Web-based software, also known as cloud software, has been enjoying increasing popularity in logistics for several years. Companies use it to obtain and compare transport offers from freight forwarding companies. This allows them to digitize their processes and become significantly more efficient. In addition to saving time and increasing transport cost transparency, it can be used to calculate freight forwarding costs and keep them at a standard market level. However, many small and medium-sized shippers who work with long-term logistics partners, so-called in-house freight forwarders, have not yet used these applications. However, the concern that this will strain the relationship with their trusted partners is unfounded, as such web solutions simplify and support cooperation with their own freight forwarders in many cases.
Definition of forwarding agent, freight forwarder
What is a freight forwarding company? A freight forwarding company is a company that commercially organizes transport for other companies that want to transport goods from place to place. Freight forwarding company and freight forwarder are used synonymously. A company works exclusively and permanently with a single freight forwarder.
Purchasing transport services from freight forwarders
Consignors can be manufacturers, industrial, commercial, import or export companies of a good or a shipment. The consignor commissions and pays the freight forwarder to handle the transport. In many production or trading companies, the procurement of transport services is carried out by inbound or outbound logistics departments. Larger companies often have their own logistics departments — consisting of one to five experts — who bundle these activities. Smaller companies often do not have the necessary logistics knowledge and have integrated transport purchasing into their purchasing or export department.
Logistics in the value chain. Porter, ME, 1985, p. 37
Transport volume and number of freight forwarders play a role
Larger companies often have a higher transport volume than smaller companies. This means that there is a correspondingly larger pool of freight forwarders or logistics service providers. These companies must have a certain number of logistics partners to ensure that the transport volume can be handled. If there are problems with processing, this must be dealt with by other freight forwarders. Only looking for new logistics service providers at critical moments is often too late and can lead to operational problems. It is also common to distribute routes to individual freight forwarding companies.
For smaller and medium-sized shippers with low transport volumes, however, it is not absolutely necessary to have a large pool of logistics service providers. They often work with one to three in-house forwarding agents with whom they have agreed annual contracts. These shippers usually do not have “race routes”, i.e. routes with regular volumes, but rather very different routings. In addition, a lot of sales are made on an “ex works” basis and purchases are made “free house”. The transport decision does not lie with the respective companies, but with the trading partner.
Control over the forwarding and logistics sector is very important for shippers
Basically, companies want to retain decision-making power over freight forwarding and logistics in order to ensure a functioning supply chain. To do this, they rely on direct and, above all, personal contact with their freight forwarding company, which is why a strong and trusting relationship with them is essential.
Outsourcing the freight forwarding and logistics sector weakens the relationship between companies and freight forwarders. The integration of tendering platforms, freight consultants or booking platforms into transport purchasing is an intervention in the relationship between companies and logistics service providers. As a result, companies lose control over their supply chain, complexity increases and additional dependencies are created.
Small and medium-sized businesses rely on forwarding and transport
Small and medium-sized companies in particular are hesitant when it comes to changing their in-house freight forwarder, putting their freight out to tender, or making changes in the area of freight forwarding and transport. They worry about complicating communication with their logistics partners. However, these shippers also have to obtain and compare offers from their in-house freight forwarders in order to be able to decide on the best way to work with them. In any case, they need transport offers for the resulting transport costs. It does not matter whether these are long-term price agreements or rates, or spot or ad hoc transport offers for individual shipments.
Web-based software ideal for small and medium-sized shippers with in-house forwarders
Basically, many companies want to improve efficiency in the field of freight forwarding and logistics, but at the same time maintain a high degree of independence from external partners and freight forwarding companies. They do not want to put freight out to tender and want to continue to work with their in-house freight forwarder.
The use of web-based software to obtain and compare transport offers is therefore particularly suitable for these shippers. The reason for this is that in this case the forwarding and transport area is not outsourced externally. The shippers retain full control over their supply chain, as the applications do not interfere with communication and support the existing cooperation with their own forwarding agents or shipping companies. In addition, companies increase their efficiency by digitizing manual processes. By using these cloud solutions, even smaller and medium-sized shippers can achieve great benefits in the form of time savings and reduced forwarding costs without any disadvantages.