Why Can’t Freight Companies Innovate

By Eric Pong

 

Let’s face it, freight forwarding companies are neither innovative nor disruptive by any means.

And it would be better if they stopped pretending to be more than they really are.

This month’s topic for editors “Freight Outlook” and subtopic “Continuous Disruption” is ripe for some fun intentional misinterpretation.

When I see freight forwarding and the words continuous disruption, all I can see is the fact that the logistics faces continuous disruption.

Within my time, I’ve witnessed traditional freight forwarders miss the opportunity to get into the express letter and the parcel delivery business.

Now, FedEx, UPS, and DHL each have sales of nearly $100B per year while Kuehne & Nagel, a company that has been around for 135 years, barely scratches $30B.

Of course things are not always rosy for everyone as even FedEx, UPD, and DHL are now being disrupted by the likes of DoorDash and friend’s business model of point-to-point asset light gig delivery which has sent DoorDash’s valuation soaring to $100B.

But even without needing to fend off startup parcel delivery companies, Freight Forwarders are once again being disrupted from multiple fronts.

Flexport, the laughing stock of the freight industry, having raised more money than they are worth, is slowly clawing its way back to back to profitability, but they have something that trad freight forwarders don’t have – youth.

Yes, the P&G’s and Unilever’s of the world are not going to use Flexport…for now. But ask any young logistician of today what they think about a traditional forwarders and many will say might be telling: Traditional forwarders are old and boring. Flexport is new and cool.

I acknowledge that this is far from enough to catapult Flexport into the stratosphere, but the disdain by which traditional forwarders dismiss Flexport exposes the hubris that will certainly lead them to be the next deer in the headlights again – whether done in by Flexport or another oncoming threat.

And another one of those threats are retailers cutting out forwarders and relegating them to being commoditised service providers to algorithms that determine what business they will get and when.

On one hand, Amazon now has the assets, the technology, and the people to get into warehousing, tracking, and freight forwarding. As the largest retailer in the world, they will eventually exist mostly outside of the traditional freight forwarders circles.

On the other hand, technology forward companies like Cainiao, have become so good managing complex global supply chains as a technology layer and orchestrator, that forwarders will eventually just be told what they will do, when they will do it, and how much they will be paid for it.

Now don’t get me wrong. I am not ridiculing traditional freight forwarding at all. Without traditional freight the world would completely shut down – as it did when Covid struck.

Logisticians keep the world humming. In that sense, traditional freight players serve the world better by being stable and reliable rather than disruptive and innovative.

However, the truth is traditional freight companies are being continuously disrupted, and not a single one of them has shown any recent history of genuine self disruption.

 

Eric Pong
Logistics Partnerships Director at AfterShip

Eric Pong is the Logistics Partnerships Director at AfterShip. He manages a vast network of over 1,200 global logistics partnerships, including collaborations with major parcel carriers, fulfillment companies, and freight forwarders. Eric also sits as E-Commerce Editor for CargoNOW Magazine, leading the publication’s coverage of e-commerce trends and providing in-depth analysis on the evolving online retail logistics landscape.