What does freight forwarding software look like in the future?
Freight forwarding software is a highly lucrative space that everyone seems to want a part of. The last few years have been no different, and I've lost count of the number of companies that have appeared (and disappeared) since Flexport's inception in 2014. But freight forwarding software had a past before Flexport, and will have a future without it. The question is, what will that future look like?
What is freight forwarding software?
Freight forwarding software is a tool that allows forwarders to move goods from a point A to a point B, and so on. Forwarding software is not limited to a single mode of transport, or a single country. It has no limits when it comes to functionality, and the potential is endless. To the uninitiated, freight forwarding software is a complex maze with many wrong turns. For software suppliers, it is a lucrative space with a list of billable functionality that makes a teenager's Starbucks order look simple.
Key functionality of freight forwarding software
You'd be forgiven for believing that those who make forwarding software know what they are doing. There are a large number of startups in the space today that have zero experience in either freight forwarding, or forwarding software. Sure, there are transferable skills when it comes to working in the supply chain, or software development. But forwarding deserves more respect that it is given, which usually leads to disappointing software and frustrated customers.
To write an exhaustive list of freight forwarding software functionality would be to show that disrespect. I believe that we are still to see an improved form of freight forwarding, and truly complete forwarding software solutions are still far from existing.
Some of the key areas of functionality are:
- Core international forwarding functionality that can handle complex multimodal moves and all aspects of freight operations.
- Customs and regulatory compliance: what I like to call the other half of international forwarding - border compliance goes beyond a simple customs declaration, and done wrong, can prove costly.
- Land transport is a key part of any complete forwarders arsenal, yet even industry leading software like CargoWise has been lagging in this space for over a decade.
- Warehouse Management Systems are their own thing and rightly so, but as the lines between what a forwarder is and is not become more blurred, warehousing cannot be overlooked.
- Rates and payments management is still handled poorly by most, if not all, freight forwarding software solutions out there today, requiring third-party tools to make it better.
This final point I'm going to include is a crucial one, and has been handled differently by each forwarding software supplier. Connectivity is so important, yet done poorly in so many cases. Magaya were struggling badly and turned to Chain.io as an official partner (will that solve anything, only time will tell...). CargoWise is as difficult as ever to connect with and refuses to play nice with others. GoFreight may be building their platform with improved connectivity at the center of everything, a smart move, but if they fail to build a real core of functionality around it, it'll all be for nothing.
Freight forwarding software is an artform, requiring a strategy, priorities, and a strong sense of balance.
What is wrong with freight forwarding software today?
Today's problems are less to do with the actual software solutions and their functionality, and more to do with the current solutions available in the market place. When thinking about land forwarding, there are too many platforms to count, but do any really stand out, or are they not just reiterations of the same thing?
From an M&A perspective, this is a crucial question, especially with WiseTech looking to break into the space. They've acquired Blume, Envase, and Trinium, but are still missing crucial functionality such as land visibility and actual land forwarding functionality. For the former, an acquisition of the likes of FourKites, or European outfit Shippeo who have an American Dream of their own, is not only possible, but likely. But for the latter, they'd do well to learn from Trimble's past outings, and the multiple hundreds of millions of dollars lost in TMS hell.
International forwarding software is a copycat's dream.
Just like how Flexport has an army of copycats all trying hard to not sell software to anybody, WiseTech has its own emulators. I suppose it is unfair to call them that, as they at least stand on their own feet and have a track record of producing software that works.
The best example of this that comes to mind today is Magaya. Magaya has been around since the early 2000s, and offers some great software for NA based forwarders with limited international exposure. They've carved out their own path, and have serviced SMB forwarders well for the past two decades.
But their recent trajectory and outings seems like they've taken a page out of WiseTech Global's playbook, thrown it out, and used the rest of the playbook to run their business. Talk of EU customs acquisitions aside, signing a partnership with Expedock a few months after WiseTech acquired Shipamax was an interesting move to say the least.
Depending on who you ask at GoFreight, they are either "doing their own thing" or "have aspirations to take on CargoWise at the top". Yes, the longtail forwarding market is crowded, and will only get worse with the likes of Amazon, Maersk, CMA, Flexport, and who knows which other pretender jumping into the ring.
The future of freight forwarding software will impact the future of freight forwarding
A freight forwarder is a middleman. Their role is to orchestrate the movement of goods between asset based carriers and the shippers who need the goods moved. They also interact with the customs brokers, or directly with the customs authorities, depending on the country.
Here's the scary part: coordinator roles like that of a forwarder are in theory the easiest to replace with software and AI. And no, this is not me jumping on an AI hypetrain. These outcomes are still in the distant future, for now. But the direction freight forwarding software takes today, has the potential to greatly impact freight forwarding as an industry tomorrow.
Automation, standardization, and integration, these are the ingredients of tomorrow.
Buzzwords aside, freight forwarding is heading towards something new and exciting. The days of picking-up a phone and making some calls to get freight moving are not over yet, but they could be. Carriers will potentially remove all phone numbers from their websites and be exclusively contactable through chatbots and booking portals. As for the shippers, as generational shift happens we'll see changes in the way they want to interact and book their shipments. These two elements alone have the power to reshape practices and put forwarders out of business. Why pay an intermediary when you can simply automate all your bookings with software that essentially replaces the forwarder?
Calls for standardization have been echoing throughout the supply chain world for some time now, and with good reason. Moving freight across the world is hard enough due to cultural differences and language barriers. Now add the paperwork, the different processes, regulatory requirements, differing best practices... The list is long, and unreasonably complicated. As AI gets smarter, and software improves, standardization should occur organically. The carriers want to digitize to streamline activity and improve their bottom line. The shippers want improved software and actionable data to make sure what they are paying for actually happens. If standardization were ever to occur, now would be the time.
As software becomes more interconnected, the need for intermediaries simply disappears.
We're moving in a direction where the shippers' software solutions will communicate directly with the freight forwarder's systems. That reality is well illustrated through the large number of integrations that exist between the likes of CargoWise, Magaya, Softlink, Riege, and others, with their customers' platforms. GoFreight looks to go one step further and make it truly simple to connect to their FMS, while Magaya have partnered with specialist Chain.io to facilitate things.
We're even seeing companies like Prompt who offer out of the box integrations between platforms focusing on forwarding systems to 3rd parties, with a twist. The twist being that they look to simplify the data structures and consolidate data received into a single display. It's only a matter of time before these connections potentially circumvent the forwarders entirely.
I'd even dare to say that the mighty CargoWise, who have been rather quiet on the integrations front, are probably working on something big and new, especially since they acquired xWare in 2019. Watch that space.
BCOs are fed up with bad results and a lack of transparency which could be the final nail in the coffin for forwarding as we know it.
Did freight forwarding set the stage for its own downfall? The way things went down during the pandemic could have you thinking this way, and with good reason. Shippers didn't have the foggiest idea of where they goods were at. Forwarders were leaving containers dockside as they sold valuable capacity to the highest bidder, regardless of contracts or agreements. It seems like they would have happily climbed on a ship and thrown the containers overboard themselves if given the access. And we thought double brokering was bad...
Right now BCOs are having to sign expensive agreements with "real time visibility providers" who themselves provide data of questionable quality. This is the reality companies trying to ship goods are faced with today, and how desperate they are to improve outcomes.
The bigger BCOs have the money, and the pull, to attract supply chain professionals and handle everything in house. Give them the software to do it, the integrations needed, and the standardization the industry is screaming for, and it will happen.
The smaller BCOs can turn to services like Flexport, large 3PLs who provide extra services such as fulfillment or door-to-door options, and integrators such as Maersk. Scale should equal savings, and as margins shrink, they may be able to better weather the storm as smaller forwarders take a battering.
As always, this is just a hypothetical outcome for a very real question.
I'm Anthony, ex-WiseTech'er and Logistics Technology nerd.
You can find me on LinkedIn: https://www.linkedin.com/in/anthonymlr/
And I may start using Twitter if Elon doesn't kill it first: https://twitter.com/Anthonymlr1
My opinions are my own, although I'm sometimes told they are shared by many, yet voiced by few.
My goal is to make Logistics Technology a healthier place and to provide everyone with the kind of information they need to decrypt this magical and mad industry we either love or hate depending on the day and if someone has blocked the Suez Canal again.