“Now I know what being in a rock band feels like,” I joked with the members of the Magaya team I was travelling with. We were checking into our hotel in Atlanta, the final stop of a three-day, three-city tour (which also included Chicago and Miami) where we conducted learning and networking seminars with executives from the freight forwarding industry. Not exactly a Rolling Stones or Depeche Mode concert, but for those who attended, it was a fun, productive, and informative experience, nonetheless.
The focus of the “lunch and learn” seminars was to discuss some of the key findings from “The State of Digitization in Freight Forwarding 2025” report, which Magaya published earlier this year based on research conducted by Adelante SCM. I encourage you to download the report for all the insights from the research. You can also read an excerpt here: “Why Is Digitization Imperative For Freight Forwarders And Logistics Service Providers?”
It’s impossible to summarize everything we discussed and shared over the three days in a brief blog post. It’s sufficient to say that the freight forwarding executives who attended generally agreed that the industry needs to accelerate its digital transformation efforts. This will not only help them become more productive and reduce costs in the face of numerous industry trends and challenges, but also enable them to better meet the expectations of their customers, which are becoming more stringent, especially with regards to providing real-time data and visibility.
All that said, here are three takeaways from the sessions that rose to the top for me.
The Need to Rethink Freight Forwarder – Shipper Relationships
One of the findings from the research was that more than a third of the shippers surveyed (38%) said they were only “Slightly satisfied” (24%) or “Not satisfied at all” (14%) with the technological capabilities of their 3PLs or freight forwarders; none were “Extremely satisfied” and only 14% were “Very satisfied.”
Why such low satisfaction? How can the industry better meet customer expectations?
As you can imagine, the executives shared various perspectives on these questions, but the one that kept coming up was that to truly meet customer expectations, there needs to be better alignment of objectives and metrics between freight forwarders and shippers.
In other words, freight forwarders and shippers need to rethink their business relationships — that is, move away from short-term, transaction-based relationships to longer-term, outcome-based partnerships.
This gap in IT capabilities and customer expectations is not new. In fact, here is what I wrote more than a decade ago in a February 2014 Talking Logistics post:
In the Third-Party Logistics Study conducted every year by Dr. John Langley, there’s a chart that shows a gap between the IT capabilities shippers expect from 3PLs and their satisfaction with those capabilities. Logistics software vendors and analysts (yes, including me) have been pointing to this gap as evidence that 3PLs need to invest more in technology.
To quote Kate Vitasek, faculty member at the University of Tennessee and architect of the Vested Business Model, “The focus needs to be on developing evolving and mutually beneficial relationships that create shared value, solve mutual problems, and get both parties to a place of ‘we’ rather than the usual ‘us vs. them’ tug of war.”
Or to put it more bluntly from a freight forwarder’s perspective, “How can shippers expect us to invest time, money, and resources in technology and other things to meet their specific needs when they include a 60-day escape clause in their agreements and put the business out to bid every year?”
Here’s one way to get the mindshift started, which Kate Vitasek shared in an August 2014 Talking Logistics guest commentary: “Why not update and flip the old-school, transaction-based Request for Proposals into something much more meaningful and useful — a blueprint for a partnership? What if instead of a Request for Proposal, the RFP became a Request for Partner?”
Employees are Critical for Success
As highlighted in the research report, “Technology is too expensive” topped the list of challenges/obstacles freight forwarders face in digitizing their operations. It was followed by “Integration with legacy systems,” “Lack of IT resources,” and “Resistance to change.”
The executives in the sessions concurred with these results, but the challenge that received the most attention was the role of employees in the success of digitization efforts.
“If I can’t get most of my employees to write a coherent email, how am I going to get them to use any kind of sophisticated technology,” asked one of the executives. Others raised the concern employees have of losing their jobs to technology, especially Artificial Intelligence.
In short, the discussion revealed two critical success factors related to employees:
- Freight forwarders need to upskill/reskill their employees. Put differently, the type of employees you might have hired in the past might not be the most suitable in a tech-driven work environment. Therefore, in addition to revising their hiring requirements, freight forwarders need to invest in employee training. This includes both technical skills like data analysis, as well as soft skills like critical thinking, problem-solving, and communication.
- Freight forwarders need to address upfront the concerns employees might have with technology, especially AI. The authors of a February 2022 Harvard Business Review article highlight this point. While their focus was on warehouse automation, their advice applies to AI and other automation technologies as well:
“Workers have serious concerns around how these new [warehouse automation] tools might harm their job security, as well as whether they’ll get the training they need to work effectively and safely alongside their robotic colleagues. As organizations look to the future, they must both address workers’ fears and build on their optimism by working to provide safe, productive workplaces and real opportunities for growth.”
The point about “real opportunities for growth” resonates with another topic discussed at the seminars: the need to make freight forwarding not just a place to land a job, but a place to build a career. Only by changing the perception (or at some companies, the reality) of the industry will it be able to attract and retain the best talent.
Finally, the executives also emphasized that despite the growing role and importance of technology in the industry, freight forwarding remains a relationship business. That is, you can’t overstate the importance of the relationships created and nurtured between “Fred and Mary at your company with Sam and Audrey at your customers.” It is those relationships, especially when challenges or disruptions arise, that are the foundation for long-term success.
Early Adopters Are Not Looking Back
Several executives from existing Magaya customers attended the sessions. Since these conversations were confidential, I cannot name the executives or their companies. That said, the success stories they shared based on their implementation of Magaya solutions had some common elements:
- Leadership support is a must. Without it, it’s impossible to make the necessary investments in technology, people, and other resources too.
- Start small and focus on low risk/good return opportunities. Trying to do too much at once is too risky and disruptive.
- Quantify the benefits achieved in cost, productivity, and other KPIs. Success opens the door to new initiatives, but you have to measure it.
- Include employees in the planning and decision-making process. The more ownership and say they have in an implementation, the more invested they will be in its success.
Overall, from a learning and networking perspective, the “Moving Freight Forward Tour” was a big success. Some of you might be wondering: Will there be an encore? Another leg to the tour?
I guess it depends on how much cheering and noise you make to bring us back on stage.
