The Amazon effect – from MHD magazine

The Amazon effect – from MHD magazine

Doug Surrett

Amazon continues to change the face of retail and recent news hints that the e-commerce giant will have a greater impact on logistics providers in the future. The retailer recently ramped up its ocean freight services and has begun trying to woo shippers from FedEx and UPS as it aims to gain more control of its supply chain. With Amazon showing no signs of letting up, this could signal changes that may bring great transformation to the supply chain industry.

Since the beginning of last year, Amazon organised the shipment of more than 5,300 containers from China to the US. Additionally, the company is forgoing many fees charged by the ‘traditional’ carriers. The concept of Amazon competing with carriers such as FedEx and UPS is not something new. And interestingly, the traditional carriers are starting to offer services competitive with Amazon. For instance, FedEx announced earlier this year they will be offering a next-day delivery service for packages picked up as late as 2am.

“The freight forwarding industry is evolving at a relentless pace and becoming increasingly competitive. The question is, who will win out?”

However, now that Amazon is a fully-fledged non-vessel operating common carrier, they can offer ocean services to clients, effectively removing freight forwarders from the middle. This ultimately acts as an accelerant in the move towards more direct relationships between steamship carriers and shippers. Today that market is controlled by forwarders, but it is beginning to change.

Transformation inevitable

The freight forwarding industry is one that will be undergoing massive transformation in the next two to five years as technology and other market forces such as Amazon put extreme pressure on forwarders to add value or disappear.

For forwarders, the pathway to profitability lies with process automation and value-added services — a two-pronged approach that reduces errors (improving customer service) and differentiates the business with customised add-on services. And the best way for freight forwarders to achieve both of these goals simultaneously is with proper partners and the right technology.

The fundamental boundaries between different systems are breaking down as logistics operations evolve into leaner, more agile services. Similarly, freight forwarders should look to technology that is offered as a continuous, scalable service. To stay competitive with the likes of Amazon entering the market, freight forwarders need highly functional systems that operate as single applications, covering everything from order management and shipping, to customs and compliance.

The pressure mounting from new market entrants is also why models like the Global Trade Network are gaining momentum. With the Global Trade Network, freight forwarders have a system that optimises the movement of customer shipments using every mode possible, but also one that helps efficiently move product across borders and time zones — without losing all-important visibility.

Perhaps most critically, the power of a network lies in its ability to bring clarity and certainty to a volatile situation, while offering on-demand connections to thousands of potential carriers. Just like Amazon is using data to drive its logistics network, the Global Trade Network provides the capability for freight forwarders to capture and share data, as well as benchmark their performance against others in the network.

The freight forwarding industry is evolving at a relentless pace and becoming increasingly competitive. The question is, who will win out? Scale can help, however for freight forwarders to prosper, they will need to become smarter and must exploit the opportunities that the democratisation of technology has brought.

Doug Surrett is the chief strategy officer at BluJay Solutions. For more information call +61 3 9020 4463 or visit www.blujaysolutions.com.

 

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