The following is a Supply Chain Matters blog guest commentary contributed by Cory Margand, Co-Founder and CEO of SimpliShip.com, an online marketplace connecting international shippers directly with qualified, dedicated NVOCC’s and freight forwarders. We feature this point-of-view guest commentary as a sidebar to our 2017 Prediction of continued global transportation industry turbulence.
The title of my commentary seems to be a very hot topic in today’s transportation industry both domestic and international. I felt I needed to share my point of view (as well as SimpliShip‘s) with the global logistics and Supply Chain Matters community.
Let’s first discuss how transportation pricing actually works. Below, I’m only specifically discussing those brokers and forwarders/NVO‘s (non-vessel operating common carriers) who negotiate contracts with carriers. For the sake of simplicity, I will refer to both international and domestic as brokers.
Each broker negotiates rates with their carriers whether it be air, domestic, parcel etc and then resells to their customers at a higher price. This is how they make money. Sure, there’s a lot more that goes into it but that’s the basic concept. The reason this takes place is that carriers get the benefit of large volume from one customer and they don’t have to worry about the small customers that they simply are not set up to do business with from both an operating and pricing stand point.
Interestingly, Maersk recently announced that they will be integrating Damco’s (their freight forwarding arm) product range into their own to sell in certain add on items like customs brokerage and cargo insurance. The question is whether this is a step towards carriers servicing the SMB’s which have largely previously been serviced by brokers. Or, is it simply to sell in Damco’s products to their current target customers. Maersk also announced that they are integrating with Alibaba. However, it’s unclear as to whether Maersk is simply making their rates available online (most likely at a premium) or they are truly going to be managing the relationship directly with the customer.
Now, to the point that really “grinds my gears”.
This topic of Techies vs Brokers is simply coming from two points of view that do not, from my view, understand each side of the business. Technology solutions aren’t always meant to disrupt- some are built to enable. In other words, we view the SaaS (Software-as-a-Service) and marketplace opportunities as a way for both the customer and the broker to create more efficient solutions.
Our team at SimpliShip is experienced at procuring freight spanning both large and small to medium size businesses. On the other side of things, we have moved freight both as a 3PL and carrier all around the world and domestically. We are now laser focused on the technology side of the industry.
Historically, carriers and brokers have a more than outdated tech infrastructure especially from the customer’s perspective with heavy reliance on static databases, EDI, or email/phone calls. This isn’t a surprise as most large carriers and brokers are putting resources into improving the user experience. This is where tech startups can really create value if they can successfully bridge the gap between tech and the industry. At this point and until carriers change the way they do business there is no threat to brokers. A technology solution that is executed correctly will create a more efficient process for all parties involved.
As a challenge to both sides, with an understanding of the above, is to think critically about your current process and ask yourself is this the best way for my organization or business to procure rates and sell to my customers especially in a transportation marketplace that is highly volatile? If not, it’s time to look at tech solutions critically as a way to enable your business.
It really is as simple as that.
In reference to global logistics, a true SaaS platform should be completely carrier/broker neutral. These platforms will become smarter and smarter but initially will offer a simple way for shippers to make decisions based on their ability to get rates and other information faster and from a larger network. A lot of the “techies” that are being discussed in industry publications or other outlets are not true SaaS platforms. These are in fact brokers. So, it’s misleading, at best, to say they are trying to eliminate brokers.
Technology will prevail when it’s created to solve specific challenges in the industry. It will enable both buyers and sellers of freight to work more efficiently and move towards a superior customer experience. Given that, our point of view is that there is no question the supply chain is going to be digitized. Those companies that embrace technology will survive and those that do not will not.
Have any insight, comments on feedback on this topic?
Please drop me a line, I’d love to hear from you.
Cory Margand, Co-Founder & CEO, SimpliShip