Freight forwarding is one of the most important aspects of any industry’s supply chain. However like any industry, freight forwarding faces its own set of challenges. Unlike 3pl companies, freight forwarding is responsible for the overall movement of cargo. Therefore, they have complete control over the channel they use and the kind of system they implement. The success of freight forwarder companies in Sydney or any other important transport hub are highly dependent on the kind of clients they serve. More precisely, it is the category of cargo that they are responsible for moving.
Let us highlight some of the common challenges that freight forwarders encounter. We will also talk about a workaround to tackle these issues.
Challenges That Freight Forwarders Face
1. Shortage of containers and transports
A very common occurrence in the freight forwarding scene is shortage of containers and moving transport. This includes all kinds of channels – roadways, railways, waterways, and airways. Courier service companies in major Austrlian cities like Adelaide and Sydney also report similar problems.
The pandemic has a part to play in this crisis as well. During the lockdown, many transports were rendered useless due to lowered demand. However, after the market opened up, the situation remained the same. Therefore, freight forwarders are facing a shortage in ‘hardware’ at the moment. Congestion on ports is another issue that makes this problem worse.
Solution: The answer to this problem is optimization. If the operations are managed in such a manner that each transport as well as container is filled to its capacity before they are shipped, it can reduce the severity of the problem. Less than container loads or LCL is also useful and complements the aforementioned solution. Here, the dimensions of the cargo are much smaller than the container itself. Also, predictive algorithms can be used to detect the upcoming demands or at least quote some ballpark numbers to the freight forwarder.
2. High burst of demand
The freight forwarding industry faces sudden bursts in demand. However, this is not the problem. Seasonal demands are quite common and freight forwarders know what to expect during these times. The Problem is that there is an exorbitant rise in the expectations of the customers. Because of the rapid rise of companies such as Amazon, customers want to get their stuff delivered to them as soon as possible. There is no scope of error in the eyes of the customer. Small to medium sized freight forwarders struggle to fulfil these demands and therefore lose a lot in respect to money as well as customer base.
Solution: Traditional methods should be discarded and new systems be implemented. There are plenty of affordable options for small to medium sized freight forwarders to adopt new features. One of the best ones is real time tracking of order. Another one can be a dedicated portal for customers as well as for middlemen.
3. Government policies can hinder operations
Although the Australian scenario is quite liberal when it comes to logistics, it is not just the national and state governments that lay down the law. International intervention is a powerful factor here. Policy makers pass laws and guidelines suddenly which leaves the industry playing catchup for a long time.
Solution: Freight forwarders should keep a keen eye on new government policies. They should also hire a team of consultants who can predict upcoming changes by looking at current trends.
4. Shortage of manpower
Manual tasks still make up an overwhelming majority here in the freight forwarding business. The pandemic compounded the problem of labour shortage but the problem was always there. It just gave a reality check to everyone. Manual labour in warehouses, ports, as well as on the channels is seen as something that cannot be avoided. Human intervention is considered to be an important part in the reliability of a freight forwarder.
Solution: Giants like Amazon have shown that automation can solve a big chunk of these issues. Automating manual tasks is the best way to solve the shortage of labour problem. Freight forwarding services should make the most of the latest software and hardware available in the market. Small to medium sized companies should understand the importance of technology. For example, drones for the ‘last mile’ delivery are now becoming a realistic prospect in the future. Companies should be ready to accept these changes.
5. Rise in the number of freight forwarders
Which is the best interstate car transport company in Australia? Who has the most efficient courier service in Adelaide? These search queries will result in thousands of answers with several companies claiming to be number one. This is indicative of the rising competition in the freight forwarding industry.
The industry has a low threshold for entry and many parties make quick entries and exits. It is hard for the strugglers to keep up with newcomers with a better capital backing.
Solution: Brainstorming and attaching USPs to your freight forwarding business is the way forward. Quality of service is the major differentiating factor. Companies should focus a major part of their energy into delivering to the clients’ expectations.
6. High dependency on other industries
This issue is quite straightforward. Logistics as a whole and even any other service industry is highly dependent on others. Therefore, any action can cause ripple effects that can seriously impact freight forwarding. Some direct dependencies include fuel prices, government infrastructure, the type of customer (eg. FMCG, textiles, etc.), and more.
Solution: Freight forwarders can adopt niche customer bases if they can afford it. Predictive algorithms are another great way to overcome these obstacles. If a company can keep a close eye on the market trends, dependencies have lesser effect.
7. Delays
Time is an important parameter that decides whether a freight forwarding company is successful or not. Delays due to natural occurrences like weather can be avoided using predictive methods. However, bad weather conditions are not the only reason why delays occur. There are things like detours, channel blockages, technical issues with the carriers, etc. All in all, delays are unavoidable when it comes to logistics. However, the frequency and the duration of the delay can be fixed.
Solution: Identifying the reason behind the delay is the only way to stop frequent occurrences. In case the problem is generated from a place which is not under the freight forwarder’s control, help from predictive algorithms should be taken.
8. Struggling with the formalities
Moving cargo from one place to another is a hectic job. The freight forwarders are usually busy with the operational aspects of the job. This leads to them ignoring the ‘formalities’ attached to the business. These so-called formalities are in fact very important. Proper documentation is required at each step of the logistical process. Minor yet important things of this nature are always a part of any logistical process.
Solution: Proper communication channels between different departments should be properly established. This will ensure that nothing important is missed and that there are no delays due to internal mismanagement. Freight forwarders should adopt new ways of communication through ERPs as well as project management tools. Software like Slack and generic ERPs built for freight forwarders can be employed at any scale as per the requirements of the company.