The freight forwarding industry is one that has grown rapidly over the last decade. It’s also one of the most volatile in terms of its sector and with similar challenges faced by all players in this industry.There are a number of industries that work together to provide various services and support for freight forwarders. The presence of larger companies has meant that more players have entered the industry, increasing competition, which in turn drives down prices for customers. To understand some of the challenges faced by these companies, continue reading this article to learn more about how freight forwarders buy and sell their services.
How Freight Forwarders Buy and Sell Services
Freight forwarding is a business that connects shippers and carriers, arranging transport of goods between two locations. Depending on the type of goods, full or partial loading, and the mode of transportation, a freight forwarder can arrange for air, ocean, or land transportation of goods.Freight forwarders buy consignment and commission capacity from various forwarders who have inked contracts with clients. They also sell capacity to new or existing clients based on the volume of goods that the client wishes to send.In both buying and selling services, freight forwarders earn a commission for each transaction they arrange. When a client makes a booking with the freight forwarder, the freight forwarder earns a commission on the transaction. This commission is usually charged as a percentage of the total value of the goods booked by the client.
Growing Demand for Transport Services
The demand for transport services is expected to grow in the near future and this will impact the growth of the industry. The growing shift towards a digital economy, coupled with the rapid urbanization process across the globe, is expected to fuel the transport market leading to an increase in demand for transport services. In addition, the rise in the use of drones for the transportation of goods is expected to increase demand for transport services.The transport sector is one that is highly regulated and is impacted by the stringent laws and policies that are implemented by various countries. This is one of the areas that has been impacted by the digital economy, with the advent of e-commerce. With the rise in online shopping, there has also been an increase in demand for freight transport services, as items can be sent to and from various locations. This has led to an increased demand for transport services, which will help the industry grow in the near future.
Increasing Costs of Operations
The growing demand for transport services and the increasing costs of operations have led to an increase in the cost of operating a freight forwarding business. This has resulted in an increase in the cost of goods that freight forwarders buy and sell, and has also led to a decline in the profitability of freight forwarding companies. To mitigate the impact of rising costs and increase profitability, freight forwarders have been diversifying their services.One of the ways that freight forwarders are diversifying their services is by offering value added services. In the past, freight forwarders only focused on arranging transport of goods and did not focus on other services such as customs brokerage, import/export clearances, and warehousing. They have now realized that it’s important to offer more than just transport of goods to ensure profitability.
Exchange Rate Variability
The growing demand for transport services, exchange rate variability, and increased regulation have contributed towards the growth of the freight forwarding industry. Demand for transport services is expected to grow in the coming years, as economical growth around the world remains low. Furthermore, the growing trend towards online shopping is expected to increase demand for freight transport services.The movement of goods is highly dependent on price fluctuation, and has been influenced by factors such as exchange rate variability. With the global economy being affected by exchange rate variability, it has led to price fluctuations in goods. This has impacted the freight forwarding industry, as goods booked by customers have changed in price as a result of exchange rate variability.
Regulatory Hurdles
The growing demand for transport services, exchange rate variability, and increased regulation have contributed towards the growth of the freight forwarding industry. Demand for transport services is expected to grow in the coming years, as economical growth around the world remains low. Furthermore, the growing trend towards online shopping is expected to increase demand for freight transport services.The movement of goods is highly dependent on price fluctuation, and has been influenced by factors such as exchange rate variability. With the global economy being affected by exchange rate variability, it has led to price fluctuations in goods. This has impacted the freight forwarding industry, as goods booked by customers have changed in price as a result of exchange rate variability.
Conclusion
The freight forwarding industry is one that has experienced rapid growth over the last decade, as the demand for transport services and the increase in demand for e-commerce has led to an increase in the demand for freight forwarding services. It is expected that this demand will continue to increase in the future, as the global economy remains stable and the demand for transport services remains high. To ensure profitability and growth in this industry, freight forwarders must offer more than just transport of goods to their clients.