In the complex web of global trade, how can small freight forwarding companies compete against industry giants with vast resources and global networks? The answer may lie in "data democratization."
The freight forwarding industry has long been undergoing continuous consolidation, with large enterprises expanding their global operations through mergers and acquisitions to strengthen service capabilities on specific trade routes. However, industry analysts note that rapid technological advancements are reshaping freight forwarding and trade processes, creating unprecedented opportunities for small and medium-sized forwarders to access advanced solutions at lower costs.
John Manners-Bell, CEO of London-based consultancy Transport Intelligence (Ti), emphasizes: "Freight forwarders today need to be more agile than ever in adapting to customer demands. In coming years, the industry's composition may undergo fundamental changes as new market participants seek opportunities and efficiency improvements."
Strategic Industry Trends
Ti's recently published "2016 Global Freight Forwarding Report" provides in-depth analysis of this evolving market. The report highlights how major logistics companies have pursued mergers and acquisitions to expand their service capabilities and remain competitive in global markets.
Notable M&A cases include:
- Deutsche Post's acquisition of Exel (itself a merger between contract logistics firm Exel and freight forwarder Ocean Group)
- German Rail's acquisitions of Schenker and Bax Global
- CEVA's purchase of EGL
- Geodis acquiring OHL
- Kuehne + Nagel buying ReTrans
- XPO's acquisitions of Norbert Dentressangle and Con-way
- DSV taking over UTi Worldwide
- Kintetsu World Express acquiring APL Logistics
Manners-Bell notes these acquisitions reflect diverse strategies in the freight forwarding market. For example, Deutsche Post DHL combined ocean and air freight capabilities with road transport and warehousing through its acquisitions.
New Market Entrants Emerge
Ti analysts identify emerging strategic trends, including parcel carriers like UPS encroaching on traditional freight forwarding business, particularly in electronics air freight. Shipping lines are also establishing forwarding divisions to capture upstream and downstream client spending, as seen with Damco (Maersk) and Yusen (NYK).
Ken Lyon, Ti board member and logistics expert, states: "The industry is evolving at remarkable speed. Large forwarders are scaling up not just to strengthen carrier negotiations but to expand service offerings that add value and improve margins."
He questions whether newly merged giants can adapt to dynamic market conditions given operational challenges, including legacy IT system issues. Meanwhile, smaller forwarders must become more efficient while enhancing commoditized services - either through niche specialization or evolving into comprehensive logistics providers.
Ti research head Lilith Nagorski concludes: "Their technological systems will be crucial to customer propositions." Cloud-based instant quoting and booking systems may challenge traditional forwarders' roles, potentially creating divergence between "data-unified" companies and less profitable "data-fragmented" players.
Technological Challenges
Even industry leaders face implementation hurdles. DHL Global Forwarding abandoned its $1 billion "New Forwarding Environment" IT system despite its promise to standardize global operations and improve transparency.
Nevertheless, DHL leads Armstrong & Associates' "Top 25 Global Freight Forwarders" ranking, followed by Kuehne + Nagel and DB Schenker. Kuehne + Nagel is establishing dual headquarters in Amsterdam to better capture European opportunities, while DB Schenker poached a DHL executive to lead its freight division.
Regional and Modal Advantages
Expeditors achieved 6% growth, while UPS Supply Chain Solutions rose to seventh place with 2.5% North American volume growth. Asia-based Nippon Express performed strongest (8.8% growth), benefiting from automotive and electronics demand.
In air freight, Hitachi Transport Systems (11.8%), Yusen Logistics (11%), and Hellman Worldwide (10.6%) showed strongest growth. HSBC analysts report optimistic U.S. export prospects despite a slight dip in its Trade Confidence Index (127 to 126), with 77% of surveyed companies expecting trade volume increases.
Brandon Fried of the Airforwarders Association cites multiple reasons for industry optimism: "All signs point to economic rebound. We believe big data and transparency will contribute to positive outlooks."
C.H. Robinson's Rick Mettetel notes free trade agreements historically stimulate freight activity, advising shippers to partner with technologically advanced, adaptable forwarders amid economic changes.