While the asset-based freight transportation business continues to consolidate into the hands of fewer and larger firms, the non-asset-based counterpart—made up mostly of freight forwarders and non-vessel-operating common carriers—remains bountiful, although fragmented.
That’s not to say that these intermediaries haven’t experienced their own share of mergers and acquisitions in recent years. However, a very big difference from the asset-based firms is that behind every significant intermediary M&A comes a legion of new players entering the business. In the United States, for example, one just has to observe the routinely published Federal Maritime Commission lists of ocean transportation intermediary license applications.
The size of the business for the forwarders is also enormous. According to research and consulting firm Transportation Intelligence, the North American market for these firms is valued at about $41.4 billion, whereas the global market registers upwards of $169.3 billion. Transportation Intelligence also estimates that the top 10 forwarders control an estimated 42 percent of the global market, with the remainder spread across tens of thousands of other forwarders.
Unless you’re a large shipper with the internal abilities and tools to manage your supply chain from point A to point B, chances are you rely on the services of a forwarder or NVO for at least some aspect of your freight transportation. Forwarders provide numerous value-added services, including processing crucial shipping documentation, helping ensure compliance with U.S. and overseas government regulations, and interfacing with carriers for rates and services. As that’s largely conducted behind the scenes, forwarders often step out of the shadows to assist their customers when shipments go awry. Generally speaking, the cost of a forwarder’s services are reasonable, not exuberant, due to so much competition in the market.
As Eric Johnson, American Shipper’s research director and information technology editor, explained in this issue, forwarders and NVOs continue to find ways to ease their own internal burdens—mostly through IT investments—to continue improving their customers’ experience. If there’s a problem, shippers can generally still telephone their forwarders for answers and assistance.
Despite turn-of-the-century predictions that the Internet would wipe out the intermediary, the opposite is true. Forwarders and NVOs have become more important than ever to ensuring smoothly functioning, cost-effective shipper supply chains.
This editorial was published in the March 2015 issue of American Shipper.
