Competitive Forces in the Freight Forwarding Market
In an Interview with Third Bridge Forum, a head of contract logistics at a European company said that smaller players face a series of significant challenges, the most prevalent being technology and the costs associated with it.
While he admitted that there will always be a place for specialised players in areas such as project logistics, which are often difficult to accommodate in larger organisations, smaller companies have to contend with economies of scale that simply do not work in their favour.
According to the specialist, the margins in freight forwarding have been deteriorating meaningfully and while this has been a challenge for the entire market, the bigger organisations have been able to cope better with it because of the economies of scale.
Freight rates today stand at $500 TEU (twenty-foot equivalent unit), while just a decade ago the rate stood firmly at the $1,000 TEU mark and above.
Part of the reason for the deterioration, he added, is overcapacity, as well as the troubled global economy and the US-China trade war, all of which have put pressure on the entire shipping industry.
It is widely expected that, as a result of the global slowdown, there will be declines in the Far East westbound, Transatlantic and Transpacific trade lanes.
In contrast, our specialist said long-term increases are on the horizon in North-South and intra-regional trade lanes. The challenge here, however, is that the trend for larger ships means not every port is in a position to accommodate them. Organisations will be faced with the decision of whether to convert existing fleets to adjust to this changing market and take advantage of the areas in which future potential lies.
To access all the human insights from Third Bridge’s CMA CGM & CEVA – Freight Forwarding & 3PL Interview, click below to view the full transcript.
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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