The impact that Brexit will or won’t have on international trade and supply chains is inevitably dominating many of the conversations I am currently having with BIFA members.
The huge uncertainty on how trade arrangements and supply chains will change post-Brexit is making many freight forwarders nervous about the future, as are many of the macro-trends happening in the world right now.
There are other challenges the freight and logistics industry faces including everything from the impact of technology and the state of the global economy, to how President Trump is trying to shake up global trade and the impact that will have on international supply chains.
Macro-economic reasons aside, there is also plenty going on within the industry that freight forwarders should be watching.
Freight forwarders are up against more competition than ever. Part of the reason is that many logistics companies that traditionally defined themselves as something else (say an as ocean carrier, or even a warehousing company) are now providing forwarding and NVOCC type services. And of course, everyone is talking about how even Amazon is getting in the game as well.
Many, if not most, shippers view transportation as a commodity. Their main priority is that the delivery gets made. In general they place greater emphasis on price rather than service. This makes it hard for forwarders to differentiate themselves from other providers – especially when there are always those who’ll try to win on price.
Some forwarders are learning they can better compete and maintain margins by offering new or better technology that improves the customer experience.
Ocean shipping is a big part of what forwarders do. It’s also a very unstable business, based on complicated rates and contracts that take an expert to understand. This can present challenges to forwarders that are trying to understand and manage their cost structure, whilst providing accurate and reliable quotes to customers. The seemingly random nature of General Rates Increases and surcharges only adds to the problem. There have been recent calls to simplify the complexity of all these things but there won’t be relief for forwarders any time soon.
BIFA recently repeated the call it has made previously for an end to surcharges imposed by shipping lines. In the ocean freight arena, we want to see greater consideration from carriers for the customers.
We also hope to see a more balanced approach to discussions on a variety of contractual and operational arrangements within ocean freight transport, as there is less and less competition inside the maritime market with bigger and bigger alliances. Additionally, there is no competition outside the market with no real alternative that can cover the needs of shippers (in terms of volume available).
A big part of most forwarder’s business comes from responding to tenders. Because the volume of these bids is so high, and each is usually so complex, they are a big drain on resources. Smart forwarders are focused on improving their tender management process to make sure they are bidding accurately and fast, but also on the best types of business for them.
There are constantly new market challenges for forwarders that need to be accounted for. A recent example is the trend for ocean carriers to form alliances. With almost no notice, these can affect the rates and contracts forwarders have with the carriers, as well as service. The aforementioned effect of technology is changing how forwarders (and their competitors) can manage their business – as well as service their customers.
Lastly, market expectations continue to focus on ever faster and cheaper deliveries.
Closer to home the future of cargo operations at Heathrow airport is a significant challenge to our members. BIFA has consistently identified the need for infrastructure investments to be made at Heathrow, and recently joined the chorus of groups that welcomed parliament’s vote in favour of the Transport Select Committee’s report on the Airports National Policy Statement.
In the road freight arena, we have previously welcomed news of capital spending on transport infrastructure in the UK. We hope to hear more good news in this area as it is imperative that new road building and road reconstruction projects are not only implemented, but developed in such a way as to maximise their functionality.
One certain challenge facing forwarders is the impending launch of the Customs Declaration System (CDS), the system that is set to completely replace the existing system for customs declarations in the UK.
There are some concerns about the readiness of the new system, and BIFA is working hard to provide companies with greater understanding of what CDS is, why it is being introduced, how it will impact their businesses, and when the system will be fully launched. The move over to CDS marks the biggest change to impact the processes by which customs declarations are managed since the introduction of CHIEF, which it replaces, and which is needed to enable importers or exporters to comply with the EU’s recently introduced Union Customs Code.
There are significant differences between CHIEF and CDS, and still a lot of unanswered questions about what will be required from our industry and the issues faced by companies that make customs declarations, which will need time to adjust their internal computer systems to accommodate CDS.
For all these reasons, freight forwarders need to work harder than ever to differentiate themselves in their business – while continuing to focus on service. What the best forwarders know is that just as important as competitive rates are giving customers better service options and technology to support decision making.
BIFA is in good shape operationally and financially, with significant momentum, a membership of around 1,500 companies, and a clear strategy that leaves it well-positioned to continue to provide effective representation and support for the UK and international freight services industry.
Against an ever-evolving backdrop, BIFA – through its secretariat, policy groups, regional consultants, and committees, as well as its board and council – continues to serve its membership and delivers on their behalf.
Posted on: July 19th 2018