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Freight Forwarding

3 critical questions Freight Forwarders must find answers, today.


by Vinod Nair
VP Operations, Infomatics Services Pvt. Ltd.
vinod@infomatics.co.in

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Freight Forwarders​ - Better known as the ​“True Architects of Transport”​ are generally responsible for the following functions:

  • Customs Brokerage
  • Networking
  • Negotiating
  • Scheduling
  • Inventory Management
  • Documentation

Today, the logistics industry is facing uncertain business challenge s in both volumes and margins. Cost control has never drawn as much attention as much it is in the past few years. Global slowdown, market corrections, fierce competition and adaptation of digitalisation has increased pressures on traditional forms of freight forwarding. This has compelled the industry to look at innovative methods to boost their Productivity, Efficiency and Profitability

Here are 3 critical questions Freight Forwarders must find answers today, to stay on top of business pressures.

1. How can I reduce the Time-to-Quote?


“Time isn’t the main thing. It's the only thing.”
- Miles Davis


Nothing more could explain the importance of speed in a Supply chain. “Ocean Freight Rates” are ever fluctuating and are frequently negotiated by the Shippers leading to critical time-loss for the Freight Forwarders.

“Ocean Freight Rates” are generally of 2 types:

  • Contractual Rates
    These rates are marked-up against the Carrier Buy Rates and quoted to Customers. These Buy rates are usually revised periodically by the Carriers.
  • Spot Rates
    These are rates (Buy and Sell) negotiated per shipment

The quotes sent to the Shipper don't necessarily convert into a Booking in a single "iteration". The tale of negotiations are also well known! Sales personnel have to battle enormous pressure before closing the deal, which takes a toll on their “ Sales Velocity”. According to studies, only 10% of people feel “in control” of how they spend their time each day.


With the evolution of “Mobile based” technology with consistent availability of “Internet Bandwidth”, mobile Apps have helped Forwarders to reduce “ Time-to-Quote”.


Today, forward thinking players have freed up “Bandwidth” for their Sales to manage and control their time by investing more into one-on-one meeting with more customers and building relationships for future businesses. This is the future “ Sales Velocity” of the organisation.



2. How can I increase the productivity of my workforce?


Obviously, the highest type of efficiency is that which can utilize existing material to the best advantage.
- Jawaharlal Nehru


Documentation is a time consuming and repetitive activity where increase in volume is directly proportional to increase in workforce.

Some of the Documentation activities include:

  • Following up with customers for Shipping Instructions (SI)
  • Monitoring mails for information exchange
  • Auditing SI
  • Entering the details into inhouse ERP, into Liner Website, etc.

These activities are repetitive in nature and don't require human intelligence to make critical decisions for the workflow to be processed, which means a lot of human resources are doing repetitive activities to manage existing customers and shipments.

With the advent of sophisticated technologies, namely Robotic Process Automation (RPA), a method where Software Applications have demonstrated surprising progress in replicating rudimentary tasks performed by humans. This new “Virtual Workforce” has shown the way to a large set of organisations to invest their "Workforce Intelligence" to more creative and Decision making roles.

RPA implementation can result in a savings of up to 50%.
- Institute of Robotic Process Automation & Artificial Intelligence


"Virtual Workforce" with the help of Robotic Process Automation (RPA) would act as a classic hybrid engagement between Humans and Machines.

Long, time consuming, repetitive activities can be then left to the Robots which can work 24x7 without having to be given breaks or rest.

Artificial intelligence (AL) and Machine Learning (ML) are two new buzzwords constantly ringing at our doors in every walk of our lives. These new-age technological progress is pushing the bar of expectation from humans to perform more productive & creative activities.

“Predictive Analytics” and “Power of Computing” using advanced algorithms are already beginning to have an impact in providing us with far more accurate predictions about the future, helping us manage risks efficiently. Manufacturing, Service, Health care, Transportation, Finance, Education and many more would be relying more on these Intelligent Softwares to chart their future.



3. How can I Improve my Cashflow?


“We were always focused on our profit and loss statement. But cash flow was not a regularly discussed topic. It was as if we were driving along, watching only the speedometer, when in fact we were running out of gas.”
- Michael Dell, founder and CEO, Dell Technologies


According to “U.S.Bank” study, 82% of small business fails due to poor Management/Understanding of Cash Flow

Cash is King for any organisation and Cash Flow is a measure of their strength for any organisation. Since a Freight Forwarder relies only on Freight margins from their ‘Buy rates' from Shipping Lines and ‘Sell rates’ to the Shippers, the timely cash collection has an impact on the survival and growth of a freight forwarder. Any imbalance between the payout and collection would have an adverse impact on the cash flow leading to financial stress.

“Freight Forwarding” is a credit hungry business. Customers demand “Credit Days” against the Booking they place. One of the reasons, Shippers prefer to deal with forwarders is to avail Credit Periods which they couldn’t have availed from the carriers, directly. This increases 2 important pressure points on Forwarders

  • Liquidity pressure, where they have to pay the Lines on a stipulated date and on the other hand, have to manage a longer collection period.
  • Margin pressure, due to extreme competition and over capacitated market

Daily visibility of the "Cash Flow position" would enable Key Stakeholders in the Organisation to make key financial decisions at appropriate times. Cash Flow budget & Cash Flow projections would enable Key Stakeholders to visualise pitfalls by better handling expenses and avoiding surprises.


Tools enabling automated Daily Bank reconciliation, Daily Cash position, AI/ML enabled Future cash flow projections provide insights to make right decisions to maintain optimal Cash Flow.

Remember, “Profit is not the same thing as cash”.

Occasionally, companies analyze investments in terms of their effect on revenue. The foremost reason is many young companies focus on hitting certain revenue targets to satisfy their investors. But revenue figures say nothing about profitability, let alone cash flow. True Return on Investment (ROI) analysis has to convert revenue to profit, and profit to cash.

Summary

  • How can I reduce the Time-to-Quote?
    Make use of available mobile technologies that you can deploy to reduce your quote cycles.
  • How can I increase the productivity of my workforce?
    Use more automated tools to become more leaner with “Virtual Workforces” to remain competitive.
  • How can I Improve my Cashflow?
    Remember, it is Cash before Profits in these turbulent times.

It would be encouraging to know your thoughts on some of the more pertinent questions that today’s Freight Forwarding community are being challenged. Please comment or do send me a mail on vinod@infomatics.co.in , I would be glad to interact.

We at Infomatics, have been partners to medium-to-large enterprises in the Asset & non Asset based Logistics business, helping them improve on their business efficiencies. To get more insights, do read our detailed case studies published on our website. Click here

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