Expectations Have Shifted
Just like the general population, shippers relied heavily on digital transactions to get work done and send goods in 2020. Now, they are expecting the same from their freight forwarders.
As shippers seek increased visibility and communication, freight forwarders that deliver it are poised to seize a competitive advantage. Prior to the pandemic, some freight forwarders had embraced digital transformation, enabling customers to secure bookings online and ask questions via email, WeChat, and other digital means; however, other providers remained wary of a fully digital approach.
In an article from The Loadstar, Forrester Research analyst Nigel Fenwick warned forwarders against failing to digitalize, saying that “your company is likely to face extinction in the next 10 years, and while you may see it coming, you may not have enough time to save your company.”
Several technologies have emerged to benefit freight forwarders interested in enhancing their digital experience. One solution is canonical data integrations, which connects the disparate systems that shippers, freight carriers, and freight forwarders rely on to manage and monitor each shipment. Canonical data integrations offer a faster, simpler, and more cost-efficient way of connecting various systems.
Shippers Are Expecting More Visibility From Freight Forwarders
From March to October 2020, the world’s largest shipping companies added $23 billion to their market value. While the pandemic played a large part, industry consolidation, trade policy shifts, and climate change mean that this disruption is here to stay.
At the same time, consumers increased their online spending by over 30%. This has created a huge gap between the consumer expectation of a highly transparent e-commerce experience and the opaque uncertainty that rules global transportation.
As the pandemic created a general sense of uncertainty, digital experiences that provided visibility into the status of online orders – even the status of a pizza on its way to a consumer’s home – gave the population a much-needed sense of control. Since then, expectations for digital interactions have shifted massively, with consumers seeking highly personalized touch points. This general shift in consumer thinking has also led shippers to expect digital experiences across every interaction with their freight forwarders.
Visibility Has Been Hard to Achieve in the Shipping Industry
Although some freight forwarders offer digital experiences, there is a pervasive visibility problem in the industry. Traditionally, freight forwarders have not known – and have not been expected to know – where their customers’ goods were at any time prior to arrival at their final destination. As more freight forwarders were forced to operate remotely in 2020, however, a need arose for cross-platform visibility.
A typical freight forwarder seeking greater visibility may need to integrate both internal and external platforms within its data centers, in the cloud, and within its customers’ networks, including:
- Customer transportation management
- Enterprise resource planning
- Customs management
- Quoting and rating management
- Warehouse management
- Shipment and container management
- Operations and accounting management
- Pricing, booking, and shipment tracking
- Customer relationship management
- Accounting and finance
- Robotic process automation
- Freight audit and payments
What’s Driving Shippers’ Shifting Digital Expectations?
- The need to replicate the digital experiences they enjoy in their everyday lives. Both at home and at work, shippers use mobile applications, websites, and other digital technologies that provide updates and alerts about their orders. These seamless experiences have motivated shippers to expect the same from their freight forwarders.
- The need to appease modern customers. In 2020, consumers spent $861.12 billion in online transactions with U.S. merchants - 44% more than they did in 2019. As more consumers grew accustomed to online ordering, they became less likely to tolerate incidents such as shipping delays or damaged goods. To maintain their reputation in the marketplace and set better expectations with consumers, e-commerce shippers need more visibility into their shipments.
One common solution for integrating technologies is point-to-point integrations. This approach is simple in nature but requires a complex architecture – often compared to spaghetti – to integrate systems that were never meant to integrate with each other, including legacy systems built in the 20th century.
Because integrating systems directly is so complex, it can take two to six months to establish a direct connection. Since each integration is highly customized, the investment in human and technical resources is non-accretive.
Each integration’s cost must be absorbed directly into that customer’s profitability and does not create new net value for either company outside of the specific transactions. Financially, this means that each integration instantly becomes a sunk cost of that individual sale.
To avoid the excess time, costs, and complications associated with direct connections, digital-facing freight forwarders are choosing canonical data integration capability instead.
How Does Canonical Data Integration Capability Work?
Canonical data platforms integrate systems without directly tying them together. These neutral platforms work like the global telephone system. Instead of connecting each phone to each of the others, they connect to a common network. This creates a world where you can dial your iPhone and speak to someone who is using a landline without having to specifically set up a connection between two parties.
Flexible canonical data connections can integrate all aspects of the freight forwarding process, including air, ocean, trucking, and rail providers’ systems.
Consider how helpful an integration could be in this common freight forwarder scenario. You have 10 customers who want to make freight bookings. Two use your website, two send emails that you process through a robotic process automation (RPA) solution, three send varying flavors of electronic files directly from their enterprise resource planning (ERP) software, and the remaining three book through external freight marketplaces. With a canonical data integration, you connect one “inbound booking” business process to your freight management system and let the platform handle all the variations.
How Canonical Data Integrations Benefit Freight Forwarders
Freight forwarders are uniquely positioned to benefit from canonical data integrations because they manage the shipping process from start to finish.
This end-to-end process opens freight forwarders to the possibility of increased customer inquiries, particularly about the current location of a shipment. If a shipper asks if its shipment is still expected to arrive on time, a freight forwarder may risk the relationship if it doesn’t have full visibility into its trading partners’ platforms.
Optimization at Each Stage of the Supply Chain
One of the major benefits of flexible integrations is that they allow you to offload manual customer service and operational work while remaining agile.
- Increased operational visibility in your transportation management system (TMS). See the progress of each shipment and receive notifications about issues and delays all in one place, by connecting multiple air, ocean, and truck visibility providers.
- Increased self-service for customers. Publish an omnichannel view of your customers’ freight, allowing them to interact with you through their preferred mechanism, which may be your website, their transportation management system (TMS), or automated reporting.
- Increased collaboration with connection to purchase order (PO) and rate management. Drive efficiencies on both sides of your relationship by automating connectivity with your customers’ upstream sourcing processes as well as your downstream carriers and service providers.
How Canonical Data Addresses Freight Forwarders’ Major Challenges
Neutral platforms can help freight forwarders accomplish these key business needs:
- Reduce costs. Instead of having to build each connection from scratch, leverage the work being done across canonical data platforms by turning on pre-existing connections to major platforms and providers.
- Increase revenue. Shippers are more likely to choose a freight forwarder that can integrate to their systems. For most mid- to large-sized shippers, these integrations are a prerequisite. If your sales team can promise them faster and cheaper, you win more business.
- Stay ahead of the competition. The freight forwarding industry – anticipated to reach $178 billion by 2024 – is highly competitive. The United States alone has more than 100,000 freight forwarders, and no single operator has a market share greater than 5% of revenue. Freight forwarders must continually reevaluate whether their differentiators are still meaningful to shippers. By adopting canonical data integrations now, freight forwarders can encourage more shippers to consider freight forwarding instead of a do-it-yourself approach.
- Provide great customer service. For many freight forwarders, common customer service questions include “Where is my freight?” and “Why is my shipment delayed in transit?” Not addressing those questions quickly could cause customers to lose trust in their freight forwarder. Flexible integrations, however, can provide instant insights, enabling freight forwarders to create the peace of mind that reinforces customer retention.
How to Know if Canonical Data Integrations Are Right for Your Business
The freight forwarders that can benefit most from flexible integrations are those that need:
- To integrate many systems. Small freight forwarders with just a few trading partners may decide to pursue one-off mappings, but for companies with more than eight integrations, canonical data integrations are faster and more cost-efficient. A typical canonical data platform can handle thousands of integrations per freight forwarder.
- To integrate systems quickly. Some freight forwarders may have an urgent need to adopt flexible integration; perhaps their customers have begun requesting updates along each stage of the shipping route. With canonical data technology, integrating a system can take minutes, compared to several months with one-off mappings.
- To integrate systems cost-efficiently. Canonical data capabilities are offered by neutral platforms that connect multiple systems. Compared with point-to-point technology, canonical data integrations have a lower total cost of ownership (TCO). For example, each point-to-point integration may have a five-year TCO of $50,000 or more, including maintenance, hosting, labor, and ongoing monitoring. Because canonical data platforms leverage economies of scale and reuse, their TCO can be less than $20,000 per connection.
How to Get Started with Canonical Data Integrations
As more freight forwarders recognize the benefits of integrating each trading partner in their ecosystem, the number of neutral, canonical data platforms is likely to increase. Before choosing a platform, ensure that it offers:
- Core forwarding built in. The logistics industry is incredibly complex. Generic mapping tools hosted in the cloud still force you to design and build each integration, just on someone else’s platform. To achieve fully scalable canonical data integrations, the platform must have concepts like bookings, invoices, and shipments built directly into its core.
- Large data processing ability. Until a freight forwarder knows how many systems are in its ecosystem, it may not realize how many integrations it needs. Before choosing a flexible integration provider, ensure that the platform can support the necessary integrations and messages that need to be sent back and forth daily. Serverless architectures are the modern approach to rapid horizontal scalability.
- Reliable customer service. With canonical data capabilities, freight forwarders can integrate systems themselves, but that doesn’t mean they won’t need good customer service for additional assistance. Identify providers that will assign a dedicated customer service team member to work directly with your account managers and information technology team members.
- A focus on problem-solving. Integrating freight industry systems is a complex operation, but you should not have to feel overwhelmed by jargon. When evaluating providers, look for those that frame their operations in terms of business processes, such as sending purchase orders and receiving bookings, rather than technical language.
Setting up Canonical Data Integrations
Canonical data integrations offer seamless visibility once connections have been made, but the first step is setting them up. Here’s an example of how simple it can be to set up a trading partner in your system:
- Add an integration that allows your trading partner to share booking data.
- Add an integration that allows you to communicate back to the trading partner.
Watch our demo to see how easy it is.
To set up these integrations, you need to know the type of application programming interface (API) connection your trading partner uses and the source file type, which is the system through which your trading partner will send the data.
Embracing New Technologies
As consumers continue to demand more efficient, personal, and visible online experiences, shippers will continue to pass similar expectations to their freight forwarders. Although point-to-point system integrations ultimately offer the same visibility as canonical data integrations, the excess time and cost to directly connect each system may prove detrimental to a freight forwarder’s long-term position in this competitive market.
The greater risk lies not in purchasing and integrating new technology, but rather in maintaining a status quo that fails to meet the modern needs of shippers. Freight forwarders that embrace efficient ways of meeting shippers’ expectations are poised to reap immediate benefits.
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