The future of any industry is shaped by the hands of its most forward-looking incumbents. Dominant businesses able to combine the boldness of their visions with deft execution tend to gain and hold pole position as captains of their domain, and one of the best ways to retain a dominant position is to build a moat.
Moats in medieval times were constructed around the perimeter of castle walls to keep enemy troops at bay long enough for the deployment of counter-artillery and archery attacks. Evidently, moats by themselves are not impenetrable obstacles but they serve to buy valuable time for the defending force to execute their next moves.
In the same way today, one of the major imperatives of global forwarders is to maintain that gulf between what sets them apart from the rest. Often this moat is technological, and more forwarders are starting to rely on this to gain market share as they reach the limits of the network effect and labor cost efficiency, which are finite. After all, there is a limit to the number of network country offices one can set up and there is only so much productivity that can be extracted from relatively cheaper labour costs. Yet as an industry, we have only just started our ride on the technological curve.
The technological moat can be seen in many industries such as the semi-conductor, aircraft and weapon manufacturers where slowly but surely, competitors dwindle in a winner takes all game until two or three players remain. Google and Apple battling over Android and Apple iOS market share globally is a telling example of how this entrenchment within a business eco-system reduces the chance of a customer migrating to another software ecosystem.
In similar fashion, the large global forwarders have launched their own digital booking platforms as technological moats to lock in their captive market share within their own ecosystems and the race is now on to onboard as many small & medium enterprise (SME) clients as they can onto their platforms first with the belief that a customer would become so comfortable with their freight management platform that the inertia to migrate to an opposing platform would extract great switching costs.
Multinational companies (MNC) are rarely the best target client for customer-facing platforms, mainly because of the form of high level business integration through multi-layered decision making, 4PL contracts, control tower set-ups and staff implants that may be required to win over their business. The technology embeddedness here comes in the form of electronic data interchange (EDI) linkages, multiple and complex relationships based across varied geographic sectors and a working timeline most often shaped by periodic global or regional tenders. Development of a customer-facing technological platform can accommodate some of their needs but it is not the best tool to engage them due to the level of sophistication and complexity required. The process is entirely different when it comes to engaging with SME business.
At this time, the battle taking place across the forwarding landscape pits the biggest players using their technological superiority in competition against the rest of the market, which still relies on the traditional ways of doing things without leveraging technology platforms. As the investment to developing a proprietary technology ecosystem from scratch is high, smaller players may partner with a bevy of middleman platform developers such as Freightos, Kontainers, Shipafreight, Cargobase and Flexport. The outcome of this battle will create a chasm in the market between the customer SMEs that are already on a technology platform and those that remain out of it. The real battle for disembedding a customer from the holds of an incumbent’s ecosystem will then take start to take place between the industry giants. All of this points to only one long-term and sobering trend: the current highly fragmented market will become more and more consolidated as the drive for technology adoption grows, and forwarders who do not have such a moat will lose market share.
Setting up an online platform is not the end all of the strategy. Several entry barriers specific to successful on-boarding and successful customer retention include complicated set-up mechanisms, slow and cumbersome on-boarding processes during the initial or trial shipment phases. The investment in dedicated product experts that guide newcomers will be significant at the onset but the increased retention rates and conversion of ad-hoc clients into long-term dedicated ones will pay off eventually.
On a tactical level, the best way to spread this migration is to establish a dedicated sales and marketing force focused on driving SME business onto the platform as quickly as possible. One effective way to measure a salesperson involved in on-boarding and platform embedding of a client is to focus on incentivizing the quantity, retention and recurring revenue of accounts on-boarded instead of the size of the business or gross profit of the account—typical metrics used to measure performance. The emphasis here is on speed to market (sales channelling deep and fast) and speed to user adoption (growth).
The likelihood of a customer that has tasted the benefits of “the forbidden fruit of technology” once – and experienced the exhilaration of getting and booking quotations instantly, tracking their shipments when they want to and not being limited to the typical working hours of a traditional forwarder – to want to return to the pre-historic days of manual quotations and bookings is unlikely, but there will always remain a few laggards on the technology adoption curve.
Luke Robert consults for SME and MNC clients in navigating trade tariff agreements and advising on industrywide regulation and the impact of political and economic trends on their supply chains. He is currently with one of the largest logistics MNC’s in the world. The views expressed here are entirely his own.
Go to Source
A massive fire broke out at the Port of Beirut on Thursday, incinerating a warehouse full of tires and oil within the port’s free zone. The same area was heavily damaged in the ammonium nitrate explosion that leveled the central port area and the adjacent waterfront on August 4. According to Lebanon’s civil defense agency, […]
Over the course of the past five days, the Australian Maritime Safety Authority arranged a medical intervention for an injured aboard a freighter in the Indian Ocean. On Saturday evening, the Spliethoff tweendecker Dolfijngracht called for assistance while under way about 1,000 nauical miles off the coast of Western Australia. A crewmember had sustained serious […]
The National Transportation Safety Board (NTSB) has released a Marine Accident Brief about an accident that occurred on April 15, 2019, involving the towing vessel DeJeanne Maria which struck the end of a submerged dredge pipeline while pushing two spud barges to the Gulf of Mexico. The incident occurred on the Mississippi River in Pass […]
Best known as a leading passenger airport serving Germany’s most populated federal state North Rhine-Westphalia, Düsseldorf has become transformed into a vital distribution point, during the COVID 19 pandemic, for medical equipment and other life-saving goods, mostly from China. Gerton Hulsman, managing director of cargo operations, reports that the handling teams are working hard to […]
The UK government’s new post-Brexit tariff regime will result in both winners and losers. The new regime is set to replace the European Union’s Common External Tariff from the end of the Brexit Transition Period on December 31, 2020. The UK’s commitment to the ongoing Brexit process and ending the UK’s transition from EU membership […]
With close to 100 daily cargo flights operated to a destination network spanning more than 65 cities across six continents, Emirates SkyCargo is delivering essential supplies and commodities to people around the world. The air cargo carrier is currently operating 11 Boeing 777 freighter aircraft, each with a capacity to transport about 100 tonnes of […]
DSV Belgium has solid experience in the transport of pharmaceutical products for different customers. With a pharma hub based at Brussels Airport a lot of experience and know-how has been built up over the years. Last weekend, the forwarder handled one hundred million mouth masks, an important milestone for its Belgian organisation that has put […]
Emirates SkyCargo has expanded its weekly scheduled cargo flight operations to cover 75 destinations across six continents. Through its wider reach, Emirates SkyCargo is able to transport essential commodities and other urgently needed cargo more rapidly across the world, allowing exporters and importers across markets to benefit from direct access to widebody cargo capacity. Some […]
Global commercial aviation charter company Albion Aviation Group is reporting that it is seeing a considerable uptake in its professional cargo broker training courses from the current global pandemic crisis and surge in charter demand. “We have completed a number webinar courses for a whole of host of companies, looking to manage their own cargo […]
Operators can continue to use pilots and other crew members who have unable to comply with certain training, recent experience, testing, and checking requirements due to the COVID-19 outbreak in support of essential operations. Additionally, this Special Federal Aviation Regulation (SFAR) provides regulatory relief to certain persons and pilot schools unable to meet duration and […]
Astral Aviation has increased its intra-African network with cargo freighters during the pandemic. While there has been a reduction in capacity to, from, and within Africa, which has been caused by a stoppage of passenger flights and limited frequencies on freighter aircraft, Astral Aviation continues to operate cargo freighters from its Nairobi hub to 13 destinations […]
The U-Freight Group (UFL), with its considerable involvement in eCommerce logistics, says that the latest statistics showing that global e-commerce sales hit $25.6 trillion in 2018 are a further vindication of its decision to enter this sector of the international freight market several years ago. The latest available estimates, up 8% from 2017, were recently […]
Callan Marine is serving as the prime contractor to the Texas Department of Transportation for a maintenance dredging project located at the Bolivar Ferry Terminal, in Galveston, Texas. Work began in May and is estimated to be complete in late July 2020. The project consists of the removal of 600,000 cubic yards of material and […]
Network Airline Management and TAAG Angola Airlines are pleased to announce the renewal of their long-term freighter aircraft contract by an additional 12 months, sealing an ongoing partnership for the foreseeable future. Operating a regular weekly scheduled service from Liege, Belgium, to the capital of Angola, Luanda, Network Airline Management provides a Boeing 747-400F aircraft […]
Qatar Airways Cargo transported 56 SkyCell containers with vaccines from one of the largest vaccine manufacturers worldwide on its scheduled freighter and belly-hold cargo flights for its customer, CEVA Logistics. The 54-tonne shipment consisting of pneumococcal and varicella vaccines were flown from Brussels to Mumbai via the carrier’s hub in Doha on two separate flights. […]
NOAA Fisheries announced Friday that it will cancel five out of its six large-scale research surveys in Alaskan waters this year due to COVID-19. The canceled surveys include the Aleutian Islands bottom trawl survey, the eastern Bering Sea bottom trawl survey, the northern Bering Sea bottom trawl survey, the Bering Sea pollock acoustics survey, and […]