Faced with rapid growth in the e-commerce sector while general cargo expands at a comparative crawl, logistics firms are trying to find ways to tap into the new bonanza. However, the way in which most of them handle pricing requests suggests they are in no position to match the speed that dictates e-commerce transactions.
A mystery shopping quest for rate quotes conducted by online rate provider Freightos casts a glaring light at the time it takes large forwarders to respond to rate enquiries. It sent identical requests to 20 large forwarders, posing as a rapidly growing mid-sized wholesaler based in the US which wanted to move an LCL shipment from China to Chicago. Wherever possible, it used dedicated quote request pages of forwarders’ websites or, as a second choice, contact forms on those sites. If the sites offered neither option, Freightos did not tender a rate request.
The results were sobering, to put it mildly, and a million miles from instant pricing that e-commerce providers give routinely on their websites. To begin with, only nine out of the 20 forwarders responded with a quote.
Moreover, Freightos found that most forwarders still have manual processes in place, and it took them on average 101 hours to provide a simple spot quote. E-commerce customers expect to receive their ordered merchandise faster than that.
Nor were forwarders showing alacrity in following up on their quotes. Only three actually did, and it took them on average 15 hours to do so.
“Top forwarders may be focusing on other priorities for now. And there are some signs of change behind the scenes. However, competitors are already making their moves to digitize freight sales, and gain market share at the expense of top forwarders, including online forwarder start-ups, mid-sized forwarders, carriers and, more ominously, the tech giants, Amazon, Alibaba and Uber,” Freightos said about its findings.
In the long term, Freightos CEO Zvi Schreiber sees an inevitable move towards digitizing the quoting and booking processes. For one thing, the up-and-coming younger generation of shipper executives will have higher expectations of information, transparency and online accessibility, he said.
At the same time, there is mounting push from other sectors that are increasingly embracing such concepts. Ultimately companies will feel competitive pressure to digitize processes, Schreiber reckons.
Furthermore, there is a growing need for ad hoc rate information as the rules of engagement between shippers and their transportation providers change, Schreiber argued. The former look increasingly for spot pricing and are less willing to embrace long-term contract rates, he said, attributing this to heightened volatility and shorter product cycles.
Freightos offers forwarders the ability to digitize their pricing information and put it online. According to Schreiber, interest among cargo agents has been growing, with interest across the board, from large to small logistics firms.
Some of these plays are clearly targeted at the e-commerce sector. When C.H. Robinson acquired Freightquote in 2015, its management admitted freely that it was a move to position itself for e-commerce.
In its effort to bring more transparency into freight pricing, Freightos launched a global rate calculator last autumn, which generates pricing estimates for shipments by ocean, air and truck. The mechanism gives rate estimates based on routing and pricing algorithms that calculate fees and surcharges and anticipate ranges for transportation rates.
Another push into this space came last year when the TAC Airfreight Rate Index was launched by former logistics executives, which offers a weekly snapshot of air freight rates on major routes. The service, which targets first and foremost shippers, is free to forwarders who share their own data, but mostly works on a subscription basis. In November, barely six months after its start in Hong Kong, TAC expanded into Germany.
While users may welcome the pricing transparency and use it for reference, many are not likely to send rate requests to individual airlines to establish the best offer, noted Joe Lawrence, president of air cargo general sales agent Airline Services International.
“Today they just send out an e-mail blast to 10 airlines asking for quotes. That’s much faster and easier for them than checking out airlines one by one,” he remarked.
E-mail also still rules the roost when it comes to bookings, according to Xeneta, which claims to have the largest database of contracted ocean freight rates. Its research found that 40% of respondents book through e-mail, followed by 35% who go via booking platforms.
By Ian Putzger
Air Freight Correspondent | Toronto