Fishing in the same pond

  • August 28, 2013

I knew my car was dirty when I saw the words “wash me” scrawled across the rear window, and so it was time to visit my favorite neighborhood car wash. As the mechanized scrubbers cleansed away the road grime, it was time to get reacquainted with the manager by apologizing for skipping my routine visits, thus creating a cleaning challenge that really required oven cleaner and a scraper to get the job done instead of simple soap and water.

It turns out I was not the only guy skipping my routine car cleansings as other customers joined the rolls of infrequent patrons of our neighborhood wash. But unlike my dirty jalopy, the manager complained that their cars were being cleaned and shined by “detailers” who had entered the market, charging a bit more but offering a vast array of services aside from the quick wash and dry. Alas, a single competitor offering more options, including the use of cotton swabs to clean hard-to-reach places, had trumped my favorite automatic car washer.

While speaking at a recent industry conference, I asked a forwarder how his business was doing. He said that everything was great until third-party logistics companies (also known as 3PLs) had begun to capture his customers. Apparently, the 3PLs were offering more value-added services including warehousing, order fulfillment, truck brokering and technology to keep track of everything.

I immediately thought of the car detailer and his dreaded cotton swabs. Could this forwarder be suffering the same fate as my favorite automatic car wash? I was on to something. As in the car wash business, where quickly cleaning cars may not be enough, simply moving freight between supplier and consumer could no longer be the key to success in freight forwarding.

As supply chains become more complex and demanding, freight forwarders have had to respond to meet customer challenges. While some may have entered the business offering just one mode of transportation, most successful forwarders today offer multi-modal solutions to meet customer requirements.

In a constantly growing web of global government regulations, customers also depend on their forwarders as guides through the regulatory minefield. Forwarders are seen as architects of the shipping process, coordinating Customs, transportation, banking, consolidation and the navigation of complex distributions to remote corners of the world.

But recently, the line between forwarders and third-party logistics providers has blurred. While some consider 3PL to be just a fancy name for a freight forwarder, these companies have begun to provide services outside of the traditional forwarding role. They have integrated themselves into the client supply chain, becoming the coordinator of all involved players while keeping the customer informed throughout the process. In short, 3PLs seem to add actual or perceived value to the customer that some traditional forwarders may not be delivering.

Forwarders are not known for their marketing expertise, preferring to leave that job to the slick advertising types who create image and brand awareness. This may be allowing the growth and proliferation of these third-party logistics entities that are finding success in convincing shippers of the need for their solutions. They may just be promoting themselves more effectively than the traditional forwarder.

Regardless of their promotional effectiveness, forwarders need to see the third-party logistics phenomenon as a clarion call to action. This begins by forwarders sitting down with customers to understand their specific supply chains and identifying areas in which their expertise can add value. Or perhaps they’ll learn the need to add to their menu of changes. The days of being a transportation generalist have given way to an era of specialization that expands far beyond the movement of cargo.

Once forwarders begin to understand their customer supply chains, they must realize that investment in technology and infrastructure is an essential component to success. Traditional freight forwarders continue to play a dominant role in international trade, still managing most of the cargo flown on planes and boarded on ships. This makes information technology and expanded global networks more essential than ever.

Finally, let us not underestimate the role in which people play in forwarding. There may be a clear distinction between a 3PL and a forwarder, but both fish for customers in the same pond. Effectively addressing customer needs through creativity and innovation are still the cornerstones of any business. The guy at the automatic car wash may be missing this vital fact, allowing someone with a more personalized approach and a cotton swab to lure away customers by creating a better value proposition.

Brandon Fried is the executive director of the U.S. Airforwarders Association.

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