“They may huff, they may puff, but they won’t blow us away”
About six months ago the world of shipping was taken by storm. The news of Hamburg Süd’s new global structure within the giant Maersk group, caused serious uproar. Like a big bad wolf, the big carriers are huffing, puffing, and threatening to blow the forwarders away.
Even if this news caused a lot of upheaval, the threat itself isn’t new, says Luc Huysmans, CEO of Levaco. Multinational carriers have been ushering similar threats for the past two decades. “I have been a member of the Freight Forwarders’ Association for over twenty years, and I clearly remember experiencing similar fears in the early days of my membership”. It’s not that I take the news lightly, “I’m sure that equilibrium in the shipping chain will change, and that potential losses are forthcoming. However, I’m convinced that the big bad wolf will not be able to blow all of us freight forwarders away”, Huysmans says.
Power Struggle
“Because of the economical and geographical imbalance, resulting from the various crises, carriers are now generating a premium. Their objective of controlling the entire shipping chain seems to be closer than ever. But I don’t believe they will succeed in obviating the forwarders altogether”.
“Carriers and forwarders simply do not have the same mindset. The added value of a logistics partner is that they strive to keep the big picture in mind. In short, forwarders operate from the customer’s perspective. Shipping companies on the other hand are primarily concerned with volumes and stuffing containers”, he adds.
“With this strategy, shipping companies want to approach customers directly and offer a full service, thus attempting to squeeze the freight forwarders’ contribution out of the business chain. By removing this link, they seek to increase profits. The aim is to build customer “loyalty” through software and data storage. But I’m not sure that the majority of the customers are so open to this approach”, Huysmans continues.
The customer will pay the price
“By investing in data exchange, carriers want to exclude the SMEs within the forwarding world. However, if customers are tied to software systems, it makes it hard for them to exit the agreement. When a service provider is connected to a carrier, the risk becomes even greater. By putting the logistical players out of action, customers are compelled to remain with the carrier for the entire route, which makes them uniquely vulnerable. The concept they are attempting to implement is absolutely not in the favour of the customer”, Huysmans says.
“During the pandemic, carriers were often cursed for their less-than-optimal communication. Considering the heavily congested logistical flow, unforeseen circumstances, such as delays, cancellations, roll-overs, etc. are very likely to occur. Regretfully carriers, more often than not, fail to inform their customers about these developing circumstances, which causes great frustration from their perspective. Forwarders are experienced to manage this lack of service and step in to provide creative answers and solutions. If this fundamental freight forwarding experience is excised there will be no suitable player left to provide customer service during a crisis”.
“The pandemic and the Evergiven blockage of the Suez Canal were the first crises after the financial crisis in 2008, but they won’t be the last. When the next crisis arrives, quality service will be the determining factor in providing robust solutions. Forwarders are real problem solvers, whereas shipowners tend to outsource the service provision to third parties”.
What will the future hold?
“Carriers have been trying to cut out forwarders for twenty years but have failed every time. The only difference today is that they’re relying heavily on data as a service to swing the battle in their favour. But even that approach isn’t new. Over the last five years, carriers have been pumping large investments in data exchange, but in reality, it’s still only in its infancy phase. They may well be making progress in the well-developed triangle of Europe, Asia, and North America. But that’s only a part of the entire market. What about other promising and important developing regions such as Africa and Latin America? Currently, some of those countries cannot rely on stable internet connections. Imagine trying to operate complex data-driven systems under such sporadic conditions”, he says.
“On top of that, carriers can’t expect to push all the forwarders to the curb and replace the services they’re offering. In Belgium, there are about three hundred forwarders, in Seoul alone there are three thousand. The carriers are going to find it very difficult and costly to put them all out of action. Furthermore, every market is different and local market knowledge is extremely important”, Huysmans concludes.
“So, the big bad wolf may huff and puff all he likes, I am not afraid to be blown away, because our house is strong”.
