By Siddharth Priyesh, Vice President (Americas & Caribbean), CrimsonLogic Pte Ltd
For many years now, enterprise resource planning (ERP) systems have been a proven tool to digitise and enhance the efficiency of supply chains. But many legacy implementations of these systems work in silos and are not able to deliver insights that respond to dynamic shifts in supply and demand.
As more players accelerate their digital transformation plans, systems that have the intelligence to evaluate and analyse data en masse can help firms boost their competitive advantage, collaborate, and enjoy the synergetic benefits of exchanging data. Here are some frontier technologies that are leading the way.
Automation and Artificial Intelligence
As we envision a future where supply chains are highly automated and autonomous, Artificial Intelligence (AI), Machine Learning (ML) and Optical Character Recognition (OCR) are three keys to more productive supply chains.
When AI and ML are applied to ERP systems, they can further improve end-to-end supply chain management processes among stakeholders and reduce operating costs.
OCR too, plays a big role by giving a huge boost to productivity during this transition from traditional to digital systems. With the ability to read hardcopy trade documents intelligently and accurately, the digitised data can then be automatically inputted into the respective customs nodes in adherence with local requirements. This means fewer errors, better compliance, fewer delays, and faster customs clearance.
All these tools reduce the complexity and improve the operational efficiency of supply chains, as time-consuming processes are offloaded from humans.
Use of data through advanced analytics
Advanced analytics squeezes out insights, predicts future trends and events, and allows supply chain managers to make data-driven decisions. By making data work even harder with the help of AI and ML, advanced analytics allow supply chain players to better forecast demand and supply gaps from farm to table.
From planning and procurement to logistics and shipping, advanced analytics provide accurate forecasts that are backed by AI and ML optimisation models to increase savings from lower inventory and holding costs. This increases resource optimisation and provides enhanced predictability and analytics for better decision-making – even during volatile situations – for a more resilient and agile supply chain.
Trade facilitation platforms
While these cutting-edge technologies may play a big part in bolstering supply chain resilience in times of crisis, what is truly needed is a platform that facilitates seamless end-to-end trade across borders, from import to export. This allows businesses and governments to automate customs clearance and logistics, reducing red tape while saving businesses both time and money, without compromising on government regulations.
With linkages to more than 80 customs nodes, 90 ocean carriers and NVOCCs across the world, CrimsonLogic continues to work closely with both government and private-sector clients through its one-stop platform for information exchange between traders and government agencies. By linking digital islands and turning them into an integrated ecosystem with end-to-end trade compliance and logistics, we can transform international trade together and help businesses and governments stay ahead of the curve.
As Cybersecurity continues to evolve, here are five trends Freight Forwarders should watch for:
Passwords are going away. This is great news for both security professionals and end users. With more than 80% of breaches resulting from weak or stolen passwords, users are bombarded with messages to create complex passwords for every system they access. This, in turn, has led to bad habits like keeping passwords in Excel spreadsheets or using the same password for multiple systems. The introduction of Multi Factor Authentication (MFA) is allowing firms, even as large as Microsoft, to eliminate the requirement for passwords while, at the same time, making their systems more secure.
E-Mail continues to be the weapon of choice for cyber attacks. Some of the old ways of sending and receiving e-mail (POP3, IMAP, SMTP) are being discontinued. Microsoft will stop supporting them in October of this year. Other vendors are likely to follow. This may stop older e-mail systems, or devices like scanners, from being able to send or receive e-mail. There will also be greater adoption of initiatives to secure e-mail such as DNS filtering (when you click on a link in a message, it is checked to make sure you are not being directed to a hacker’s site) and DMARC (a way to ensure that the person sending you an e-mail is really who they say they are).
Customers are realizing the importance of ensuring that their suppliers comply with cybersecurity requirements. This is especially true as they look for productivity improvements by integrating supplier systems with their own. More customers (and insurers) are demanding proof of compliance. Many require completion of a cybersecurity survey. There will be increasing demand for compliance with cybersecurity standards such as SOC 2 or ISO 27001.
Whenever the discussion of cybersecurity is raised, most people immediately think about their computers and the networks that connect them (IT). However, as companies push to increase productivity and reduce costs through the use of robotic systems, intelligent thermostats, security systems, etc., they are creating new ways in which cyber attacks can occur. There will be an increase in affordable Vulnerability Management tools that can find, and recommend solutions for, vulnerabilities in this converged environment.
The impact of quantum computing on cybersecurity won’t be felt for a few years yet. However, it is on the horizon. As access to this powerful technology becomes more widespread, the fear is that hackers will be able to use it to easily decrypt any data they can access. Encryption (for example when you see HTTPS: at the beginning of web link) is the bedrock for keeping data secure. It is based on the concept that it takes years of continuous computing power to decrypt data. With the introduction of Quantum Computing, this would be reduced to minutes, making current encryption schemes useless. Many experts are predicting that the changes required to protect against this potential threat will be similar in size to those that were required to prepare for Y2K. Some estimates put the expenditure to prepare for the year 2000 at $100 billion in the US alone.
Drew Simons is a trusted advisor with close to 40 years’ experience in IT and Business Management. He works with senior management at small to mid-sized firms and helps them realize the benefits available from the appropriate implementation of business processes and technology.
He has held senior roles with Bell Canada, Bell-Telic, PC Service Partners (an IBM subsidiary), and others.
In 1998 he founded SICON CRM, a consultancy which helps firms increase their profitability through the implementation of the processes and systems that drive Customer facing teams in Marketing, Sales, and Customer Service. Simons founded Roxville Technology in 2009. Roxville acts as the bridge between Senior Management and their IT Teams and/or suppliers.
He is also a Professor at Seneca College.
He is a member of the Canadian International Freight Forwarders’ Association’s (CIFFA) Technology Committee.
By Nikhil Sathe • Logisyn Advisors, Managing Director
Digital freight companies are creating an enormous buzz in the market. These are tech and HR companies that happen to be logistics and transportation providers. 3PL is a labor play – the companies that drive superior unit economics also drive value and rapidly increase market share, while creating significant operational, sales, and procurement efficiencies in a “lights out” business model.
This sector of the industry has been innovative – evolving as solutions providers and problem solvers; they set out to drive costs out of the business and create efficiencies across the board. Digital freight companies have been focusing on improving their business models to better achieve quality margin management and a higher level of customer service.
Defining Digital Freight Matching
Digital freight matching exists to create connections between truckers and shippers with digital brokers acting as conduits in the process. Leveraging a full spectrum toolbox including AI (artificial intelligence), ML (machine learning), algorithms, and process re-engineering, brokers efficiently convert tendered loads into revenue loads. Digital brokers differentiate in their carrier procurement to maximize loads per carrier rep and leverage an effective tech stack and carrier database. The cutting-edge technology seamlessly integrates the customer and carrier load tendering processes into their TMS or operating system. Due to these factors, digital freight demonstrates significantly higher output per capita in revenue loads and other unit economics.
Carrier procurement is a daunting task for brokers and digital freight companies. Utilizing machine learning, innovation, and AI technology assigns a load to a carrier in the most competitive time frame. Since the market size is huge and the carrier market is deeply fragmented, such automated procurement spearheads volume growth without many touch points, maximizing load and operational efficiency.
Digitization of Freight: Trendy or Inevitable?
COVID-19 exacerbated freight digitization and hit the fast-forward button, putting automation front and center of corporate strategy. Many mid-sized freight and logistics companies embraced technology, data sharing, and remote operations. System intelligence is now an essential commodity. Digitization doesn’t replace customer service, but it augments and strengthens the service model. Looking inward, technology is a productivity toolbox to drive efficiency and superior unit economics. Outward-looking tech stacks create superior responsiveness, visibility, and a seamless process from distant freight to actual delivery.
In today’s market where carrier and broker fragmentations run too deep, most intermediaries are trying to create customer and carrier hooks for load tendering and competitive capacity sourcing. Digitization at a higher-level means automating repetitive processes, efficient carrier procurement, AI-influenced and binary decisions, driving unit economics, workflow efficiency, and higher conversion of revenue loads.
Understanding the Market and Growth Trajectory
For the past few years, significant VC and Private Capital have flown into Digital Freight Companies claiming superior technology stack, power to scale market share, and load volumes. Some of these companies have experienced exponential top-line growth. Many of them are unicorns with robust proforma valuations. As the level of outsourcing grows at more than 3-4 times GDP, the market presents a huge opportunity for building scale and size. Fragmented broker and carrier markets present a unique opportunity to scale and stack synergistic brokers.
Most 3PL’s are embracing technology in a significant way, especially in the wake of COVID. Digital freight companies’ focus is placed more heavily on data than loads, superior unit economics than mere execution, automation than multiple touch points, and seizing market share than quality margin management.
Digital Freight Matching Considerations
Digital Freight Brokers also have their own set of complexities and challenges in their business models, including:
The industry needs Digital freight, and these brokers are using innovation to transform business models and achieve greater operational efficiency. Digital brokers today can find trucks quickly at very competitive rates. With over 800,000 motor trucking companies in the US (87% of these companies own less than 6 trucks), we believe these brokers are doing a great job in creating efficient carrier networks to service their customers.
As of now, this is still a single-use service, but digital freight brokers are understanding the need for better quality of carrier procurement. The industry has seen a recent trend of these companies investing in expanding their carrier relationships to strengthen sourcing capacity.
“Global Digital Freight Brokerage Market to Reach $10.9 Billion by 2027
Amid the COVID-19 crisis, the global market for Digital Freight Brokerage estimated at US$1.2 Billion in the year 2020, is projected to reach a revised size of US$10.9 Billion by 2027, growing at a CAGR of 37.3% over the analysis period 2020-2027. Roadway, one of the segments analyzed in the report, is projected to record a 38% CAGR and reach US$3.6 Billion by the end of the analysis period.
After an early analysis of the business implications of the pandemic and its induced economic crisis, growth in the Seaway segment is readjusted to a revised 42.1% CAGR for the next 7-year period.
The U.S. Market is Estimated at $341 Million, While China is Forecasted to Grow at 43.9% CAGR
In 2020, the Digital Freight Brokerage market in the U.S. was estimated at US$341 Million. China, the world`s second-largest economy, is forecasted to reach a projected market size of US$2.3 Billion by the year 2027 trailing a CAGR of 43.9% over the analysis period 2020 to 2027. Among the other noteworthy geographic markets are Japan and Canada, each forecasted to grow at 31.3% and 35.2% respectively over the 2020-2027 period. Within Europe, Germany is forecasted to grow at approximately 33.4% CAGR.”
— Global Industry Analysts, Inc, April 2021, “Digital Freight Brokerage – Global Market Trajectory & Analytics”, Research & Markets
Key Factors & Growth Drivers
“Analysts are predicting to expand at a CAGR of 33% during the forecast period from 2020 to 2030. The extensive use of smartphones and mobile applications for efficient shipping and logistics operations fuels the growth of the digital freight brokerage market. Solutions in the digital freight brokerage market include mobile applications that enable shippers and carriers to interact directly and match their services for transportation and logistics.
Significant capital investments leading to increasing use of technology are favorable to the growth of the digital freight brokerage market. This is attracting a number of small-to-large scale digital freight brokerage companies entering the fray.
The inclination of established transportation management companies to partner with digital freight brokers is creating new frontiers in the digital freight brokerage market. The announcement of the partnership of Uber Freight with Transplace and Cloud Logistics by E2open to provide added value, flexibility, and control of shipping logistics is a case in point. The move is expected to offer shippers transparency, and an exceptional degree of ease in the current fast-moving market.”
— Transparency Market Research, May 2022, “Digital Freight Brokerage Market to Reach US$ 26 Bn by 2030”, Globe Newswire
Digital Freight Competitor Highlights
M&A Perspective on Digital Freight Brokers
The past few years have seen exponential VC and private capital attracted to this segment given the significant market opportunity. Many of these companies are characterized by high load and top-line revenue growth, superior technology stack, and robust proforma valuations. Valuations are influenced by the financing environment and capital structure is often influenced by the capital markets. We have also seen the transportation technology sector booming with new solutions, platforms, and architecture.
We often get asked about the difference between a logistics company and a tech company. The difference primarily lies in its operating model. A common question is if logistics companies would trade X revenue rather than X free cash flow. Our response is that it should be deal specific, which mainly depends on the target’s growth story and buyer’s investment profile and orientation. Superior technology stack in and of itself doesn’t warrant the company to trade at X revenue, as we believe the technology stack should contribute to superior and exemplary P&L performance.
The digital freight market is estimated to be larger even than recent reports have captured and continues to grow at an exponential rate. Based on our indications and trendlines, The U.S. segment of the market could surpass $30 billion over the next decade. During the pandemic time between March 2020 and early 2022, we saw growing digitization in the mid-market segment, and these companies are now trying to close the technology gap between tech-forward and tech-enabled brokers.
“Over the past few years, large digital freight brokerages (DFBs) backed by venture capital have emerged in the global transportation and logistics industry. Although in North America startups like Convoy, Uber Freight and Transfix dominate media coverage of DFBs, incumbents C.H. Robinson, J.B. Hunt, and others have made large investments in technology to digitize their brokerage operations.
It’s not just in North America – Berlin-based company, Sennder, raised a $70 million Series C in July 2019 that valued the digital brokerage at $300 million, post-money. BlackBuck, a DFB from Bengaluru, India, raised a $150 million Series D in March that valued the startup at $862 million, post-money. Finally, Beijing’s Manbang Group, a DFB created in 2017 by merging two other Chinese firms, is seeking a $1 billion investment that would value the company at $10 billion.
North American valuations have swelled and many of these DFB’s are now unicorns, such as Loadsmart, Convoy, Cargomatic, etc. Uber Freight, a division of publicly traded Uber Technologies, is valued by the market at a multiple of its gross revenue, not its earnings before interest, tax, depreciation and amortization (EBITDA).
Moreover, there’s a disconnect between the way that private markets value DFBs and the way that public markets value third-party logistics providers (3PLs) like Echo Global Logistics and C.H. Robinson…
…the truckload industry will grow along with nominal GDP and that freight brokerage has an approximate ceiling of 35 percent market penetration in 10 years, up from about 18 percent today. We also assume that DFBs will account for 50 percent of all freight brokerage in 10 years, up from about 1 percent today. Finally – to create a fair but realistic scenario where most factors work in DFBs’ favor – the assumption is made that digital freight brokers are able to achieve an 8 percent gross margin in 10 years, up from about 1 percent today.”
— Freightwaves, August 2019, “How much are digital freight brokerages really worth?”
Digital Freight Valuation
We estimate the size of the trucking industry is over $800 Billion, when using the total addressable market by digital brokerages. The current brokerage market is estimated to be north of $75 Billion. The trucking industry and brokers are deeply fragmented, making a strong case for scaling and stacking synergistic assets to maximize enterprise value.
Inherent in the valuation model are always underlying assumptions. Valuation is done based on Scenario Planning which assumes a financial model that includes a present-day number of future earnings – probability of earnings given the external factors and internal factors which sometimes are in your control and sometimes to the vagaries of the market.
The Valuation Dilemma
Some of these Digital Freight Brokers underinvest to maximize earnings, some invest heavily front end to spearhead growth, and others take a middle approach, starting with cutting earnings power and then speeding up the margin and EBITDA expansion. We think the latter option give these companies the best valuation potential.
Traditional buyers would value the target based on traditional valuation methods, and their financial models are typically based on X FCF. Most of these digital companies with solid proforma valuations are unicorns and would have challenges matching or exceeding actual valuation on exit. There is still no precedent for the exit valuations of these companies. In our view, exit valuations should be pressure tested with margin and profitability performance over the long term.
Digital Freight Companies, with their ability to spearhead high growth, their lean enterprise execution model, and their superior freight unit economics, would drive better-than-market valuations.
We are already watching some macroeconomic headwinds in the capital markets, and there seems to be a considerable slowdown in VC-backed investments in new ventures in 2022. Despite all uncertainties, we believe technology will continue to dominate the Freight Brokerage Market, and we are quite bullish about valuation expectations given strong and secular growth credentials in this high growth, fast paced, and dynamic market.
Logisyn’s Expertise in Digital Freight
Logisyn is an M&A advisor that caters specifically to companies in the logistics sector. The Logisyn team has deep domain expertise in taking digital freight companies to market and determining the most effective market map of synergistic buyers driving valuations and optimizing deal structure. Our customers include global freight forwarders, customs house brokers, domestic forwarders, trucking companies, logistics software providers, and many other companies across the industry. Our team leverages our deep relationships in the market and our broad database to help buyers find the “right” target for the “right“ value.
Nikhil Sathe • Managing Director
Nikhil Sathe has an extensive background in working with digital freight companies in North America to spearhead their growth strategy and maximize their enterprise value. Nikhil has successfully run strategic engagements for mid-size logistics companies as well as being known as a thought leader and domain expert in the 3PL and tech space. For more information, please email nikhil.sathe@logisyn.com.
Publication Sources
by Julian Alvarez, Logixboard
Digitization across the logistics industry may have gotten off to a late start, but it’s quickly catching up. Features like real-time visibility, which were previously novelties, are now table stakes for BCOs to do business with a forwarder.
As competition continues to ramp up in the freight forwarding industry, traditional 3PLs are searching for new ways to differentiate themselves. With a nearly commoditized service and comparable rates across most of the industry, the two other main factors for forwarders to differentiate on are their people and their tech.
Speaking with forwarders, we’ve found a trend of BCOs first evaluating price, then tech, and finally your people before becoming customers.
If, like many forwarders, you’re confident in your price and your team, then tech is where the battle for customers is really happening.
Customer expectations for tech are on the rise
For many BCOs, it’s no longer enough to receive periodic updates from their forwarders. Or, worse yet, to have to chase these updates themselves. Instead, they need to feel informed and in control of the process so they can make strategic planning decisions.
Many 3PLs are launching customer experience platforms to give their customers easy access to their shipment information. When forwarders provide real-time visibility, documents, messaging, accounting, and analytics all in one place, shippers have the experience they’ve grown to expect from “The Amazon Effect”, as described in a recent Forbes magazine article, where (“As a consumer shopping in your own home, you get used to full visibility and predictability of everything that you order. Products come on time. It’s easy to shop. Apps are beautiful, functional and fast-moving. So, as a consumer, you are a happy camper.”) and feel the sense of control over their own business that they are looking for.
Unfortunately, providing this isn’t as easy as it may sound.
The build vs. buy debate
The growing demand for customer experience platforms across the market has led many companies to weigh the cost of building vs. buying their software. With industry giants like Flexport making waves with their own tech solutions, it’s understandable why some would lean toward a fully-custom tool to differentiate themselves.
Early in the digital transformation of the logistics industry, an in-house build may have been the best or only solution. However, increasing competition has forced existing and new tech vendors to develop better long-term digital solutions.
This means that today, rather than attempting to dedicate the significant resources and developing the expertise to design a user-friendly tool, build integrations, and continuously update a full-blown custom software, forwarders have the option to build an integrated stack from vendors like Logixboard– often without even having to change their core TMS.
Getting ahead in the changing logistics landscape
The winning formula in freight forwarding is pairing first-rate technology and a great digital customer experience with industry expertise. As logistics technology continues to evolve, we’ll see all the disparate parts coming together until BCOs have what they really want: A single place to see everything they need. For immediate and long-term success, we believe you should prioritize your logistics tech stack with that in mind.
By Gabriel T. Ruz Jr., Chief Innovation Officer, Co-Founder, and Board Member, Magaya
With a mere 12 percent of supply chain professionals currently using artificial intelligence (AI) to benefit their operations, it’s clear that opportunity abounds for early adopters. Alas, although AI is not new, its use in the freight forwarding industry is still very much in its infancy. Its time has arrived, though. As supply chains complexify and customer expectations soar to new levels, it has become a necessity for freight forwarders to turn to technology like AI simply to keep pace.
The possible uses of AI in freight forwarding are both endless and exciting. Defined by Gartner as technology that “applies advanced analysis and logic-based techniques, including machine learning (ML), to interpret events, support and automate decisions, and take actions,” artificial intelligence can be used in myriad ways to improve the freight shipping customer experience and help freight forwarders operate at new heights of speed, efficiency, and service.
AI Bots for Faster Carrier Contract Management
Uploading lengthy carrier rate contracts into a rate management system is a time-consuming, error-prone process that freight forwarders are all too familiar with. AI-powered bots can perform the same task in seconds, scanning carrier contracts into a rate management solution and parsing the data with superior levels of accuracy.
AI Transforms the Quoting Process
Perhaps one of the greatest opportunities for AI to have a positive impact on a freight forwarder’s day-to-day operations is in the quoting process. For years, the quoting process for freight has looked the same: customers email their requests, then the freight forwarder gathers rates from several different sources, pulls them back into an email, and then the exchange continues from there.
With AI, a computer can automate the whole quoting process from end-to-end: reading incoming emails, automatically extracting key data points using natural language processing, pulling rates from carriers, and bringing a formatted quote back into an email. This can save as much as 15 minutes of data entry and research time per quote and eliminate hours of back-and-forth exchanges for freight forwarders and their customers.
Faster Warehouse Operations with AI
The uses of AI for freight forwarding extend beyond the office. In high-volume warehouses, slicing just seconds off the handling time per parcel can yield impressive cumulative results. Smart freight forwarders are now using AI technology to automate the manual process of measuring, weighing, and photographing cargo as well as capturing label information and inputting it into the freight management system automatically.
The Road Ahead
The freight forwarding industry is about to experience a long-awaited renaissance. As artificial intelligence becomes more accessible, the possibilities to maximize productivity, lower costs, improve the customer experience, and increase accuracy are exciting. Now is the time for freight forwarders to learn more about how AI can address their pain points and set them up for sustainable success.
Every year, CIFFA offers an award to a young freight forwarder who best demonstrates industry knowledge and skills to become a true international freight forwarding professional in the future.
After a review process of industry experience and a written dissertation demonstrating technical knowledge, CIFFA is pleased to announce that Viktoriia Rudyk of DSV Air & Sea Inc. has been selected as the 2023 Canadian Young Logistics Professionals Award winner.
Originally from Ukraine, Viktoriia came to Canada to study the 2-year International Business Management diploma program at the British Columbia Institute of Technology (BCIT) in Vancouver, BC. In addition, she has taken the CITT and CIFFA courses, has been actively volunteering, participating at different networking events, and has worked on projects as a Student Consultant at Delta Chamber of Commerce and the World Trade Center Vancouver. After finishing her studies at BCIT, Viktoriia joined the trainee program at the Toronto branch of DSV Air & Sea Inc. At DSV she has worked as an Air Import Coordinator, an Air Export Coordinator, and currently works as an Ocean Import Team Lead in Montreal. She is a big fan of the continuous learning concept and likes the constant challenge that the freight forwarding profession offers. We asked Viktoriia why she chose to participate in the YLP Award competition and she gave us the following answer:
“I learned about the YLP Award when I was taking the CIFFA courses. After working in the transportation and logistics industry for over 3.5 years, I decided to take on a new challenge and participate in the YLP competition. I have always been passionate about creating cost-efficient and sustainable solutions for our clients and thus, writing a dissertation on a similar case study interested me. I believe that by participating in the YLP Award, I will be able to gain more industry connections and expand my knowledge on the topic of logistics.”
As this year’s Canadian winner, Viktoriia will receive a cash prize of $1,500 and will represent Canada at the FIATA Americas regional competition. This requires the submission of two dissertations. If selected as the Americas regional winner, Viktoriia will compete in the 2023 FIATA World Congress in Brussels, Belgium in the fall. Her registration fees, hotel accommodation costs during the Congress and travel costs of up to US $1,000 will be covered by the TT Club and FIATA.
Additionally, CIFFA would like to acknowledge the good efforts and exceptional work of the Young Logistics Professionals Award competition runner up, Lilian Tkachuk of Schenker of Canada Limited. Lilian holds a Bachelor’s Degree in logistics, has completed MIT micro masters courses in supply chain and a professional logistics certification in Ukraine. After moving to Canada in 2017, she continued her studies at Humber College and has obtained CITT and CIFFA certifications. Additionally, Lilian has been involved in pro-bono projects establishing logistics channels in war-torn Ukraine. She currently works as the ocean export supervisor at Schenker
(For more information on the Young Logistics Professionals Award.)
By Ian Putzger
Vancouver International Airport has initiated a project for proof of concept for a cargo community system (CCS). It will involve a handful of ground handlers, forwarders and trucking firms. The program kicks off with truck slot booking functionality and will subsequently be expanded to other features, according to Amar More, CEO of Kale Logistics Solutions, which will implement and run the CCS.
CCSs are on the advance at a growing number of North American airports – including Boston, Philadelphia, New York and Chicago Rockford – as airport authorities see a need for a digital ecosystem for their cargo communities. Forwarders also face pressure to digitize from airlines pushing e-air waybills and online bookings, as well as from customers demanding improved visibility.
At the same time, there are internal pressures to digitize, from the need to free up overstretched personnel from routine processes to cost containment and the ability to respond faster to disruptions.
“Digitization and IT have been front and centre at OEC. We’ve invested heavily in tech in our network,” said Marc Bibeau, president and CEO of Overseas Express Consolidators. He is also CIFFA’s technology chair.
Stan Wraight, president and CEO of Strategic Aviation Solutions International, regards digitization as inevitable. “It saves money, is ecologically sound, it helps alleviate staffing shortages, and you know what’s coming,” he remarked.
Some evangelists of digitization have hailed the digital forwarder as the future of freight forwarding. While this is technologically possible, it is extremely difficult today, noted Kareem Naouri, CEO of logistics software provider LogistaaS.
“The industry is still facing some serious obstacles. Each process has to be digitized individually with carriers, with truckers and the other parties you’re dealing with. Interactions with platforms must be intuitive. Nobody is going to learn a complex system to deal with a platform,” he said.
Technology itself is less of a hurdle now, although cost is still somewhat of an obstacle for smaller forwarders at this point. Bibeau sees this change in the near future. “We’re going to get to a point where technology is available as SaaS at an affordable price,” he predicted.
More said that the technology required to interface with KALE’s CCS will be relatively straightforward for small forwarders to use, adding that there are some shortcuts to deal with technology challenges. Forwarders who are unable to transmit e-air waybills can send a system-generated PDF of their AWB to the CCS platform as an e-mail, which will convert it into the required format.
Regardless of the state of technology a company is using, one element that is indispensable is data quality. If the master file is not up to date, players find themselves in a case of garbage in, garbage out, noted Bibeau.
Mindset can be another major obstacle. Digitization helps automate internal processes, but the full potential unfolds as data flow up and down supply chains. Many companies are uncomfortable with this, though, partly out of concern over cybersecurity, partly because they don’t want to share any information that might compromise their competitive advantage. Bibeau sees this reluctance to share information as one of the biggest challenges with digitization. For supply chains to function well, transparency and access to information are paramount, he noted.
To forwarders that seek to facilitate information flow it makes sense to feed it into their transportation management system (TMS). The benefits vary a great deal, depending on the system used. Most of those currently in use are not cloud-based and have limited feature sets, noted Naouri.
“In future TMSs will be integrated, plugged into different third-party platforms and tools,” he predicted. “I think the future of a TMS will be kind of a core operating system that is integrated with different systems and apps.”
Air Canada has been one of the airlines that have driven the use of online channels to obtain pricing and book shipments. In addition to its booking functionality on its website, the carrier has engaged with the three largest online booking portals for airfreight – cargo.one, WebCargo by Freightos and CargoAI – in order to allow forwarders to connect with it through the main pricing and booking channels.
The volume of bookings through the third-party portals is not as large as what is processed through its proprietary channel, as these are recent additions to the mix, but uptake has been good across all channels, reported managing director commercial Matthieu Casey.
In some markets, including Canada, the share of online bookings is quite substantial, he said.
Most of the online bookings are for general cargo. “For special cargo we’re not quite there. It’s still early days,” he remarked.
Most customers tend to use the online channels for domestic and recurring shipments to begin with before advancing to more complex bookings as they get more used to the system, he observed. Users are not necessarily the more tech-savvy forwarders, as those tend to be more interested in more sophisticated solutions, seeking integration through APIs.
The portals are used exclusively for ad hoc shipments and price queries. Casey does not altogether rule out opening them for contract cargo, but shippers that sign contracts usually already have a good connection with the airline, he noted.
Besides price queries and bookings, for most forwarders the other major focus in digitizing external communication is on shipment visibility. The disruptions of the past two years have brought painful illustrations of the need for timely information.
“Everybody has track and trace, but if you have outdated information, you’re at a disadvantage,’ said Bibeau.
In a digitized setting shipment status information can be conveyed to clients through control towers. Likewise, forwarders can put up dashboards for customers to monitor and control shipments – without having employees spend precious time chasing shipment data and conveying them to the client.
James Coombes, CEO of Vector.ai, emphasized the importance of connecting shipment visibility information with a forwarder’s internal processes. His company provides digital freight forwarding platforms that automate processes and provide actionable visibility for aspects like accounts payable, arrival notices, pre-alerts and customs clearance workflow. Forwarders either adopt specific modules or the entire platform.
“Visibility should drive actions,” Coombes stressed. Once a forwarder receives information about a change in a shipment’s itinerary, it is necessary to communicate the requisite changes to contractors like truckers. Much of this can be automated if the flow of visibility data is digitally linked to operations, he said.
OEC complements visibility data with business intelligence and reporting, Bibeau said. Large shippers and players like DHL have embraced predictive analytics and artificial intelligence to get early warnings of potential disruptions. To that end they harness information on weather and elements like news on possible industrial action in an area that factor in a given supply chain.
This requires a more advanced state of digitisation, moving the journey to the next stage – digitalization. Whereas the former transforms existing processes into digital format, digitalization leverages digital capabilities to develop entirely new functionalities and capabilities that are digitally native.
Bibeau thinks the step into digitalization is inevitable. “I don’t think we have a choice. The world is moving at a fast pace to automated environments,” he reflected.
The spread and use of CCSs is a case in point. The need to manage truck flows and avoid landside congestion has been the spark for their adoption in recent years, but now more and more airports want to embrace a much broader spectrum of capabilities that these platforms can offer, More observed.
Moreover, there is a growing desire to connect these digital ecosystems and establish digital corridors that can provide end-to-end visibility and enable parties at both ends to align their activities virtually in real time.
“What would digital corridors between airports do? They would provide an instant alert of a delay and allow the receiving station to make the arrangements for staffing numbers, reschedule trucking etc.,” said Wraight. “If you digitize airports, pharma that arrives should be on the customer’s truck within 90 minutes after landing.”
More listed three critical elements that have to be in place for a fully fledged digital corridor. It requires shipment status tracking capability, shipment data capture and the establishment of e-customs and e-certificates of origin.
He thinks that digital corridors for the likes of Vancouver to come within reach in about a year. “First we have to get the systems in place,” he said.
For CIFFA’s technology committee, the next goals are not quite as lofty. A fairly recent creation, it first focused on cybersecurity. According to Bibeau, this has been well received. “I think we’ve given our members a good toolkit,” he said.
The next mission is going to be about operational efficiencies and technology. This will look at process automation and productivity and highlight leading practices. Interest should be high.
We already have a proven one—the Canada Border Services Agency
By Bryn Heimbeck, President and Co-Founder, Trade Tech, Inc.
There have been lot of suggestions around how to manage port congestion in the past two years. The suggestion has been made to focus on a better flow of data in order to achieve the efficiency and productivity needed for our ports to handle the large cargo flows they have been facing. This would alleviate the need for major capital improvements. In the U.S., the Department of Transportation and the Federal Maritime Commission are looking to accelerate digitization within the industry in an effort to address the challenges that are plaguing today’s supply chain.
Both the DOT and FMC have pointed to the lack of a global data standard as the challenge and calling for a new one to be created—working collaboratively with commercial organizations that will benefit from the government’s investment in the massive undertaking of creating a new standard.
We know— as most Customs House Brokers know—we do not need another data standard. We have a well-established data standard system that has been refined over the last two decades to near perfection by U.S. Customs.
The industry welcomes the government’s response and willingness to facilitate a solution to the supply chain crisis, but the DOT and FMC are overlooking that the existing U.S. Customs’ standard is already a solid foundation upon which to build.
Neutral, not-for-profit U.S. Customs and its international counterparts represent a fine-tuned global data standard that is already used by Ocean Carriers, Port Terminals, Customs Brokers, and Customs Agencies throughout the world, with the standards established by the World Customs Organization (WCO) model tying them together.
Data standards are not new.
Congestion at ports has raised calls for many reforms, including greater transparency. But the government’s call to create new data standards is misguided, as:
• WCO data standard has been followed globally since the early 1980s
• Regulations for compliance expanded in 2003 as part of increased security efforts following 9/11
• These regulations are strictly enforced by many global Customs agencies and carry heavy fines and penalties for non-compliance
A proven global data standard–U.S. Customs and Border Protection’s Automated Commercial Environment (ACE) system.
Data Standards make it easier to create, share, and integrate information. The U.S. Customs and Border Protection’s Automated Commercial Environment (ACE) is an exceptional system for today’s Ship, Air, Rail, and Truck transport. This foundational standard also maintains well -regulated processes and procedures. Multiple stakeholders, including carriers and ports, are tied into this digital communication system.
Under ACE:
• Every required data element must be transmitted to ACE 24 hours before cargo is loaded aboard a vessel (the timeframe for Air Shipments is shorter)
• ACE covers all contingencies for cargo movement from origin to destination including the vessel arrival at the port of entry, any in-bond movements, Permits to Transfer (PTT), Immediate Transportation Entry (IT), Immediate Export (IE), and Transport and Export (T&E). Any failure to comply results in fines ranging from a minimum of $5,000 to the value of the cargo. Truly bypassing US Customs is called smuggling and can result in potential jail time.
An ill-advised pivot to creating new standards is an enormous challenge that will likely:
• Call for a vast number of resources, both labor and capital investments
• Take several years to develop
• Require more than a decade for any substantial adoption from the industry
• Will not be adopted globally
How third-party software has become critical to succeed in freight forwarding and CHB.
The following is a contributed article by Cris Arens, Managing Partner, Logisyn
When I started my logistics career in the late 1980s, telex machines and typewriters were prominent in freight forwarding. Fax machines were almost magical when I was traveling around the world for a Chicago-based freight forwarder. While some logistics entrepreneurs had invested in a few personal computers, a good operator typing 70 words per minute was far more efficient than those old IBM machines fighting with dot matrix printers. It is still hard to believe what we accomplished without cell phones, email, internet or networked computers back in the day.
As a young man, I saw a different future and co-founded Fountainhead International. Our product was CargoWise which set out to build Windows-based systems for midsize freight forwarders in the USA and Canada.
For the past 14 years, with Logisyn Advisors Inc., a global M&A company for the logistics industry, I have pursued a new interest in mergers and acquisitions for logistics service providers (freight forwarders, truck brokers, trucking companies, e-commerce, etc).
Over the past two years, Logisyn Advisors has spent a lot of time researching and networking with logistics technology firms. Technology is core to the M&A integration process. Smart buyers and sellers need their advisors to understand this space. From startups to the new unicorns we have met many interesting tech entrepreneurs around the world. The industry has come a long way in terms of technology; however, Logisyn Advisors believes this is just the tip of the iceberg.
The five main points below apply to freight forwarders around the world who should all be asking these types of questions.
For privately held companies, ownership’s long-term strategy is critical in determining tech budgets. If ownership has built a lifestyle business with a strategy to hand off to the next generation or exit 2-10 years down the road, you needed to begin investing in technology yesterday. In contrast, if you are planning on pursuing an exit strategy in the near future, switching systems may hurt your valuation short term. If you sell the firm to a strategic buyer (versus a financial buyer who would use the company as a platform), the new owners will be on their own TMS / visibility system. They will most likely have you switch again. Implementing new technology is painful, so make sure you think this area out before you start your research.
If you are a multinational freight forwarder who needs customs capabilities in multiple countries with full global accounting…. your TMS solution was most likely already mentioned in this article. That game is over until a new competitor steps forward with a real global solution. However, if you are a 50-employee Canadian freight forwarder with offices in Toronto, Vancouver, and Montreal, you don’t necessarily need or want that complexity or expense. There are great TMS providers out there for mid-size forwarders who have deep domain knowledge with country specific or regional expertise. With the new integration tools and companies focused on logistics (chain.io for example) you can integrate with customers, agents and vendors around the world even if they are on different systems.
Shippers and consignees are demanding information solutions from their logistics providers that were just a dream 10 years ago. The list includes difficult shipment routings / tracking requirements at every step of the supply chain, visibility software, OCR standardization, electronic bookings with all vendors, global payment systems, AI enabled document automation, are just a few examples. Seamless integrations to customer ERP systems and competing TMS systems will become a requirement to compete.
Logisyn Advisors has spent a lot of time and money researching and writing about this topic in the logistics tech sector. Do not underestimate the importance of the adoption of quality visibility software. Every TMS provider claims to have visibility software, but if you ask the freight forwarders or their customers, many disagree that current TMS visibility solutions meet the new customer requirements. The unicorns in this space have convinced their investors that they will change the game. Firms like FourKites and Project 44 are the current leaders, but there are more coming.
(A research paper on this topic is available.)
It is always about the customer. COVID did so much damage to the world, but it also forced us to think and act differently. One positive side effect is it made global freight companies and their customers see the value of investing in technology. For the small and mid-size CIFFA members without large IT budgets, that can seem daunting, but don’t forget your main advantage. You can be nimble and move fast. When a firm has thousands of employees on legacy systems, implementing technology needs to go through committee and testing processes that can take six months to two years. Use your advantage.
Before the 2002 dot.com bubble hit, financial institutions were throwing money at tech companies promising to cut out the freight forwarder. We kept a list of firms that had raised over $10M on a whiteboard in my office. We always resented these companies because we had worked around the clock living on credit cards to build a real product. In contrast, these firms had raised millions of dollars selling vaporware via PowerPoints to financial people who did not understand the industry. When the tech crash happened, our team felt vindicated when we crossed names off the whiteboard competitor list.
Twenty years later, we are in a different environment. But with rising interest rates, money has become more expensive for investors and they will want their portfolio companies to become profitable sooner than later. If your software partners had a Series A, Series B, Series C…into infinity fundraising strategy, make sure you have bet on the right horse.
We always seem to be moving from one crisis to another in logistics. It is the life we have chosen and the tech changes are going to change the game. With that said, Logisyn believes the small / midsize freight forwarders can thrive with technology in the new environment; but it will require strategic planning.
For more information about TMS providers best suited for both large and small freight forwarders in Canada, and about the interesting tech ecosystem building up around the TMS providers,please email max.arens@logisyn.com.
The Government of Canada launched the National Cyber Security Strategy Consultation this summer, requesting feedback to the changing digital landscape and the exposure to cyber threats and cybercrime.
An eight-week public consultation ran until August 19, 2022, with contribution from a broad range of Canadians.
Canada’s National Cyber Security Strategy was initially launched in 2018. Since that time new technologies and international events have impacted how we use the internet, and increased potential risks. The COVID-19 pandemic and the significant increase in ransomware are just two examples of events that have changed considerations around cyber security since the Strategy’s release.
Input received will be compiled and analyzed to identify key themes, ideas and suggestions to help inform and guide the Renewal of the National Cyber Security Strategy. Results may be used to inform policy and may be shared within the Government of Canada. Public Safety Canada will retain completed online survey and email submissions in order to develop a summary of findings and to develop a high-level public report.
Goal 1: Secure and Resilient Canadian Systems:
The threats we face in cyberspace are complex and rapidly evolving. Governments, businesses, organizations, and Canadians are vulnerable. With more of our economy and essential services moving online every year, the stakes could not be higher.
In terms of concerns related to cyber security, cybercrime, etc., and how the Government of Canada could help to better protect individuals and organizations, CIFFA indicated that :
“ Our members are struggling with assessing the risks that they face and the level of investment those risks justify in Cybersecurity and/or Cyber insurance premiums. It would be helpful to have a risk calculator developed by the Government of Canada that would allow them to establish appropriate budgets.
Our members are also concerned about risks (unintentional or otherwise) from with their firms. Clear guidance on what they can and cannot do with respect to monitoring the use of company IT would be helpful. This is especially true in Work from Home situations.”
Goal 2: An Innovative and Adaptive Cyber Ecosystem
In terms of Cyber Security Awareness, and initiatives needed to help increase cyber security awareness for all, CIFFA indicated that:
“We would like to see the Government of Canada advertising the resources that have been made available (www.getcybersafe.gc.ca). The advertising should be broadcast across as many channels as possible and specifically address securing Work from Home environments.
We would like the Government of Canada to partner with Associations like ours to get the message out to Members. The Government should provide a quarterly bulletin that we can incorporate into our regular Member communications. We would like access to more up-to-date information. In many cases the information provided by the Government of Canada is 10 years old.”
Agile and Adaptive Cyber Security Capabilities
What steps should be taken to secure networks, emerging technologies, and to better protect Intellectual Property and consumer products (like Internet-of-Things and apps)?
CIFFA responded that it would like to see the Government of Canada certify any device that attaches to the network as meeting Cybersecurity standards.
“We would also like to see the introduction of penalties for firms that deploy apps and/or hardware that collect and disseminate information for which they do not have appropriate permission. “We would like to see clearer guidelines for reporting Cybersecurity incidents. We would also like to see the process clarified and simplified. When do members contact police, privacy commissioner, etc.?”
Cyber Skills and Talent Pipeline
What can be done to increase Canada’s cyber security workforce capacity and create job-ready workers? (For example, is there a mismatch between the in-demand skills and the skills of post-secondary graduates, is there a misalignment between job descriptions and the experience of candidates, is there a need for standardized curricula and outcomes, access to work-integrated learning opportunities, and short-cycle training and upskilling for workers and graduates, etc.?)
CIFFA noted that “we believe that there are unique cybersecurity concerns in the supply chain for which skills are not being developed. We recommend, in cooperation with the Government of Canada, the development of a short cycle training program that is made available to our members to ensure their staff have the appropriate skills for dealing with these unique challenges.”
Goal 3: Effective Leadership, Governance and Collaboration
What is needed to strengthen collaboration and engagement on common interests between the provinces, territories, Indigenous communities and Municipal governments, regulators, private sector, academia, not-for profits, labour organizations and the Government of Canada?
CIFFA would like to see cooperation between the Government of Canada and providers of cybersecurity insurance so that a common understanding of the risks and ways to mitigate the risks in the most cost effective manner can be developed and shared with our members.
What can the Government of Canada do to help shape the international cyber security environment in Canada’s favour and advance Canada’s international cybersecurity interests?
Finally, CIFFA indicated it would like to see the Government’s support and/or participation in the global initiatives to enhance cybersecurity in the supply chain. This includes topics as diverse as smart sensors (IOT) and Blockchain.