Trends in the Global Freight Forwarding Industry
published: cw 21, 2007 in Logistics & ShippingThe freight forwarding market has been a major beneficiary of an increasingly globalised world economy. The development of extended supply chains, integrating manufacturers, suppliers and retailers on a worldwide basis, has led to significant year-on-year growth in international trade volumes. Freight forwarders revenues - and profits - have surged and this has resulted in structural changes to what for many years was a conservative and stable industry.
These changes have included an unprecedented level of mergers and acquisitions from which a small number of global players has emerged. Many long standing brands have been subsumed: MSAS, AEI, Emery, Danzas, ASG, Wilson, Circle, to name but a few. In their place have evolved mega-carriers such as DHL Global Forwarding, Schenker, UPS Supply Chain Solutions and Kuehne + Nagel. As with the rest of the logistics market, private equity is also starting to play a major role in the sector’s development.
The levels of profitability in the market, its growth prospects and the asset light nature of freight forwarders’ business models have made the sector highly attractive to investors. The industry’s attribute of counter-cyclicality - that is, its ability to increase margins in times of economic downturn - gives it an advantage over other segments of the logistics market.
This is not to say that there are no clouds on the horizon. A cooling US economy would have serious repercussions on trans-Pacific and trans-Atlantic trade, although the growth of intra-Asian volumes would go some way to mitigate this. In addition, freight forwarders have a poor reputation with some customers for being a low value adding resource, providing a range of commoditised, cost based services. Major challenges remain in overcoming these negative perceptions.
Source: Transport Intelligence
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