SURVEY RESEARCH MAY 2017

“WE DIFFERENTIATE
ON SERVICE”
Forwarders on the future of service differentiation in the era of digital freight
Like all service-based industries, freight forwarding emphasizes WHAT SERVICE MEANS TO FORWARDERS
service as a key differentiator. When asked, forwarders generally
Declarations of superior service are front and center on most
refer to both customer service, like exception management, or
forwarder websites, driven by a belief that it drives business:
physical services, like cold chain.

“An industry leader in service and quality, delivering on time,

Forwarders have always adopted technology like EDI, email and
and maintaining total control and communication during the
rate management tools to improve service levels. As logistics
process.”
technology develops at breakneck speed, freight digitalization
Trust Freight (Canada)
stands to comprehensively transform the industry.

“Successful ocean cargo forwarding depends on the

There’s a common fear that digitalization will increase
fulfillment of customer requirements ... We know that our
transparency, eliminating the importance of service, and fully
customers want reliable, personalized service.”
commoditizing freight operations. In other words:
Ibex International Forwarding

What does “service differentiation” mean? “Freighting is all about logistics and details – we don‘t expect
How will digitalization change service differentiation? our clients to be the experts – that’s our job.”
How will digitalized freight change forwarder operations? Complete Freight

To explore these ideas, Freightos surveyed nearly 70 freight

forwarders, followed by in-depth interviews with senior executives
at enterprise and mid-size freight forwarders.

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 “We differentiate on service”
What does that actually mean?

Freightos’ April 2017 survey asked nearly 70 forwarders to drill

down on what service differentiation means to them (Fig. 1). Two of
the four factors were value-added services and the other two were
customer-service oriented. According to the results, relationships
clearly matter. Forwarders rated the value-added services as less
critical for differentiation than customer service.

While many claim to offer unique value-add specialty services,

Terry Donohoe, the President of Sherwood Global Logistics, points
to Kuehne+Nagel’s cold chain and DB Schenker’s aerospace
product as two of the lone successful exceptions.
Customer service factors – providing a personal touch and
ensuring seamless operations – ranked highest. Since the lion’s
share of shipments, irrespective of forwarder, follow the same
process (and even the same carriers), it stands to reason that
customer service reigns supreme.
FIG. 1: SERVICE DIFFERENTIATION BEFORE FREIGHT DIGITALIZATION
The new generation of tech-enabled forwarders, of course,
differentiate with digitalization, positioning technology as a
customer-service amplifier. According to Donohoe, one global
forwarder also tried doing that but failed, as many processes were
essentially manual: “A mailroom lodging invoices in the cloud.”

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THE DIGITALIZATION RESEARCH
Analysts are convinced that a massive digital transformation is
In a recent study, Technavio quantified potential savings from data
brewing in freight. Several recent papers have explored future
analytics, e-freight, web portals, and cloud-based systems.
scenarios for digital freight and the impact on business models.
Enhanced operational efficiency, on-time delivery, and improved
satisfaction could yield up to 12% potential savings for forwarders.
In one of these, Drewry predicts that the first steps in automating
freight will happen in sales – since operational processes, like
Similarly, the World Economic Forum projects logistics savings of
customs clearance and compliance, are more complex. They figure
up to $789 billion by 2025.
that this will first require:

Adopting new technology once meant running large and risky IT

• Controlled tariffs with dynamic sourcing and pricing,
projects. But recently, implementation has been getting easier.
routing, and sales automation.
• Instant quoting, automated execution, and improved
process handling.
“Many people have the impression that freight digitalization
• Digital feeds with marketplaces and carriers to efficiently
is about IT, conjuring up images of projects that drag on for
provide dynamic pricing.
years, over-promise, and under-deliver. IT has since shifted to
faster, cheaper and easier implementation, such as the cloud
Byte automation will be followed by skid automation. Technology
and software-as-a-service applications.
like automated stowage and self-driving forklifts will soon be all-
encompassing. “I wouldn’t have said that two years ago,” Terry
But freight digitalization isn’t about IT. It’s about truly
Donohoe reflects, “but then they started testing driverless cars.”
understanding core business processes and then optimizing
That week, Amazon completed its first US drone delivery.
them. For the most part, this means eliminating manual
intervention where time is wasted on tedious processes.”

Zvi Schreiber, Freightos CEO

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OUT OF THE WHITEPAPERS, INTO THE WORLD
Analysts are bullish on digitalization but it’s still early days on the
ground.
Where has it been?
“Digitalization inroads have been limited because the back-end is
still analog”, explains AMASS Freight International VP, Ruben
Huber. “Take the big international couriers. They’re great at
streamlining services, but their freight arms are still not digitalized.
Their express service provides the package, the label, everything,
and they do all of the shipping, mostly without disturbing the
Forwarders were asked to predict 2022’s digitalization model,
from:
Full Automation: Amazon-like e-commerce service, where
every aspect of operations is computer-driven.
Process Automation: Mostly automated, but with some
human intervention, like personal banking is today.
Low Automation: Largely manual processes with enhanced
data augmentation, like a doctor conveying data-driven
diagnoses to a patient.
74% of forwarders predict that in just five years time, freight will be

customer. Freight should be, could be, and will be just like that.” highly automated with people only helping by exception (Fig. 3).

Freight digitalization seems inevitable. More players are involved –

from carriers to enterprise forwarders and shippers, and from
small startups to giants like Amazon.

Turning a container ship around takes time, especially for an

industry portrayed as averse to change. So the Freightos survey
asked forwarders to assess the pace of digitalization adoption and
its impact on shipper/forwarder relations.

FIG. 2: FREIGHT DIGITALIZATION IN FIVE YEARS

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DIGITAL CUSTOMER SERVICE 70% of forwarders agree that the first places to reinvest funds
would be in new services and winning new customers.
Freight as easy as personal banking is great for shippers.
Forwarders will also benefit, with plenty of scope to automate, strip
Interestingly, today’s top service differentiator, the personal touch,
costs, and free up employee time. For example, this is an
drops from 77% agreement (Fig. 1) to just 54% in five years time.
opportunity to eliminate the dozens of calls spent on each
Only 25% thought costs savings would be banked. This is
shipment, or the 43% of freight sales team time spent on pricing.
fortunate, as that would likely set off a price race to the bottom.

When asked where newly-freed resources would be deployed (Fig.

Reinvesting in improved service is wise, as shippers are placing
4), forwarders predicted a reinvestment in future growth.
more importance on customer service – with only 35% predicting
that pricing will dictate forwarder selection in five years time (Fig 5).

FIG. 3: SERVICE DIFFERENTIATION AFTER DIGITALIZATION

FIG. 4: WHAT DRIVES SHIPPERS MOST?

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TRANSPARENCY, FOR BETTER OR WORSE Beyond weeding out low-quality forwarders, transparency should
If commoditization is one of freight digitalization’s fears, the other also help forwarders add more value.
is the impact of increasing transparency.
• Digitalization paves a cost-effective path to customer
service – as evident in U.S trucking, where customer
Once shippers are able to calculate true value of customer service,
convenience drives cost cutting, not the other way around.
hidden or unfair charges will become things of the past – while
only forwarders that provide better all-round customer service will
• Transparent ratings will change customer interactions.
stay competitive.
Forwarders wanting to retain favorable ratings and reviews
will differentiate by providing a comprehensive customer
It will also become easier for shippers to identify better forwarders.
focus, for instance, through an Amazon-level chat service.
When web-based ratings or comparisons become the norm,
customers will seek out forwarders that truly deliver on their
• New IoT technologies, like tracking and monitoring, can
customer service promise.
turn forwarders into omniscient consultants. That role may
expand to collaborating with shippers’ other partners
That’s not a bad thing. The better forwarders have always looked
across the entire supply chain.
for ways to improve competitiveness, become more efficient, and
respond to whatever challenges are facing the industry.
• As carriers digitalize, forwarders stand to gain from
increased transparency, for instance as it becomes harder
for shippers and carriers to abrogate their booking contract
responsibilities.
“Increased transparency is driving gross profit margins down. But
this is not necessarily a new development, and we have successfully
Service differentiation will not be diminished by transparency.
dealt with price pressure for many years. We simply need to figure
If anything, it will boost customer focus, create new opportunities
out how to run faster than the competition.”
and reward forwarders that provide great customer service.
Jens Lund, DSV CFO

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BUSTING FREIGHT DIGITALIZATION MYTHS
The survey set out to assess forwarder attitudes toward service
differentiation and how freight digitalization might change that. In
the process, it busted some common myths:
1. Forwarders are change averse.
Dating back to Dial-A-Truck, forwarders have always
adapted beneficial technology. They’re now ready for
massive change – predicting that in just five years, the
industry will be as automated as personal banking is today.
2. Digitalization will erode service differentiation, leading
to commoditization and a race to the bottom.
Forwarders predict that within five years, shippers will no
longer be predominantly price driven. Digitalization and
transparency will help forwarders better focus on
customers, triggering a service race, not a price race
“Freight forwarding is and will remain a relationship based industry
with customers looking for the service that forwarders provide.
What technology will do is change the ways in which customers
interact with freight forwarders and purchase forwarding services.”
Sanjay Tejwani, DHL Global Forwarding Americas VP FCL Product
3. Digitalization is a whitepaper phrase with few tangible
changes. Real change is decades away.
Practical examples, like carrier pricing intelligence,
enhanced routing, and container tracking are already being
used by forwarders, carriers, and startups. Digitalization is
already a reality. And in five years, not fifty, forwarders
agree it will be even more pervasive.
Digitalization will change forwarding in many ways, but it will
enhance, rather than undermine, the industry’s key value
proposition – providing customer service. Freight digitalization will
not only help forwarders better focus on customer service, but will
also help them grow in a period of change.
“Successful forwarders are looking for the service edge over
their rivals. That’s no different to how it has always been.
Freight Digitalization is inevitable. Prudent forwarders see this
and are preparing for it, looking at what benefits it will bring.
Forwarders intent on providing a good service have much to
gain from digitalization. Far from the threat it was once
perceived to be, it’s now emerging as the best bet for future-
proofing business.”
Zvi Schreiber, Freightos CEO
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