Latest / The Loadstar / SME Freight Forwarders: Challenges, opportunities and advice

Transcript

SME Freight Forwarders: Challenges, opportunities and advice · The Loadstar

• 0:00
  Speaker A: Hello and welcome to the Lodestar Podcast. I'm your host, Charlotte Goldstone. As of next week, we will be returning to the regular news in brief format. But this episode I'm going to be joined by Dan March, CEO of WCA World, the world's largest network of independent freight forwarders. We are going to be looking at the changing role of small and medium sized forwarders in an increasingly consolidated industry. Dan is going to explain what challenges and opportunities they're seeing and how smaller players can compete as major carriers and logistics companies take on a more integrated role. So let's get straight into the episode. Hello Dan. Welcome to the Lodestar podcast. It's great to have you here.
• 0:44
  Speaker B: Thanks, Charlotte. It's a pleasure to be here.
• 0:46
  Speaker A: Now, before we deep dive into the role of small forwarders and the challenges and opportunities that they are seeing, can you first outline what it is you do at WCA World? For those who might not be familiar,
• 0:55
  Speaker B: our entire goal is providing SME and regional forwarders with the services, the tools, the platform, the protection, the global reach to sort of act like a multinational, but with the benefits of the personal service and the agility of a smaller forwarder. So that's what we do. We listen to our members, we act on what our members need, what they want, what they need to grow and succeed. And our job is to provide them with those tools and those services and those benefits so that they can grow their businesses and grow into the future and be successful. If they're not successful, we won't be successful.
• 1:38
  Speaker A: That's wonderful and I'm sure particularly useful right now because there's just so many headwinds facing particularly small forwarders. And we are going to get into that in this episode. I think one of the big topics that we've been looking at for quite a while on the Lodestar and increasingly is that just how the role of small forwarders is changing with the sheer amount of consolidation that we're seeing on the market. So how big of a factor is consolidation in the industry right now? Is this something that a lot of your members are worried about?
• 2:04
  Speaker B: They're not worried as per se. There is consolidation. There's always been consolidation. There has been post Covid, probably a blip in the uptake from certain areas, not across the board in. Well, I would like to say purchases rather than consolidation. Because by saying consolidation you say the number of companies is shrinking and that it's all congealing into the bigger companies, which is not what we're seeing. We're Definitely seeing some purchases by bigger companies, but we're also seeing plenty of newly established smaller freight forwarders coming to the market. So yes, a number of forwarders have been purchased and if they are purchased by a multinational, they can no longer stay as a member of wca. But we have seen just as many new forwarders coming in as we always do. So it's an interesting time. Another point of consolidation is when a smaller forwarder gets acquired by a multinational. Their very top owner or top level management may be tied in to that deal for a year or two, but the middle management, the sales managers, the people with real contacts with the customers, very often don't wish and have chosen not to work for a multinational and they move on and either start their own companies or join other small companies. So it's hard for a, for a company purchasing a company that's asset light but really relies on the skills and the contacts of their employees to retain them all. So it's always been a challenge and an opportunity. Don't forget these people have built their businesses from nothing in many cases. And if they're coming to the end of their career and they choose to sail and they make their money on their, you know, decades of work, great for them. Yeah, quite often if they're young enough and enthusiastic enough, they'll start up again. We see that many times as well. So yes, there's, there's challenges, but we don't see it as a threat to the SME existence. We just see it as a natural rule of things. As you grow and become successful, you become attractive. But there's plenty coming in the bottom to take their place and grow again.
• 4:26
  Speaker A: That's definitely encouraging to hear. I mean, something else that we've been writing about that perhaps poses a bit of a threat, the smaller forwarders, is that we're now seeing these major carriers and larger companies kind of pivot towards an integrator role rather than just a traditional carrier. I mean, do you see this as an issue for smaller forwarders? And what does this kind of relationship between the SMEs and the larger integrators look like at the moment?
• 4:48
  Speaker B: It's always been difficult to be honest with the carriers, especially on the ocean side. Relationships with carriers. I don't feel that carriers have treated that part of the market, particularly with, with much care in the past and long in the past. They've made numerous plays to try and take forwarders business, not just small forwarders, but big forwarders, you know, the big multinationals, to take their business direct Away from them. It's never really worked because I don't think shippers want the market controlled by a few big entities. It's not good for them, it's not good for their pricing, it's not good for competition. So shippers and forwarders, I've always been in a bit of a battle, especially with ocean carriers and to a degree with airlines, but more on the ocean side on creating those partnerships where you can trust each other. Now if a shipping line continues to try and move into traditional forwarders business, then there's going to be a conflict and shipping lines have to be very careful where they tread, I feel and what they do regarding business with shippers if they want to retain the forwarders business. So it's always a dance and a game that obviously we've seen some shipping lines even move into buying assets, air assets, starting their own airlines and they have expanded. And it's not just shipping lines, it's ports as well. Notably a port in the Middle east has been highly acquisitive. But again, do shippers really want their supply chain controlled by a few big entities? I'm not sure they do. Maybe the very biggest ones will get a good deal. But medium, regional and smaller shippers, I don't know. I think they're quite happy to have competition in the market.
• 6:52
  Speaker A: It must be quite difficult though because as we were saying with the consolidation thing, I mean this is happening with the carriers as well and so there's less choice with the carrier. So it's not like you can just kind of boycott a carrier. So I mean, yeah, that must be, that must be quite a, quite a challenge.
• 7:05
  Speaker B: No, you can't. And, and like, like even the big guys do to a degree, but our guys do have to play the spot rate a little bit. But at the end of the day it's the shippers who are hurt by higher shipping prices, not the forwarder. So they, the forward is there to protect the shipper and try and get, get their customers the best services and the best pricing. But it does, it doesn't affect the forwarder because at the end of the day the shipper has to pay the market price. So if shippers are putting pressure on carriers to provide the capacity and provide the service, that's good and forwarders will certainly be doing the same.
• 7:48
  Speaker A: And I guess it helps having things like WCA World who can kind of ban these smaller forwarders together and give them more power in that sense.
• 7:55
  Speaker B: I think on your own as a SME or regional forwarder, it's quite hard to get any particular leverage, but banding together you certainly can. And you know, part of our job is to effectively make sure that our 13,000 plus member offices of the world are, where possible, working in tandem together.
• 8:17
  Speaker A: I mean, I listed a few challenges that we've kind of been reporting on. Is there anything that you've identified as a particular challenge that perhaps your members are coming to you with or that
• 8:26
  Speaker B: you've seen well in the immediate past, the geopolitical disruption. I'm sure we'll talk about that further. But the sudden tariffs, the global conflicts, the difficulties between relationships between big trading companies, all obviously have a massive effect on logistics and a massive effect on trade lanes. Now, where it's helped us is our Forders are small, smaller, so they're agile and they're closer to their customers. So they've become a sounding board in these very uncertain times, especially geopolitically, to tell their shippers what it means for them, what the tariffs mean when they're lasting, when they come into effect, how to avoid them or change their way of doing business, or change their trade lanes or so. And so a Ford is no longer making his money or her money purely on freight rates. And any forwarder who does that into the future, who says, I'm an ocean freight forwarder, I make my money on the margins I make on freight, is in trouble. You need to be a full service provider to your customer, which means providing information services, insurance options, risk management, very big part, and so on. So they become a partner with their of their customers for all sorts of things rather than just can you get me the best rate? Which remains important, but obviously they have to offer other services. Specialization is another big key. If forwarders can become real experts in two or three niches, the margins are better and they can really provide their customer with a service that the multinationals can't. So whether it's pharmaceuticals, perishables, live events, a whole projects, whatever, they do that if you can get some niches that you become renowned on as experts in your, in your location, you tend to do well longer term. I think the challenge for small afforders is digitalization. Without a doubt, it's overwhelming for a lot of smaller companies. The amount of technology, you know, I'm approached three times a day by technology companies saying we have the best system, we have new AI, we have this. Deciphering that field is difficult. We assist our members in trying to do that, not only by providing our own tools, but bringing in vendor members that we feel add value, smaller forwarders IT companies. But any advice for an SME forwarder would to get your digital strategy set and right, you can't be 100% concreted into it because it changes so fast. But have a strategy, really look at what you need, look what's out there, look at what new technology and AI can do for you. Because I think if in five years you haven't done that, then you may face difficulties for sure.
• 11:37
  Speaker A: Yeah, no, that's definitely a good bit of advice. And as you said, I mean, it must be quite difficult to manage as it is changing so, so rapidly. I guess by the time you've got a strategy then that's like old news.
• 11:47
  Speaker B: It really is. Technology is changing very quickly, as you know. I mean we weren't really talking about AI 5, 6, 7 pre Covid years, but now it's, it's front and center of how you can increase your efficiency and how you can make your productivity rise. So it's really important. The good thing for our forwarders is they haven't got great teams of IT people, you know, to develop it themselves or assess. They may have a small team, but they're agile. So when something, and they're clever, they know their business. So when something comes across that's going to work for them, they can pivot and use it and adopt it very quickly, which is, you know, something a multinational can't do. It takes months, maybe even years to change a process or a system in such a large company. A smaller company can do it in a matter of weeks or months. So that agility and the way things are changing rapidly is actually an advantage to the smaller forwarder. There's so many off the shelf solutions now. You can, you can pivot and change quite quickly, but you have to get your strategy right.
• 12:53
  Speaker A: Yeah, it must be quite useful for especially the smaller companies when used correctly because I guess it means that you don't have to massively upscale your operations, but all of a sudden you're able to do things a lot more efficiently. Kind of like an extra person without having to hire an extra person.
• 13:07
  Speaker B: Well, that's right. The whole, whole benefit that I see from this is not replacing people with technology. It's releasing people from repetitive admin day to day taskings and allowing them to do jobs that were more likely to bring in new customers and new revenue into the company. So it shouldn't be seen as a threat. And I know employees will often see it as a threat, you know, if they've been doing the same job 30 years and a computer can take part of it away, but it just releases them to do more work in areas that's going to be more productive instead of repetitive admin or work that technology can do for them. It's a tool to aid them, not replace them, in my view.
• 13:52
  Speaker A: Definitely. I wanted to ask you about something that you mentioned a bit earlier on about kind of the geopolitical side of things at the moment. I mean, since COVID the, the landscape's just been so turbulent. I mean there's the tariffs, there's the geopolitical, there's wars, there's extreme weather. Yeah, this is this kind of general chaos that we're seeing. People now kind of pivot towards resilience and just in. Just in case, not just in time. Is this kind of a good thing for small forwarders, you think, like you said, with the being able to develop niches or do you think that it's just really hard for smaller companies to manage with all of this chaos?
• 14:29
  Speaker B: Well, I think for logistics overall, it's not a great thing and certainly for shippers, their customers, it's not a great thing for, for the landscape to be changing so rapidly and being unable to do medium and longer term planning because they don't know what's, what's happening down the road. It's been tough in the Middle east, obviously it's been tough in parts of Asia. The relationship, you know, with all the countries with the US is changing rapidly all the time. So it's not great overall for logistics. But as you say, there are benefits for SME companies that they're agile and they can change quickly. Can they advise their customers on new trade lanes, new routes? The expansion in Asia is still ongoing. China's not the China it was 15 years ago in growth terms, but it's still growing. But the growth in areas such as Vietnam, Indonesia, starting now in Cambodia, Thailand, these sort of places still have rich opportunities. And I mean, and South America is another area that, that we've seen really solid growth. So yeah, being agile and being able to identify those areas that are growing is important and is much more easily done than in a larger company. So yeah, there are definitely some advantages.
• 15:55
  Speaker A: Much better to not dwell on the negatives.
• 15:56
  Speaker B: Well, you can't. Our forwarders are very resilient. They have had a lot thrown at them over the last 30 years, from rate fluctuations to wars to groundings to volcanoes to anything you can think of. But they are now sort of built in resilience and built on adaptability and can thrive on it, for sure.
• 16:21
  Speaker A: Are There any other kind of big opportunities that you are noticing for your members at the moment?
• 16:25
  Speaker B: I think, yeah, I think, as I said, Asia's a very strong area. I think a lot of our forwarders are looking at not just China now, but other parts of Asia. South America's a strong area. I think they, as I said, looking at technology is absolutely key and looking at their business closely. But finally, and it's really part of what we really do is making sure that they are providing their customers, shippers, with more than just a freight rate, a whole suite of tools and services and options that can, can aid the shipper and provide extra revenue for the forwarder. So if I was a forwarder, as I said, I would be looking to see what I can do in all of those areas that the shipper needs help and what I'm doing to help them.
• 17:21
  Speaker A: Very good bit of advice there. I think our listeners will really appreciate that. Finally, Dan, looking forward to the next five, 10 years, how do you landscape changing for smaller forwarders, if you can predict such a thing? I mean, can we expect more kind of consolidation? What do you think are the biggest factors influencing this industry right now?
• 17:38
  Speaker B: I think there'll be some changes. I think one, one area we've seen changing in Europe is very careful use of land and offices. So for instance, since COVID working from home has become almost a norm or part working from home. I think some members now are thinking, why am I housed in a very expensive office right next to a port or an airport where I can move somewhere cheaper or not at all, Some of my staff can work at home. Those fixed costs are something. Technology is helping them change. So that's something we're looking at as well as to how people working is changing. Attracting good people to the industry has always been a challenge and we need good people in the industry and it's always been almost an afterthought. It's not very glamorous to tell people you're you're in logistics or you're a freight forwarder because they think you're packing boxes in a warehouse. But there's so much more to it than that, obviously. So we started the academy, the WCA Academy, a number of years ago. Leah's done a great job in building that. We have a whole bunch of education courses, training courses in the academy and that's an area for us to concentrate our members to concentrate on. The future is bringing in some more of the brightest young talent into the industry who can grasp the digitalization and AI evolution. It's not a revolution. I know people like to say revolution. It's an evolution and can grasp it and take the industry forward. The current generation and the founders of these companies have done a great job, but they need to be able to pass the baton onto a younger generation of employees who can take the next step for sure.
• 19:33
  Speaker A: Yeah. I've been really trying to get my friends to join the industry. Every time I tell people I'm a journalist, their ears prick up. And then I say, for the supply chain and logistics industry, and then they're like. But then I have to assure everyone, no, it is a very, very interesting industry to be part of. You get to travel all the time and everyone is just so love. And yeah, especially right now, I think it is very, very, very important in this industry, moving things despite everything that's going on. So, yeah, definitely, definitely.
• 20:00
  Speaker B: It's vital to the world. Without what our guys do, you wouldn't have anything in your shops and you wouldn't be buying anything and businesses wouldn't be able to produce stuff. I mean, it's the heartbeat of the world, the logistics industry. So it's unglamorous, but it does probably, you know, there's nothing more important to the global trade than logistics.
• 20:19
  Speaker A: Seems like quite a good place to end the episode. Dan, thank you so much for your time. It's been wonderful to speak to you.
• 20:24
  Speaker B: No problem. Thank you, Charlotte. Thanks for your time.