Another Market Ready to Disrupt? - International Transport

As we watch the world today we see more and more markets being disrupted. A few years ago no one knew about Uber, Lyft, or AirBnB. It was just a few years before and no one heard of Yelp or Angie’s List. Amazon and eBay were these alternatives to going to the mall or your local Target 10 years before that. Gone are the days of the Thomas registers that would pour out of the offices of purchasing departments.  When is the last time you saw a paper sailing schedule or an official airline guide book on some ones desk?

Could traditional freight forwarding be ready to change, come to an end as we have known it?   Are the value of the services given by a freight forwarder replaceable in an age of technology innovation and transparency? Is it possible to disrupt on a large scale? 

To get to the answer we need to consider:
1. What can the current state of technology and technology proliferation achieve?
2. How does a customer in this space decide and purchase services?
3. What barriers might exist and are they real?

Rather than give us all a large reading assignment (and me a writing assignment) I want to break these questions down over a few posts.   

What can the current state of technology and tech proliferation achieve?

Current State of Technology

In a recent Wall Street Journal article, Freight Startups Attract Silicon Valley Attention the topic is discussed about bringing the freight industry into the internet age. It is already there and has been since the transportation companies portals were launched over 15 years ago. If you were to tell UPS, Expeditors International, KUEHNE + NAGEL, FedEx and the others that they are not in the internet age they would quickly tell the readers of this article to spend some time with them reviewing their booking, tracking, payment, and other services all available on the internet. The fact is; a new user interface doesn’t make freight forwarding any cooler when funded by Silicon Valley than if funded by a private equity firm or is IPO funded like one of the biggest debt play roll-ups occurring in the industry today.  

If you take this view traditional freight forwarding isn’t coming to an end, we are just upgrading from using .net and JAVA to building with ruby-on-rails (sorry to use those terms for the non-techy folks but needed the context). Hosting the cloud using full stack or having your own data center does not make it any more exiting either.

Did you know there are more than 20,000 international transportation intermediaries (freight forwarders) in the world and that is just a guess? It would be like Uber or Lyft trying to count the number of taxis. What this tells us is? There are a lot of them. And using the taxi comparison they range from the Tuk-Tuk (really small and local) to the well-known Yellow Cabs. The point is, when there is a lot of something the opportunity to do something different and better is much greater. This is what disruption means, different and better.

Back to the question: Is it possible to disrupt on a large scale based on technology and technology proliferation?    

Technology Proliferation in International Transportation

Freight forwarders are aggregators and intermediaries. This means that for technology to come into play it requires proliferation.

As an aggregator the freight forwarder brings together different asset based providers of services to put together a complete product for the customer to purchase. The bill of materials (to think of this in a manufacturing context) is the pickup service, documentation, consolidation or loading, customs clearance, movement between countries, and delivery services. Depending on the freight forwarder this “Bill of Materials” is divided between different asset owners who have trucks, warehouses, ships, planes, and technology.

As an intermediary the freight forwarder brings together different relationships that represent the best quality that the freight forwarder can achieve for the customer. These relationships might be managed by phone calls, faxes, emails, text messages, and for some EDI.  This also includes the financial aspects of moving funds, payments, and billings across international boundaries. The relationship is there to manage, control, and achieve a degree of quality service.

40 years ago the phone was the technology that a freight forwarder used to do this.  25 years ago the larger freight forwarders were doing this with mainframes, greens screens, and dedicated networks.  You needed to be large to have one. Ten years ago there were people selling systems to the small to mid-sized freight forwarders and most of any scale had some kind of Internet facing portal for customers. Technology today exists and is used by even the smallest freight forwarders. It is easy for a small business to get access to technology for automation and integration.

What about the asset owners that the forwarders aggregate and intermediate?

When I see a truck picking up an Ocean container the driver is dispatched with their cell phone with a text message. They update their dispatch the same way. Warehouse operators who do loading of containers and unloading of containers also have technology in place. They track the goods into their warehouses, into the containers, and back out the door. The ocean carriers, air carriers, and truckload carriers have had technology to manage what they do for years. Need a status - it is available electronically. Need to know the schedule, they are published on the internet.

Virtually every part of the “Bill of Materials” that a forwarder puts together has the ability for technology integration. When the ocean carriers are the same, the warehouse operators are the same at the ports, and the trucks that pickup and deliver are the same the value proposition comes down to customer experience.

If you have used a ride service like Uber or Lyft the experience is different, why because now you and the actual operator of the asset engage. If you are in a new city and don’t know where to eat you likely get a search from google or yelp to help you choose.

The technology of the freight forwarders can enable the customer to have an experience like booking your flights on a travel site. Today it is possible to make your choices in one place if as a customer you force that change just like you can choose on Amazon which seller to purchase something from … and still get PRIME service. It is possible to have a marketplace for these services that will add value for the customer.

The answer to the first question is that the current state of technology and its proliferation can enable the customer to manage for themselves the same “Bill of Materials” that the freight forwarder has done traditionally.