TIACA ES: Digital technology taking effect in the forwarding world

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Digital technology is changing the freight forwarding marketplace and indeed much of the air cargo industry and those failing to invest and keep pace could well struggle, writes Justin Burns.

This was the basis of a discussion at The International Air Cargo Association’s (TIACA) Executive Summit in Miami on 20 October in the ‘Rise of the digital forwarder’ session.

The moderator was the International Air Transport Association’s (IATA) head of cargo, Glyn Hughes who says shippers’ are increasingly demanding more sophisticated capabilities from the supply chain – and use of digital technology is a key part of their demands.

Hughes notes the “new world” is coming, but feels the most encouraging thing is technology is coming into play and has taken a leap in forwarding, adding the airfreight industry will see some significant changes.

A study by McKinsey & Company has found by 2025, 15-20 per cent of airfreight shipments will be booked directly with the airline due to the implementation and rise of digital technology, which has led to many asking if this will mean the death of the traditional freight forwarder.

The company’s associate partner, Ludwig Hausmann was a panellist and he says digital technology will help air cargo carriers a lot in the future, as it will help boost load factors and it can compensate for any rate declines and profitability.

He says McKinsey’s study found it was 100 per cent profitable for airfreight forwarders to invest in digital technology.

Hausmann says evidence was strong that 15-20 per cent of airfreight volumes will move back to the carrier where digital technology captures payloads directly, while airlines will approach customers directly, noting McKinsey is working with some that are doing so already.

“Then there will be 10-15 per cent through technology that passes back to the shipper so less cargo will end up with the forwarder, but that also means at least 70 per cent will still remain with intermediaries and it is still a lot and the industry is growing,” he explains.

Hausmann adds: “But 70 per cent will still be with traditional forwarders versus the digital model, but what that also shows is that in 10 years only 30 per cent of airfreight shipped, is not the destruction, we are talking about the gradual change of the industry and not the Uber-type of destruction.”

He concludes traditional freight forwarders investing in and adopting digital technology will reap the rewards over the next 10 years.

Canadian International Freight Forwarders Association executive director, Ruth Snowden who was also a panelist, also explains the forwarding world is very different to when she started out in the industry.