From the CIFFA Secretariat office, the latest in our advocacy work:
In the fall of 2022 CIFFA initiated a request to the CBSA to implement a change to the Release of Commercial Goods regulations, which CIFFA felt would improve fluidity and increase efficiencies for the movement of containers to an inland rail terminal.
In its letter dated September 19, 2022, CIFFA requested changes to the Release of Commercial Goods documentation, in particular, relating to the Timeframes for the Release of Goods and limited specifically for cargo arriving via vessel at a Canadian seaport for movement to an inland Rail terminal for customs clearance purposes. In a January 12, 2023 response, the CBSA indicated that reverting to the old timeframes would reintroduce inconsistency and would create situations where carriers would be unable to meet their obligation under Section 12(1) if the CBSA systems automatically triggered release at 12:01. CIFFA’s position remains consistent, that there are opportunities in which to improve the clearance process and increase fluidity, without jeopardizing carrier obligations. We will work with relevant stakeholders in which to the reposition this matter in the interests of supply chain efficiencies.
The federal government, ahead of Budget 2023, has asked to hear ideas about how to help Canadians succeed “while building stronger, greener, more competitive, more innovative, and more inclusive Canadian economy.” In January 2023, CIFFA submitted its pre-budget brief, noting that supply chain problems are far from being resolved, and they constitute an ongoing financial drain on the Canadian economy. “Although we commend the Minister and Department of Transport for the Supply Chain Task force report, it’s essential that the recommendations they’ve endorsed become part of the government’s budget priorities. “
The uncertainty of supply chains impacts the economy at myriad levels- undercutting investor confidence, limiting business growth, and preventing Canadians from capitalizing on market opportunities. This should be one of the highest priority files of a national government. Two factors are critical to an efficient, competitive transportation system: a skilled workforce and excellent infrastructure.
Budget 2023 does respond to a number of urgent demands made by CIFFA through the past year; it’s obvious our voice was heard. A couple of gratifying examples: Our testimony in Parliamentary committees focused on the lack of a national strategy to guide the considerable amount of money pledged for transport and trade infrastructure and we are delighted to see a commitment in this budget to “Establishing a National Supply Chain Strategy with strategic trade corridor investments.”
We also protested vigorously the continued exemption from competition laws which is enjoyed by ocean shipping cartels. In meetings and submissions to Transport Canada and the Competition Bureau, as well as myriad Members of Parliament, we identified this situation as contributing to the abuse of Canadian shippers we’ve witnessed in recent years and again we see a response in Ottawa: the budget announced a promise to launch a “review” of the Shipping Conferences Exemption Act to improve marine shipping competition.” We will be monitoring this pledge closely.
Perhaps impressed with the US President’s State of the Union speech last month, the federal government threw a bone to consumers which included one of our favourite issues: “Budget 2023 announces the government’s intention to work with regulatory agencies, provinces, and territories to reduce junk fees for Canadians. This could include higher telecom roaming charges, event and concert fees, excessive baggage fees, and unjustified shipping and freight fees.”
We noted also that the recommendations of the National Supply Chain Task Force are referenced in the budget, although only generally. (We have urged the opposition politicians to hold the govt’s feet to the fire and actually implement some measures.)
The one specific recommendation that is referenced is the plan to create a Transportation Supply Chain Office to coordinate federal efforts, especially in a crisis. We remain unconvinced this will have a significant impact, but we’ll engage with it as soon as we can and offer CIFFA’s support to their efforts.
The budget certainly says more about supply chain issues and infrastructure than we have ever seen before from this government.
“Canadians expect and deserve a transportation and supply chain system that reliably delivers goods and people to our cities and towns, provides businesses with access to global markets, and safely and efficiently connects our communities. Our economy depends on it, too.”
“Canada’s trade corridors keep our economy moving. From ports, to airports, to railways and highways, they are the backbone of the supply chains that bring goods to our communities and enable our businesses to export their products around the world.”
CIFFA will be looking to comment on changes to Transportation of Dangerous Goods Act, The Customs Act, Transportation Security Clearances and the Canada Transportation Act and associated regulations. CIFFA is also supportive of the repeal of the Canada Shipping Conferences Exemption Act. There is a direct relationship between the cost of doing business in Canada and the abuse of dominance of shipping conferences. The Government recently undertook a review of the Competition Act where the CIFFA raised this issue. The CIFFA submits that repealing the Shipping Conference Exemption Act would bring positive relief to consumer prices as a companion to reduced taxes.
By Pedro Antunes
Central bankers in Canada, the United States and many other developed economies are nervous, anxious to see if the rapid increase in interest rates over the past year will have the intended outcome—slow economic activity and douse inflation.
The U.S. Federal Reserve and the Bank of Canada have increased their key lending rate by over 4 percentage points in record time over the past year. This has resulted in a similar rise in lending rates for households and businesses. The intent is to encourage households to spend less, lower economic activity and take further pressure off prices. Thus far, the policy is working in Canada. The volume of retail sales flattened over the last few months of 2022 and home sales and existing home prices have dropped sharply from the frothy activity we were seeing about this time last year.
More recently though, the rapid rise in interest rates has added another layer to market jitters. While all eyes were on the still-resilient consumer sector, the financial system came under strain as a few banks in the United States and Europe failed. Evidence suggests that these banks were mismanaged, such that the pressure of higher interest rates simply exposed existing problems, but the situation has nonetheless shaken confidence in the global banking system.
Fearing a much wider spread of financial panic, U.S. and European authorities have stepped in quickly to guarantee deposits and ensure liquidity to other banks to prevent the crisis from widening. One bank’s failure can lead to knock on effects at other banks as finances are interrelated. The immediate concern is that there will be more public (and social media) driven scrutiny of other banks. And no bank has enough liquidity to survive a bank run if concerns surface and depositors start withdrawing.
The turmoil had temporarily sent market interest rates plunging, even after a hawkish Fed chair Jerome Powell had signalled that benchmark rates would continue rising in a speech only a few days earlier. We believe Fed rate increases will resume, but that the peak is nearly here. The banking mini crisis has raised recession odds and probably ended up aiding central banks efforts to bring inflation rates down, but more progress needs to be made on that front before rates can be brough back down to neutral territory.
The inflation story is still with us, but progress is apparent. The price shocks brought on by the war in Ukraine started to subside in late spring 2022, helping inflation rates in the United States and Canada ease to below 6 per cent in the first months of 2023. Even Europe, where war impacts are highest, has seen recent progress on taming price growth. The Bank of Canada can afford to pause interest rate increases while it checks to ensure price pressures don’t reignite. We see consumer prices growing within the Bank of Canada’s targeted 1-3 per cent band by early next year, which will allow for neutral or at least positive real wage growth going forward.
The labour market made an impressive start to 2023, marked by a rise in labour force participation and significant employment gains. Large employment gains are being fuelled by an uptick in population growth. International migration to Canada has risen sharply over recent quarters driven by record immigration targets and increased admissions of non-permanent residents, including temporary foreign workers. The rise in migration will contribute to employment and population growth in excess of 2 per cent in 2023.
Expanding labour supply is helping to soak up unmet labour demand in the Canadian economy, which surged in 2022 as pandemic restrictions fell away. Today, downward trending job postings and job vacancy data indicate that labour demand in the economy is moderating. As labour demand falls further over 2023, employment gains are forecast to soften, resulting in a modest rise in the unemployment rate.
We anticipate that oil prices will continue to soften throughout this year due to the ongoing global economic slowdown. With many developed economies facing high inflation and rising interest rates, we expect the demand growth for crude oil to remain sluggish, while output and inventories increase at a faster pace. As a result, we predict that the WTI price per barrel will average US$78.80 this year. Looking further ahead, we anticipate that inventories will continue to rise, leading to a further decrease in oil prices. Specifically, we project that the WTI price will average US$76.2 in 2024.
Through all this, our forecast for real GDP is keeping to the pattern of growth slowing through 2023 to a virtual standstill, with an eventual recovery beginning in early 2024. For the year, real GDP will expand by 0.9 per cent in 2023, followed by 1.4 per cent growth in 2024. A stronger 2.5 per cent rebound is expected in 2025 once the effect of rates falling back to neutral levels takes effect.
Pedro Antunes,
Chief Economist, The Conference Board of Canada
Pedro Antunes is the thought leader and spokesperson for the Conference Board’s suite of economic forecast products, as well as other reports and economic indicators that relate to Canada and its regions. Mr. Antunes has provided expert testimony before parliamentary committees. He makes numerous presentations on economic topics and dialogues with Canadian leaders, the public and media about issues important to Canada.
Mr. Antunes joined the Conference Board in 1991 after working with the Canadian Forecasting Group at the Bank of Canada. In addition to his contribution to regular forecast products, Mr. Antunes led research on the impact of demographic change on the financial sustainability of public health care, productivity and other issues affecting the long-term economic growth for Canada and its provinces. He also worked on several international projects, helping decision-makers in Tunisia, Morocco, Jordan and Ukraine develop appropriate forecasting and policy analysis tools.
Pedro is fluent in both official languages. He is married with one son and enjoys hikes with his dog and playing soccer.
Mr. Antunes holds an M.A. (Economics) from Queen’s University and a B.A. (Honours Economics) from Bishop’s University.
TORONTO, April 28, 2023. – CIFFA, the Canadian International Freight Forwarders Association, is pleased to announce two winners for its 2023 Donna Letterio Leadership Award this year: Janet Wallace, Managing Director, Cargo Operations and Transformation, with Air Canada Cargo, and Christina Forth, Director of Logistics Canada, Mass Logistik Inc.
CIFFA introduced the annual Donna Letterio Leadership Award in December 2015. The award is granted annually in memory of former CIFFA President Donna Letterio, who passed away in August 2013. The award recognizes a woman in the global freight logistics sector who has demonstrated, as Donna did, professionalism, commitment, leadership and a passion for excellence in her career and in her life. In addition to the award, CIFFA will prepare a cheque in each winner’s name for $1,000, which will be presented to Bladder Cancer Canada.
About the Winners
In her role as Managing Director, Cargo Operations and Transformation, with Air Canada Cargo in Montreal, Quebec, Janet Wallace shares her knowledge and commitment to detailed, well-informed processes and procedures, improving customer service and satisfaction as well as the quality of the workplace experience. Janet has a deep understanding of Air Canada’s passenger and cargo operations, which she draws on to support operations, commercial goals, and lead the engineering, procedures, regulatory, training and quality assurance teams. Under her guidance, Air Canada Cargo obtained two CEIV certifications from IATA, ensuring international and national compliance to safeguard product integrity. She is known throughout the company and among partners and customers for her knowledge, experience and personal approach.
With an extensive list of volunteer experience in her Alberta community of Leduc, serving on various boards, Christina Forth’s commitment to the industry, colleagues, career, customers and family is well-evidenced.
At Mass Logistik she has provided nonstop support to grow the business in the industry, getting the local and overseas teams educated in Canadian Freight Forwarding requirements, driving cost savings initiatives, mentoring the logistics staff, bringing encyclopedic knowledge to the job, and fully implementing the e-manifest system including training all staff and SOP development. She was also involved in early-stage advising and testing of the e-manifest portal as an industry representative. She has been the President of the Edmonton International Oilmen’s Curling Tournament since 2016 also serves on that board.
“CIFFA is very proud to continue with this very prestigious award, recognizing women of influence in our industry, which will also inspire the next generation of women leaders. We are very pleased to present this award to both Janet and Christina, who exhibited all the qualities that the award represents,” said Bruce Rodgers, Executive Director, CIFFA.
Learn more about the Donna Letterio Leadership Award.
Earlier this month, seven CIFFA member companies participated in a job fair at Langara College in Vancouver to meet students interested in employment opportunities in the freight forwarding, freight brokerage, logistics and drayage industries. An eighth company also participated in a panel discussion to answer questions from students.
Participating companies were:
About 70 students from Langara’s Supply Chain and Logistics post-degree program, including graduates from within the last three years, attended the day-long event. The employers held mini interviews to get to know the students.
Employer feedback included the following:
The panel comprised Paul Courtney of Courtney Agencies, Brent Peconi of DSV and Nicole Rozinbaum of ITN Logistics. They discussed the following questions from students:
Andrea Bouska, Program Coordinator, Supply Chain and Logistics Placements, Continuing Studies at Langara College, said: “The career fair was geared towards the jobs in the field of student’s studies, so the event was attended by a large number of enrolled students as well as alumni. Students and alumni came professionally dressed with brushed résumés ready for interviews. The lineups were so long that some of the employers didn’t get a chance to interview everyone on the spot. We were glad to see this event at the grounds of Langara College.”
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.)