Freight Needs a Sea Change in 2017

Freight Needs a Sea Change in 2017

When times are tough, freight is often one of the first industries to notice. As global trading slows down and the number of imports diminishes, logistics businesses are quick to realise that they’re well over capacity and the industry as a whole needs to change in 2017.

Last year, a record amount of ships were either left standing or worse still, sold for scrap. As much as 10% of the world’s shipping resources were idled and neither geography nor scale played any part in protecting freight companies across the world - everyone was affected.

This meant prices for shipping between China and the United States peaked much earlier than they would previously have done.

And although the Hanjin bankruptcy was a major factor in the dramatic changes seen in 2016, the industry needs to alter its approach on all levels if it is to keep pace efficiently with global demand.

One potential threat on the horizon is that capital-rich organisations begin to invest in their own logistics operations. Whether motivated by potential for a new revenue stream or simply through increasingly large outlay for freight services, this is an area already being explored the world over.

But the advent of businesses like Amazon straddling over into the freight industry is only part of the problem. Tech-based start-ups are quickly identifying niches and efficiencies by applying their specialist tech knowledge to areas like freight data analysis, tracking options and end-to-end user interfaces. Making shipping more user-friendly opens up new opportunities which the freight industry has no choice but to incorporate or risk another similarly volatile year.

Certainly the flow of information is far from efficient in the logistics industry. It’s important that this improves in 2017 to enable buyers to compare services and make informed decisions and allow sellers to provide genuine and effective competition for business.

A sample of freight rates from Shanghai to California taken from mid-December 2016 showed alarming variation in pricing across one of the busiest shipping lanes on the planet.

Rates fluctuated by as much as 30% in the sample taken from the top 20 freight companies and further investigation reveals that the disparities weren’t deliberate, since those clients paying the higher rates weren’t necessarily the largest customers. It affirms the theory that clients cannot easily compare rates and therefore don’t know what a fair cost actually is. In an industry where supply and demand takes years, not months, to become apparent, the additional costs seem to be simply passed on to those buyers who are less savvy.

In short, a sea change is required. Worldwide freight needs to make better use of the tech available and allow the shipping, logistics and their offshoots to shape the industry in the coming months and years. Every industry which tech has touched has either been superseded by that innovation or influenced and improved by it. For freight, it’s vital that data usage is optimised for buyers and sellers alike and 2017 is the time to do it.