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Smaller forwarders can score in post-Brexit integrators-independents battle
Apr 10, 2017

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04/04/2017

Smaller forwarders are best placed to remove customer headaches that will accompany Brexit, as expected supply chain disruptions are likely to be accompanied by increased demand for express and expedited logistics services.

That’s the view of group managing director at Priority Freight Neal Williams.

He told The Loadstar he believes there is a positive future for the European express market, and he expects continuing volume growth driven by significant innovations.

"I expect the market will see positive disruption from improved IT infrastructure," he said. "And I think a lot of this will come from niche players innovating in specialist sectors."

Mr Williams believes integrators do a “fantastic” job, handling volumes that “feed the machine”, but says their focus on “vanilla” shipments leaves open major niche markets for the smaller forwarders.

“The integrators are not interested in specialist shipments as they can slow the bulk of shipments down,” he said. “And for them, it is all about volumes.

“Conversely, shippers with smaller volumes may not see the benefit of going through the bigger players, but they can see benefits going through smaller players that offer specialist shipments.”

A DHL spokesperson said while its express division mostly carried shipments of 30kg or less that can be containerised, it often went beyond these parameters.

“We transport a huge array of shipments with complex requirements such as specialised packaging needs, larger dimensions and temperature control requirements.

“Defining criteria for using express is more likely urgency, shipment value, the need for a door-to-door service and geographical coverage, rather than that they are ‘not complex’ or ‘higher volume’.”

But Mr Williams argues that the fallout from Brexit could dampen integrators’ willingness to get involved in shipments that could potentially suffer delays from increased customs procedures.

“Our company opinion is that Brexit is not the best thing for the UK and its industry. It will, however, give the independents a platform and a necessity to innovate.

“Companies like Priority have good experience of UK/European customs procedures and clearance and are a necessary adjunct to the integrators.”

The British International Freight Association (BIFA) said while the likes of Maersk and Alibaba got the headlines, there was collaboration at many levels between carriers, integrators and forwarders.

“All operators in the supply chain cooperate, but we have no view on methods of trading and leave members to operate to the mutual benefit of forwarders and customers,” said a spokesperson.

Managing director of WCA e-commerce Alex Allen believes integrators would become more reliant on independents to fulfil cross-border and last-mile services.

He said: “Integrators are having to reassess their strategies with stronger focus not only on high volumes, but also on sustainable margins to maintain fixed higher operating costs.

“Some are finding it increasingly difficult to maintain current margins against a growing customer trajectory for on-demand and speedy cross-border express services.”

Mr Allen said this surge was coming from B2C platforms and is, in turn, affecting integrators’ premium B2B margin segments, following a trend of volume shift towards B2C e-commerce shipment services.

Historically, B2C services have been built around high, fixed-operating cost models, negatively affecting yields per package.

“Integrators are trying to come to terms with higher volumes but lower margins on these B2C e-commerce shipments,” said Mr Allen. "Independent forwarders will become fundamental for integrators in this shift, based on their needs to manage high cross-border, fulfilment and last-mile costs in a sustainable manner."

However, the DHL spokesperson said its preference, and “that of our customers”, was to use its own network, adding: “Where a shipment cannot be carried on the DHL Express network, we would typically direct the customer to another division, such as DHL Global Forwarding, Freight.

“It adds value for customers through its know-how, its ability to secure competitive rates and the specialised knowledge of its freight forwarding experts in key areas of the supply chain.”

However, Mr Allen said the SME forwarder traditionally operated on lower costs but was still able to provide all of the cross-border, fulfilment and last-mile solutions competitively and effectively.

“Thereby reducing the integrators’ cost model for providing such services,” he said.

“We can see independent forwarders fulfilling these requirements on behalf of the integrator – especially in large and dynamic e-commerce hot spots in emerging markets such as South-east Asia.”




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