Global freight forwarders have mass appeal

Dick Armstrong, chairman of supply chain consultancy Armstrong and Associates said that there’s a certain paradox when considering that most of the leading freight forwarders are from the EU when most of the actual business is generated in the Asia Pacific arena.

“And don’t expect to see any startups get into this picture,” he says with a laugh. The barriers to entry are incredibly high, and it would take vast amounts of money and other resources to penetrate this market. The capital outlay for technology alone is overwhelming, and finding the right people to create the network would also be a daunting task.”

According to Armstrong, the top forwarders are simply an extension of global third party logistics providers (3PLs). Given the huge scale of these operations, it should come as no surprise that they would have the leverage to compete for market dominance.

“And that included human resources as well,” says Armstrong. “Expeditors, for example, lost a number of high-earning sales executives in the past couple of years. To the company’s credit, they kept faith with their staff by not having lay-offs during the recession. But by reducing the commissions paid to top performers, they effectively drove them toward other dynamic competitors like UPS.”

These “top performers,” says Armstrong, are selling complete supply chain packages in their sales pitch. This includes value-added warehousing and transportation management.

“The leading forwarders are going to replace old fashioned sales activity with incentive based pay structures,” he says. “This, in turn, rewards innovation.”

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