single struggle with their complex IT legacy. It takes To clean up such IT legacy with a simple API platform from dominating the entire market a lot of time to digitize it and to align with the is not enough; this requires both forwarding in the upcoming years and winning over the respective counterparts to finally understand expertise as well as digital excellence for industry in a simple landslide victory. Our to what degree the platform interfaces knowing which functionality or features to survey suggests that derivatives of a pure should be open to outside complementors. include in the platform. platform model are more likely to thrive. Looking at tech trends such as blockchain and autonomous driving as a complementary source of innovation for freight forwarding, not a single platform systematically incen- tivizes this technology deployment. Lastly, by definition freight forwarders are far from being digital: In the end, it comes down to shipping physical goods from A to B. Hence, digital technologies can only ever have a limited impact. 12
Digitalization in Freight Forwarding | Beyond the Platform Hype
The platform derivatives in
freight forwarding
Beyond the platform hype, three •• Niche platforms follow a bare platform •• Digital forwarders persist as an inter-
derivatives are on the horizon: niche model with no transport liability. As mediary platform between shipper and
platforms, regional ecosystems, and matchmakers they derive profit from carrier with their unique selling proposi-
digital forwarders. transaction fees for the platform usage. tion of liability, guaranteed capacity, price
Given the industry-specific prohibitors to a This business model will only work in stability, and invoice consolidation.
bare platform approach, the interviews lead closed systems, which means the number
us to believe that there will be a variety or of parties involved will remain limited.
co-existence of three platform derivatives
in forwarding. It is likely that these will not •• Regional ecosystems will enrich their
constitute either the traditional analog inter- existing platform business model by add-
mediary model in forwarding or the new dig- ing freight forwarding services, building
ital platform model. Rather, the three trends huge competitive gravitation in suitable
combine aspects of both poles by having the economic environments.
same purpose of offering a kind of platform
to connect shippers and carriers in one way
or another. In total, three distinguishable Anonymized case Study:
derivatives became apparent: Incumbent/Startup cooperation to build the platform
The freight forwarder incumbent signed an exclusive agreement with a startup to
pair shippers with truckers in order to initiate platform activities. To deepen the
ties, the incumbent took a stake in the online freight booking platform startup.
A separate project was set up to combine the incumbent's industry expertise
with the startup's digital excellence. The incumbent's digital unit was expected to
absorb the startup's capabilities in a manner that would allow for new services.
Yet, after several years of headaches and massive investment, a leading industry
platform had not evolved; instead, the two will split again, struggling once more
on their own. The reasons for the failure are complex – not least the cultural
differences. Plus, the fact that contracts were set up on the hoof, not describing
sufficiently the actual value to be delivered, exacerbated the missing absorptive
capacity at the incumbent. Lastly, change management failed to involve the
incumbent's departments working in the traditional lines. They felt threatened by
the progressive endeavor, which led to permanent resistance.
13Niche Platforms 1. In such a closed setup, “competition inter In addition to such platforms allowing for In the digital age, the attacker's advantage pares” among the carriers will be possible direct interaction between shippers and of new entrants will allow laptop and coding by incentivizing both carriers and ship- carriers to align on a shipment, the experts capabilities to remain virtually the only entry pers to participate in the platform. Yet, also expect visibility platforms to evolve. barrier to this market. This will essentially given the closed setup, they will struggle Such platforms allow for collaboration and hold true for land transportation (without to incentivize many others, e.g. warehous- the fusion of financial and physical supply autonomous fleets in the short-term ing platforms, to complement their offer chain processes across trade communities future). As the typical customer persona to a very high degree. by offering different software modules. They is millennials (Barclays, 2013), specialized will generate profit from subscriptions and platforms will perfect the means of interac- 2. The advantage of the closed setup will be transaction fees. While such niche platforms tion with their users (KPMG, 2016). These trust to evolve among its participants. The do not directly target the core of traditional platforms are characterized by providing limited number of parties with dedicated forwarders, they might offer a service that the digital platform to initiate and operate needs and services allows for sufficient adds more value than that of the incum- an interaction directly between carrier and confidence in the platform. bents. In the long run, they may use their shipper. As matchmakers their profit comes data power to grow their business into core from transaction fees for platform usage 3. Niche platforms intrinsically favor quality transportation services, too. without any transport liability. However, over quantity with their specific yet limited drawing parallels with the dot-com bubble, number of players. the experts surveyed assume that most of these platforms will fail to thrive due to their 4. Furthermore, given the inherently limited inability to offer sufficient incentives to join scope, niche platforms will have trouble the platform in the first place. funding the overheads required to build They rather expect “niche platforms” to first-rate intellectual property. survive by focusing on specific client needs and carrier competencies. The interviewees 5. By growing their own digital forwarder assume that niche platforms will be capable talents within their niche area, they will of luring away customers of “spot market improve their platform's user experience. business and specific types of smaller customers with recurrent transport needs” from the traditionally large freight forward- ers because they are characterized by the following traits: 14
Digitalization in Freight Forwarding | Beyond the Platform Hype
Regional Ecosystems 1. W
ith such a huge service portfolio and McKinsey (2019) has already elaborated in
By contrast, the experts interviewed expect parties already part of the original eco- detail on the impact of such cross-cutting
the leading global digital players to grow system, incentives to join the regional ecosystems without borders. For forwarding
their dominant regional ecosystems and, ecosystem for transportation services this means that, with such service offerings,
based on necessity and opportunity, enrich are expected to be rather high. A user's regional platforms will be capable of luring
their existing business with the required switching costs will increase as soon shippers away from traditional freight for-
forwarding platform capabilities. Such a as a small number of regional platform warders. In such a universe, one interviewee
platform will bundle digital solutions from providers dominate and leverage network even considers that “offering transport
transportation & logistics, for instance effects. Carriers will find themselves in services for free can become true and
different apps from multiple players, and devastating price wars. would be a game changer for all”, ranging
connect supply chain players with a uniform from carriers to forwarders to shippers.
information and application system. They 2. A s many participants will have long- Speaking of such a winner-takes-all logic, this
may even use existing businesses such as standing relationships with the regional trend will dominate Asian and, to a lesser
banking or assurance to complement their ecosystem for other purposes, trust and extent, North-American markets. This is
cross-industry platform offering, as custom reliability will be sufficiently high. emphasized by the fact that China is the
authorities' interests as well as legal and tax most active country in terms of transport
aspects will be taken care of. 3. The regional dominator platform will have deals worldwide (Oliver Wyman, 2019; PwC,
more than two sides integrated. Given its 2018). The European market, with a different
reliable revenue streams from other ac- freight forwarding structure, a well-
tivities, it will be able to afford to subsidize established service culture, as well as an un-
any player wishing to join the platform. derstanding of competition (EU Commission,
2018) will be less prone to such a regional
4. Enriched by technological excellence dominator platform in freight forwarding.
and a profound awareness of intellectual Overall, this industry trend is expected to
property, these players will lead by having realize most of the platform potential as
their own fleet of autonomous trucks, depicted in Figure 3.
extending control in the supply chains,
and building critical mass.
5. Even if not forwarding-specific, the digital
talents of the platform will allow shippers
to benefit from the seamless end-to-end
user experience.
15Fig. 3 – Competition between the platform derivatives in forwarding (simplified)
Niche Platforms
Shippers with specific Direct interactions
recurrent needs and Shipper Carrier
carriers with
specialised services Affi
lia ns
tio tio
ns lia
Affi
Digital Forwarder Platform
Digital
Shipper Carrier
Intermediary
Digital Digital
Forwarding Contract of
Contract carriage
Regional Ecosystem
Carriers locked in,
Transport as a by-product
shippers with Service B Service C
regional, limited needs
Service A Service E Service D
16Digitalization in Freight Forwarding | Beyond the Platform Hype
Digital Forwarders 3. As such, the digital freight forwarders will be
In parallel to the continuing deployment of able to coordinate even better the different
the industry's platform potential, it is antici- parties they already synchronize manu-
pated that freight forwarding will persist be- ally: customs, shippers, carriers, drivers,
cause an intermediary function is expected. ground-handling agents, assurance, etc.
Incumbents who succeed in digitalizing their
business will become digital forwarders. 4. Traditional freight forwarders have
already started to “grow” their own digital
1. D
igital forwarders incentivize shippers to talents and apparently continue to do so
entrust them with their goods by present- with their dedicated digital units, inten-
ing a selling proposition of liability, guaran- sified R&D cooperation, and new hiring
teed capacity, price stability, and invoice profiles.
consolidation. They can offer customized
solutions to large clients and complex 5. This will increase their technological
traffic flows with key activities managed by maturity with their own intellectual
humans, while activities such as capacity property in route optimization or tracking
brokerage, routing, and pricing will become devices, ultimately allowing for a smooth
digitalized. This will allow small clients with information service to the customer. Yet,
sporadic, simple shipments and without their technological maturity will drag
complex customs management to be behind the maturity of regional dominator
serviced easily. ecosystems as their play money required
for significant investment is probably sig-
2. These digital forwarders will be partners nificantly lower. They will struggle to de-
of choice. The ability to combine both velop unique, compelling features that are
poles of governance in their intermediary hard to imitate (see intellectual property)
platform is a unique asset of digital freight and absorb technology features from an
forwarders: On the one hand, they offer adjacent market such as the automotive
quality – liability and trust, while on the industry.
other they also offer quantity – proprietary
hubs, domestic shipments, and a network
of tens of thousands of carriers in multiple
countries for executing international
shipments
17These findings show – and all experts support from digital coaches who master
interviewed agree – that the market is about both digital change and technology can be a
to interpret the general digitalization and good way to start.
platformization potential for the industry.
The three up-and-coming forwarding plat- Second, traditional freight forwarders
form derivatives will intensify competition: should make use of their valuable resources
“New types of players will evolve, luring away in a smart manner. They can build difficult
customers even from digital forwarders.” to imitate resources and leverage them
Figure 3 shows that customers with recur- into attractive new products and markets,
ring, specific needs might be tempted to use for instance matching algorithms or fleets
niche platforms to increase profit margins. of autonomous trucks. They might need
Shippers with an already thriving business to ensure their advantage with unfamiliar
might build critical mass to lock in carriers, means such through property rights; but
which enables highly competitive and even path dependence and time is on their side
“aggressive” prices to be offered to shippers. (given the effort needed to develop the
Hence, the overall pressure on profit mar- same resources). Plus, for certain strate-
gins will increase further. gically important resources, it might even
make sense for incumbents to coevolve
Traditional freight forwarders need a smart them with the industry, which might partially
strategy to counter this increased com- go hand-in-hand with further consolidation
petitive pressure. In such an environment, of the industry.
the sustainability of their competitive
advantages remains at maximum medium Will all of this be done tomorrow? Probably
term for them. This is why the leaders of the not. But we expect the forwarding universe
incumbents should consider the following to further evolve and hope that this report
two main aspects. provides useful insights to the leaders of
incumbents as they seek to address digital
First, digitize: Increase process efficiency threats and opportunities. To flourish,
with the help of digital technologies such freight forwarders should trust in one of
as RPA. This aspect might pertain to their oldest skills: seeing the way ahead.
cross-cutting functions such as controlling
or procurement to core functions such as
state-of-the-art transport management
systems. The major challenge related here is
about overcoming organizational resistance.
Dedicated change agents and / or unbiased
18Digitalization in Freight Forwarding | Beyond the Platform Hype
19Endnotes
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21Authors Tillman Hentschel Dorothea Haas Marton Farkas Deloitte Consulting Germany Deloitte Consulting Germany Deloitte Consulting Germany Transportation, Hospitality and Services Transportation, Hospitality and Services Transportation, Hospitality and Services thentschel@deloitte.de dhaas@deloitte.de mfarkas@deloitte.de Kai Krotki Nargiza Umetova Christoph Semmelmann Deloitte Consulting Germany Deloitte Consulting Germany Deloitte Consulting Germany Transportation, Hospitality and Services Transportation, Hospitality and Services Transportation, Hospitality and Services kkrotki@deloitte.de numetova@deloitte.de csemmelmann@deloitte.de The German transportation team consists Through our close collaboration within and of more than 20 dedicated industry experts beyond service lines we act as door-openers with focus clients in the fields of Postal, Avia- and ensure the highest degree of quality for tion, Railway and Logistic Providers. our clients. Our deep industry experience and digital ex- We are therefore able to consult our clients cellence enable us to create tailor-made cus- along the whole value chain – from the tomer solutions for key industry trends and concept creation to the hands-on imple- topics such as robotics process automation, mentation. transport management system support and digital procurement solutions. 22
Digitalization in Freight Forwarding | Beyond the Platform Hype
23This communication contains general information only not suitable for addressing the particular circumstances of any individual case and is not intended to be used as a basis for commercial decisions or decisions of any other kind. None of Deloitte GmbH Wirtschaftsprüfungsgesellschaft or Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte network”) is, by means of this communication, rendering professional advice or services. No entity in the Deloitte network shall be responsible for any loss whatsoever sustained by any person who relies on this communication. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/de/UeberUns for a more detailed description of DTTL and its member firms. Deloitte provides audit, risk advisory, tax, financial advisory and consulting services to public and private clients spanning multiple industries; legal advisory services in Germany are provided by Deloitte Legal. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte's approximately 286,000 professionals are committed to making an impact that matters. Issue 08/2019
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