The current state of freight forwarding, and logistics in general, has certainly been greatly influenced by the pandemic, but it has not had as much impact on the future. Even before the coronavirus, changes had begun that have only been accelerated by today’s crisis, but the main cause of the changes is digitalization. At this moment, companies with long-term partners and contracts in logistics are profiting, and the key advantage for all involved in long-term logistics relationships is the stability of freight rates and the guarantee of service execution. This is stated by Tomislav Bagarić, a member of the Management Board of Manšped, who emphasizes that classic freight forwarders, i.e., intermediaries in organizing transportation, have been in constant decline over the past five years. The reason for this lies in the more aggressive approach of ‘capital-intensive logistics providers,’ as Bagarić calls them, who have increased investments in warehouses, fleets, ships, and other equipment in recent years.
– In recent years, such logistics providers have had to reduce prices due to the pressure created by freight forwarders, while at the same time having to repay their large investments, and precisely because of this, fewer and fewer of them are trying to avoid the services of freight forwarders as intermediaries, and more and more are directly contracting jobs through various platforms, without them – says Bagarić.
A Year for Introspection
Jobs are still contracted in the old way, but also through online platforms. Bagarić adds that during the pandemic, e-commerce platforms took over the transport and logistics market and established themselves as freight forwarders, i.e., intermediaries in organizing the transportation of the future. Although he notes that one e-commerce platform cannot take over the entire supply chain, it will certainly take a serious share of the market in parcel and pallet distribution. Their IT solutions are moving towards integration into SAP and ordering systems, procurement, and inventory management of companies that, in addition to the above, directly communicate with the carrier and driver through their interface.
– The past year was a year for introspection, and we used it for restructuring, analyzing the services we provide, and preparing for the next pandemic or similar crisis situation that could paralyze the market and the environment in which we live and operate. Current trends are excellent, and in the first half of the year, despite the third wave and lockdown, we maintained the level of 2019, with expectations of significantly higher growth in the second half of the year, specifically in the third quarter when most profits in our sector are generated – says Bagarić.
In the upcoming period, Bagarić expects that the perception of logistics costs must change from short-term pressure on prices to reliable and sustainable service. In the past period, he says, we have witnessed drastic differences in the operations of companies whose goods are subject to short-term market influences and those whose activities and operations can function on long-term contracts with carriers, logistics providers, and shipping companies.
– I believe that everyone has learned a lesson from 2021, some in a positive sense, some in a negative sense, but certainly in the direction of long-term/stable relationships with their logistics providers – says Bagarić.
Important Specialization
Boris Vavra, Sales Director and Management Advisor for the maritime, air, and customs sector at Primacošped, also shared his view of the overall situation in the freight forwarding and logistics market, with the caveat that these are his personal views, not the company’s. He confirms that we are facing a continuation of changes, as he believes that the role of freight forwarders may not change that much, but the way of communication and the relationship with clients will definitely change. He explains that a freight forwarder ‘used to be just a freight forwarder (with a wide range of jobs they perform), while today they are more like a department of a client company. For example, Primacošped has employees who work in the office of their client where they also perform services for that client.
– Advisory services of freight forwarders are more important than ever, in all areas from international transport to customs or VAT calculations. The services will not change that much because there will always be an import declaration and customs representation, but in the future, freight forwarders will become completely invisible. For all service users, freight forwarders will become just an icon of an application on a mobile phone, tablet, or computer – says Vavra.
When discussing the current state, Vavra says that everyone is finding their way and doing business in their own way and notes that in recent years, specialization has become increasingly important in the freight forwarding business. Those who have not realized this in the conditions of international competition are finding it increasingly difficult to operate.
– Primaco has specialized in goods that are transported in temperature-controlled environments, and in recent years, this specialization has brought the most new revenue. Additionally, we have implemented Key Account Management in the customs department for large clients and thus provided better and higher quality customs representation services than a customs representative who has 50 clients and responds to 50 different requests. These changes are quite general and are not directly related to the pandemic; they would have occurred regardless of the pandemic, although the pandemic has accelerated them. Many Croatian freight forwarders have not been able to do this due to geographical limitations and limitations in human resources, although one must not forget the effect of the digital age that has surpassed many freight forwarders. If they do not keep up with it, they will be buried – says Vavra.
