Forwarders adapt operations

Singapore freight forwarders – Star Concord
19-Feb-2024

The Red Sea crisis and other geopolitical challenges have had a significant impact on forwarders and the distribution of cargo movement. Heightened geopolitical tensions have led to disruptions in traditional trade routes, forcing forwarders to adapt their strategies and seek alternative transportation modes.

In some cases, forwarders may opt to shift cargo from sea to air routes to bypass volatile regions or expedite delivery times. Conversely, increased maritime security concerns may prompt a shift towards air transportation for high-value or time-sensitive cargo. 

Ultimately, forwarders must remain agile and responsive to geopolitical developments to ensure the uninterrupted flow of goods and mitigate supply chain risks.

“The current geopolitical landscape underscores the vulnerability of supply chains to external disruptions. Geopolitical events such as conflicts, trade disputes, and sanctions can have far-reaching implications for cargo operations, disrupting transportation routes, causing delays, and increasing costs,” Brandon Fried, Executive Director of the Airforwarders Association (AfA), stated. 

“To protect cargo operations, forwarders can adopt a proactive approach, diversifying transportation modes and routes, enhancing supply chain visibility and resilience, and leveraging technology to mitigate risks. 

“Additionally, collaboration with industry stakeholders, government agencies, and risk management experts can help identify and address potential vulnerabilities in the supply chain.”

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Small forwarders surge

In recent months, a shift has emerged in the airfreight industry, with large forwarders losing market share to their smaller counterparts. Fried put this down to a number of factors: Firstly, smaller forwarders often offer more personalised services and tailored solutions, which can be appealing to shippers seeking flexibility and agility in their logistics partners. Additionally, advancements in technology have empowered smaller forwarders to compete on a more level playing field, enabling them to streamline operations and enhance efficiency. Furthermore, the increasingly complex and fragmented nature of global supply chains has created niche opportunities for smaller forwarders to specialise in niche markets or regions, allowing them to carve out a competitive advantage.

While there has been some shift towards shippers working directly with airlines, forwarders still manage about 80% of shipments flown on passenger and freighter flights. However, the trend seen in the market is shippers seeking greater control over their supply chains, as well as the desire to reduce costs and improve efficiency. 

“While direct relationships with airlines offer certain advantages, such as increased transparency and potential cost savings, they also require shippers to assume greater responsibility for managing their logistics operations,” Fried continued.

“Forwarders bring specific skill and trade knowledge to the table, allowing shippers to avoid operational pitfalls while allowing shippers the opportunity to focus on their core business.”

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Artificial intelligence’s offering

The rise of artificial intelligence (AI) offers immense potential for revolutionising forwarding operations by enabling forwarders to leverage data-driven insights, automate repetitive tasks, and optimise decision-making processes. 

AI-powered predictive analytics can forecast demand patterns, identify potential risks, and optimise routing and scheduling to enhance operational efficiency and reduce costs. Additionally, AI-driven algorithms can improve inventory management, route optimisation, and supply chain visibility, enabling forwarders to deliver faster, more reliable services to their customers. 

With this in mind, the AfA are in the early stages of AI development, with Fried acknowledging the promising future the rise in providers focused on deriving efficiencies using this technology within the forwarding industry offers.

“Digitalisation is progressing rapidly in the logistics industry, but barriers to innovation persist,” Fried highlighted. 

“Legacy systems, data integration challenges, cybersecurity concerns, regulatory compliance, skill shortages, interoperability issues, and costs hinder the pace of digital transformation. 

“Despite these challenges, the industry is moving forward, driven by the recognition of the benefits digital technologies bring to efficiency, transparency, and agility in supply chain operations. 

“Collaboration, investment in talent, and strategic approaches to regulatory compliance are key to overcoming these barriers and unlocking the full potential of digitalisation.”

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Author: Edward Hardy