Changing logistics – freight forwarders evolve with trade
Freight forwarders and logistics service providers have to “keep cargo moving” despite challenges created by evolving trade patterns.
March 22, 2017
By Lim Guan Yu
The Oxford English Dictionary defines logistics as “the branch of military science relating to procuring, maintaining and transporting material, personnel and facilities”. However, the New Oxford American Dictionary, leaving the military perspective aside, defines logistics as “the detailed coordination of a complex operation involving many people, facilities, or supplies” and the Oxford Dictionary on-line defines it as “the detailed organisation and implementation of a complex operation”. As such, logistics is commonly seen as a branch of engineering that creates “people systems” rather than “machine systems.” In this regard the idea that freight forwarders are “architects of transport”, as the International Federation of Freight Forwarders Associations (FIATA) wrote several years ago, functions well in this description.
In 2004 it became apparent that more clarity was required with regard to the services that freight forwarders and logistics providers offered and FIATA provided a description of such services that is still publicly available on FIATA’s website and seems to fulfil its task of describing what FIATA members actually do:
Freight Forwarding and Logistic Services means services of any kind relating to the carriage (performed by single mode or multimodal transport means), consolidation, storage, handling, packing or distribution of the Goods as well as ancillary and advisory services in connection therewith, including but not limited to customs and fiscal matters, declaring the Goods for official purposes, procuring insurance of the Goods and collecting or procuring payment or documents relating to the Goods. Freight Forwarding Services also include logistical services with modern information and communication technology in connection with the carriage, handling or storage of the Goods, and de facto total supply chain management. These services can be tailored to meet the flexible application of the services provided.
The importance of remaining relevant by travelling light
Freight forwarders and logistics service providers in general have been grappling with different modes, different standards, different habits, but managed to “keep cargo moving” despite the raising bar of the challenges created by evolving trade patterns. Freight forwarders are today a truly global industry whose importance in the world trade is second to none and compares well with the importance of financial services.
For the sake of quoting an example of industry good practice, FIATA Diploma Curriculum is a world-wide endeavour that enables thousands of young professionals to seek their opportunities in a number of welcoming countries, which are very glad to avail themselves of well-prepared young resources. The FIATA Diploma ensures the perspective employer that job seekers have a minimum standard knowledge of the required procedures. Courses exist also in electronic format, this being an evolving paradigm for FIATA. In a world where restrictions seem to gain momentum, this is a shining example of opening and proactive behaviour in favour of better trade.
In an industry that spans so globally, one would expect the hand of the regulator to be intertwined throughout its history. However, this is in fact the opposite, as the industry has always done well to regulate itself by understanding the need for harmonized rules and streamlined processes to keep trade barriers low and facilitate the movement of goods. The very creation of FIATA in 1926 embodied the representation of this requirement, as it clearly appears in our historic documents. In this nearly century old work in search of efficiency, freight forwarders – through FIATA – have cooperated with a number of institutional and private sector interlocutors. Our work with various UN entities and bodies, the WCO, the WTO and many others happens on a daily basis, we have continuous collaboration with the International Chamber of Commerce and similarly we work with peer organisations such as IATA, IRU, UIC etc. and many others; in FIATA the industry has always found a guiding hand, able to ensure its longevity. For these reasons we firmly believe that our sector must remain agile and nimble, able to deal with the ever increasing level of challenges international trade presents.
We are about to enter an entirely new revolution now, which is made possible by the ubiquity of information services which did not exist just a few years ago. eCommerce is a relatively new concept which is re-shaping trade, and consequently our industry. It brings big challenges and huge opportunities. In front of these changes it is vital that our sector is not hampered by excessive bureaucracy. It is a question of development or stagnation and it has complex interconnection with concepts such as safety, security, integrity and compliance. We strongly believe that we must not put this powerful surge or new ideas into the narrow box of antiquated stamps and forms.
From walking through history to harnessing the future – the tech boom
The International Transport Forum (ITF) expects international trade to represents 50 percent of global GDP increasing 350 percent by 2050. A growing share of trade would take place between emerging economies – one third of trade would then take place between non-OECD economies by 2060, compared with only 15 percent today. And by 2030, the North Pacific corridor would surpass the North Atlantic one as the main freight corridor of the world. Supposing these predictions come true, this will all be made possible by improvements in infrastructure and broadband connectivity.
Mobile phones have made it easier to work on the go, which is particularly valuable in an industry that operates at an international level and is often on the move. The addition of cloud-based services has made documents readily available in a business that requires accurate and prompt documentation at a forwarder’s finger tips. This will certainly lead to the greater harmonisation of documents. New technology has given rise to eCommerce platforms which are changing the landscape of logistics. What once was only the business of trading goods between large and medium traders who were wholesalers working with organised local distribution is now rapidly changing into a business of trading goods between private consumers and micro-enterprises. The WCA projects that by 2020, freight forwarding will be 20 percent e-commerce driven and some believe this is a modest expectation. By allowing products to reach a broader range of customers through eCommerce, sellers will require more sophisticated and integrated logistics networks. Such networks are best harnessed through forwarders who have a strong understanding of trade rules and logistics routes. Knowledge will make a difference and this is where FIATA can lead the entire industry.
In cauda fabulae
Governments will need to play their role in the future of trade to avoid erecting trade barriers; this is the only way to facilitate their citizens’ businesses’ access to markets, whilst ensuring that citizens’ safety and security are not put at greater risk. The power of the regulator will be best exercised in seeking greater harmonization of standards and procedures. As history has taught us, regulation had been relatively absent in our sector, resulting in a healthy industry harmonizing its own rules and improving its own trading environment. This trend must continue with regulation being the silent finger pointing to unity in harmonization only where trade rules require a small push.
The goal of the freight forwarder and the principles that they operate on have practically not changed since inception, still a business of moving goods from one point to another at the service of trade. Interesting enough, when examined closely the freight forwarder is not practically needed to move the goods. The forwarder creates its own demand by offering a superior level of service; as trade continues to grow in importance and digital tools become available, forwarders will continue to provide that added value to their customers. In fact, customers becoming less individually interested in the rules of trade and more concerned about receiving reliable and fast service at the tip of their fingers will create more demand of knowledgeable, flexible services that traditionally freight forwarders have been able to organise. How bright this future is will greatly depend on the level of collaboration that forwarders will be able to create among one another amid this almost chaotic development of trade paradigms.
Freight forwarders today are much more advanced than others in dealing with the chaotic development of eTrade, simply because freight forwarders have been dealing with chaotic environments for time immemorial.
Being a freight forwarder in fact is not only trying to work as an architect of transport, as said earlier, but it becomes more and more like trying to make sense of the chaotic development of modern lifestyles.