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Freight Forwarders Idea Proposal (EXPD, KNIN, PWTN)

Freight Forwarders Idea Proposal (EXPD, KNIN, PWTN)
 

Will the emergence of web-based freight forwarders threaten the volume and margins of incumbents like Expeditors International?

 

Report Available: December 21, 2017

 

Blueshift’s initial research found a fragmented freight forwarding industry reliant on old-school methods for connecting shippers and with ocean, air and ground carriers at ports around the world. Numerous start-ups are trying to automate parts of the freight forwarding operation, with some starting to have success. That could portend trouble for industry leaders like EXPD, PWTN, KNIN, and others, though some are skeptical that digital platforms can make much of a dent. Longer term, blockchain technology could disrupt the standard process for tracking and managing cargo.

 

Observations

  1. An estimated 40,000 freight forwarders help shippers around the world deal with the complexity of moving cargo between ports and connecting shipments between ocean, air and ground carriers. This logistics layer within the multi-trillion dollar shipping industry has historically been known for secrecy and a reliance on paper manifests to get the job done, making the freight forwarding industry ripe for a technology shake-up. The biggest incumbents include EXPD, PWTN and KNIN.
  2. In recent years, a host of start-ups have begun trying to automate portions of the freight forwarding business to increase price transparency, cut down paperwork, improve efficiency, and reduce shipping costs. Freightos, backed by GE Ventures, has developed an online marketplace to help shippers compare costs, manage shipments and track cargo. Flexport, a licensed forwarder using proprietary software to improve shipping efficiency, has quickly become one of the top-25 freight forwarders, moving an estimated 7,000 shipping containers per month. Others, like Haven, are trying to use technology to carve out a niche within the fragmented industry.
  3. Major carriers, too, are looking at ways to automate shipping logistics, such as Maersk’s partnership with IBM to digitize the paperwork associated with moving freight. The two companies are using blockchain technology to manage and track shipping transactions. Increased use of blockchain at ports around the world could be another disruptive development for old-school freight forwarders.
  4. Traditional freight forwarders will have to become “like travel agents in the age of Kayak and Expedia” to survive, offering value-added services beyond matching shippers to carriers or filling out paperwork, according to some industry experts. Some logistics providers have developed portals to give shippers more visibility and control. PWTN, for example, recently launched a customer portal for ad-hoc air freight that includes rate quotes, booking and visibility. However, some industry analysts are offering caution about the hype around digital platforms revolutionizing the container shipping process, saying they have made little progress despite heavy investments.
  5. Blueshift’s Nov. 2 report on freight brokerages found a similar dynamic brewing in the trucking industry, where start-ups like Uber are trying to automate the freight-matching services. Sources said tech firms are having some success delivering on their promises and will eventually have a mammoth impact on the margins of traditional freight middlemen. Such movement has been slow enough, however, that the longtime powerhouses of the trucking industry, like CHRW, will have time to develop their own technology and adapt to a new reality.

 

How are the emergence of web-based freight marketplaces and forwarders affecting incumbents like EXPD, PWTN and KNIN? Will they steal meaningful volume or eat into margins of profitable segments like custom brokerage? How do shippers and carriers view the tech-based start-ups? How are the incumbents responding to the new competition? What impact will blockchain technology have on the freight forwarding business? Could automation help make smaller freight forwarders more competitive with their larger counterparts? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Shippers, Carriers, Freight forwarders, Port officials, and Industry specialists.

 

Companies: AP Moeller Maersk A/S (CPH:MAERSK-A), Deutsche Post AG (ETR:DPW), Expeditors International of Washington (EXPD), FedEx Corp. (FDX), Kuehne und Nagel International AG (VTX:KNIN), Panalpina Welttransport Holding AG (SWX:PWTN), United Parcel Service Inc. (UPS)

 

Research Begins: November 27, 2017