Freight forwarding is a business that has always been about managing data and information. Before information technology arrived on the scene and prices became affordable, most forwarders used a combination of paper documents, phones, duplicating and printing machines, Telex lines and carrier pigeon – I’m joking about the last one. The point being that these were the recognised mechanisms to capture, qualify, transcribe and share shipment information.
The forwarders themselves also held huge amounts of knowledge in their own heads, some of it quite specialised. Relationships and connections with associated companies, contacts and trading partners were, and still are, vital in managing the flow of shipments across the globe. In short, if international trade had a ringmasters’ guild, it would probably have freight forwarders at its heart.
As information systems became cheap enough for some forwarders to consider buying them, a number of software packages appeared on the market. They were very primitive and in many cases only a step up from the manual process of transcribing information and then reproducing it on numerous bits of paper. In fact, the first systems a lot of companies introduced were accounting systems and any operational functionality came later.
The primary incentive for using information systems in the UK arose from the implementation of port community systems and customs authorities, allowing customs entries to be presented electronically. A huge number of small software companies were founded to support this explosion in demand. It also caused forwarders to realise the value of sharing information between computer systems. Actually a number of events from various sectors of the industry coalesced around the opening up of customs systems and port community systems – known by the unprepossessing title of Direct Trade Input, or DTI.
Shipping lines had been investing in major computerisation projects for some time and now started to get into the act, by allowing major shippers to place bookings directly into their systems. The mechanisms were clunky and cumbersome, but given the state of technology in the late 1970’s and early 1980’s, this was not a surprise. Keep in mind, what we know as the internet was still a US Department of Defense research project (ARPANET) at that time and personal computers were still in their infancy.
If we move forward a few years, to the mid-to-late 1980’s, forwarders were now able to purchase a range of systems to support their operations. Some of these were very sophisticated in that they were capable of producing freight quotations and could process those that were acceptable, all the way through to full bookings and automatically handle the documentation and accounting. These systems were powerful because they were integrated, although very few were networked outside of their parent organisation. But even so, the efficiency gains they provided enabled those companies that knew how to use them with a big competitive advantage.
As the industry evolved and new players entered the market, to maintain relevance, implementing some form of computer system became a necessity. When the large US parcel shipping companies started to expand internationally and entered the UK market, even the major players realised they had to up their game in terms of technology. Not only did the new players have scale, they were prepared to invest heavily in information systems to keep customers informed. This occurred at the same time as the internet broke out of its academic world, and the World Wide Web was invented to exploit its potential ubiquity. This was the genesis of the technology landscape we find today.
Freight forwarders have generally been maligned as being slow adopters of technology. In a few cases this has been true, but usually caused by poor business models and low margins, rather than a reluctance to embrace it. In truth, many of the innovations in the sector have come from a handful of forwarders and related software developers who have push the boundaries of what technology could be used for.
The integrated operational systems that can follow a process through initial pricing and quote request, to confirmed booking, shipment monitoring up to and including the final delivery, has been in existence for nearly 30 years. It’s the evolution in communications and device hardware that has reduced prices and expanded the scope of such systems.
The giant global forwarders who have always had to manage a large geographically disbursed operational landscape, have different challenges. For a variety of reasons, they initially invested heavily in information systems either through accounting systems, or the nascent ERP technologies such as SAP and others. These huge, highly functional software systems did a fantastic job of integrating all the internal functions in a company and enforcing operational discipline. They were (and are) very expensive to buy, install and maintain. But they were never designed to exist and collaborate in an open, interconnected trading partner network.
More significantly, their inherent inflexibility that provided management with the means to enforce operational compliance, has become a massive commercial disadvantage when the business has to rapidly change its operational model. This has resulted in the rise of a federated technology model to support logistics operations. This is where various applications or application services from different vendors are used by companies to support operations. The IT staff in the company have a primary function to ensure the integration and smooth operations across the application ‘federation’, so that the users of these applications can service customers appropriately.
This approach is now easier to support as modern applications have been designed to collaborate and integrate through open interfaces, or API’s. The costs to do so have also dramatically reduced. But there are still challenges to this, in the sense of being able to exchange information easily between applications is one thing, but maintaining the context of that information across multiple databases, may be quite another.
An integrated application usually means that all of the various functional modules (sales management, pricing and quotations, bookings, shipment visibility, etc.) all share a common database. But in a world where companies are using a combination of systems, trying to maintain coherence across what may be multiple databases can be a challenge.
Smaller forwarders are probably still best served by going with vendors who provide a complete suite of capabilities across a single platform. Preferably one that has been designed as a service running on one of the major cloud platforms such as Microsoft Azure, or Amazon’s AWS. Larger players may have the staffing and financial resources to support the federated ‘best of breed’ approach, providing them with the opportunity to adjust the technology infrastructure if the company strategy changes.
Both approaches will need to exist in a fluid landscape of mobile applications, emerging cloud services supporting a flood of sensor data from IoT devices, machine learning and big data analytics. These factors increase the opportunities for cyber intrusions and critical system failure.
Whatever approach is adopted, these factors can be managed, but forwarders will still have to maintain their ability to support customer requirements as they have always done, with ingenuity and adaptability. The best choice will always be a solution platform that can support such a goal.
Source: Transport Intelligence, September 17, 2019
Author: Ken Lyon
