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Is Digital Disruption The Way Forward For Freight Forwarding?

Is Digital Disruption The Way Forward For Freight Forwarding?

The digital age is increasingly upon us and the question looms: Will digital be the way forward for freight forwarding?

Word emerged this week that Amazon CEO Jeff Bezos was among investors in a $15 million Series A funding round for Beacon, a U.K. digital freight forwarding and supply chain finance company.

In announcing the funding, Beacon CEO Fraser Robinson said that while freight forwarding is a $1 trillion global business, “the traditional freight-forwarder model remains surprisingly analog, using systems and processes that are slow and inefficient, with opaque pricing and limited use of technology.”

It’s a market that has yet to fully pivot toward digital platforms, as you might see with, say, Uber. Meanwhile, Beacon estimates that only 30 percent of shippers are satisfied with their customer service under the current system.

That dissatisfaction might stem in part from less-than-optimal practices when it comes to speed and delivery of getting price quotes. By contrast, Beacon delivers real-time data on shipping costs and prices around the world.

For digital upstarts serving global freight firms, there’s an attraction in addressing a fragmented market. As of late last year, even DHL had only 13 percent market share, and it could take 100 hours to get a price quote from traditional freight forwarders, as noted by container-xchange.com. Digitization – especially aided by advanced technologies such as artificial intelligence (AI) – would offer automated tracking and better efficiency in ensuring that deliveries are made on time.

As for Beacon, beyond pricing transparency, the company offers supply chain financing. Beacon has noted that there is currently a “cash crunch” within logistics, where importers pay suppliers months before goods are shipped. To help with that, the company offers a revolving credit facility with terms of up to 150 days.

The system also allows for deferment of freight, VAT and duty costs. Beacon adds that it offers “qualifying finance” within 72 hours.

In an interview with JOC.com, Byron McKinney, trade finance product manager with IHS Markit, said that “one of the key issues in trade finance banking and freight forwarding is the cost of compliance and how it has led to de-risking. Globally, there is about $1.4 trillion of unaccessed finance, where smaller and medium-sized companies are not able to tap into traditional bank finance [and] so have had to look for other options.”

The pandemic may spur a shift toward digital solutions as top lines continue to be pressured. In April, market research firm Ti estimated in a whitepaper that as the pandemic rages on, the global freight-forwarding market could contract by more than 2 percent in 2020 – or more than 7 percent in a worst-case scenario.

Air cargo would pace those declines, while sea freight would decline by about 1.1 percent this year and roughly 7.5 percent in a worst-case scenario, as cited by aircargonews.net.

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PYMNTS STUDY: THE CROSS-BORDER MERCHANT FRICTION INDEX – JUNE 2020

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