Despite the hype, the self-appointed disruptors are just the same as everyone else. The original digital disruptors, the rate portals and booking platforms, have been increasingly pushed into the shadows by the overpowering publicity machines of the digital forwarders like Flexport, Twill and iContainers
The new disruptors claimed they were exploiting a technology gap left by the established forwarders’ business models and attracted huge amounts of external investment to a global market worth trillions of dollars.
SWG founder Steve Walker, who spoke on ‘The rise of digitisation’ at Multimodal: Forwarders already replicate much of what the digital forwarders are doing with online quoting and booking, track and trace, and supply chain analytics. By leveraging their legacy systems latent capability and upping their marketing effectiveness they can eradicate the perceived early entrant advantage enjoyed by the digital forwarders.
Total digital start-up funding reached a staggering $5.3 billion in 2016 and will have smashed that in 2017.
And while Flexport are valued at $1bn and able to raise further funding at will, another significant digital disruptor has failed. San Francisco-based Shyp, which boasted a valuation of $250m had offered a simple global shipping solution to small merchants, but closed after just four years.
Shyp blamed its failure on competitive pressure and falling margins. An environment familiar to forwarders around the globe.
Recent market changes do raise questions about the sustainability of the digital shipping portals, that may offer a channel to attractive rates when supply is high, but are not so effective when space tightens and deals are required to secure capacity.
Against this more challenging background ad-hoc markets like portals are not so effective, unless they can guarantee capacity.
Shippers are likely to be wary of committing to these channels in uncertain times. They may be attracted by the allure of lower rates, but the potential lack of operational capability may leave them in big trouble if something goes wrong with a shipment.
And therein lies the biggest issue with the ‘disruptors’ view of digitisation: It’s not really a benefit, it’s not even a USP. It’s simply commoditisation accelerated. And that’s a big danger for everyone.
The global logistics market has grown for 40 years and continues to grow, so nothing will stop new entrants joining.
Even as news of Shyp’s failure emerged, another freight portal, SimpliShip, unveiled its instant freight pricing interface designed to enable forwarders and NVOS to offer real-time pricing on their own websites.
Without a doubt, there is interest in technology that creates pricing and capacity transparency, but without more sophisticated service elements, it adds no value and simply increases commoditisation.
By building systems from the ground up, digital forwarders claim operational efficiencies – and consequently reduced costs – that traditional forwarders cannot emulate.
But such ‘innovations’ increasingly look like exploitation of a perceived advantage, rather than real disruption, which means more disruptors will follow Shyp’s downward spiral, as these weaknesses are exposed.
The ‘digital’ forwarders are forwarders, just the same as all the rest. Which means that they are serving businesses that will judge their service not by its marketing or interface but by its reliability and cost.
It is a mistake, often repeated, to believe that legacy forwarders are not innovative. They have been implementing, adapting and evolving technology for decades. And will survive this latest turmoil.
Forwarders already replicate much of what the digital forwarders are doing with online quoting and booking, track and trace, and supply chain analytics.
They should leverage their legacy systems latent capability and up their marketing effectiveness to eradicate the early entrant advantage enjoyed by the digital forwarders.
There is no doubt that global transportation is undergoing profound change and freight forwarding will look very different in five or ten years.
The most exciting technologies will be those that arrest commoditisation and add value for carriers, shippers and forwarders. The industry is awash with data and technologies such as blockchain which are capable of offering a positive future vision.
Matt Dailly, Editor, FORWARDER magazine