We all know that the freight forwarding industry is facing challenges due to the ongoing market volatility, trade wars, supply chain disruptions, and environmental regulations. And thus, freight forwarders and carriers need to adopt smart strategies to cope with these uncertainties to maintain their competitiveness. In this blog post, we will discuss a few strategies that freight forwarders and carriers can use to save costs and manage risks during market volatility: dynamic pricing, customs data, and trend analysis.

Dynamic Pricing

Dynamic pricing is a strategy that enables an organization to optimize its prices in real-time, based on historical data, current market demand and conditions, and the power of predictive analytics. Dynamic pricing engines can produce instant freight quotes and leverage insights on supply and demand. This will help organizations to get the best rates for their orders and ensure that they are  able to meet customer demands.

There are several benefits to Dynamic pricing, such as:

• Increasing revenue and profitability by capturing the optimal price for each shipment
• Improving customer satisfaction and loyalty by offering competitive and transparent prices
• Enhancing operational efficiency and agility by reducing manual work and errors

According to McKinsey, logistics companies that transform their pricing strategy can typically expect a revenue boost of 2 to 4 percent—which translates to roughly a 30 to 60 percent EBIT margin improvement (McKinsey, 2020). However, achieving this upside requires a strategy that tackles the entire pricing cycle. So, to implement the dynamic pricing strategy, organizations can take the following steps:

• Invest in data infrastructure and analytics tools that can collect, process, and analyze large volumes of data from various sources.
• Develop a pricing algorithm that can generate optimal prices for each shipment based on multiple factors, such as origin, destination, mode, weight, etc.
• Test and refine the pricing algorithm using historical data and feedback loops to ensure its accuracy and effectiveness.
• Deploy the pricing algorithm across all channels and touchpoints, such as online platforms, mobile apps, and email notifications.
• Monitor and evaluate the performance of the pricing algorithm using key metrics, such as revenue growth, margin improvement, customer retention, etc.

Customs Data

Customs data is another valuable source of information that can help freight forwarders and carriers save costs and manage risks during market volatility. As it can be leveraged to provide insights into various aspects of the global trade landscape, such as:

• Trade volumes and values by country, region, product category, etc.
• Trade patterns and trends by origin, destination, mode, seasonality, etc.
• Trade regulations and compliance requirements by country, product category, etc.
• Trade risks and opportunities by market segment, product category, etc.

Freight forwarders and carriers can use customs data to optimize their supply chain operations and decision-making in several ways:

• Identify new markets and customers by analyzing the trade flows and demand patterns of different regions and product categories
• Optimize routes and modes by comparing the costs, transit times, reliability, and environmental impact of different transportation options
• Reduce delays and penalties by ensuring compliance with the customs regulations and documentation requirements of different countries
• Mitigate risks and uncertainties by monitoring the trade disruptions and changes in the global trade environment

Trend Analysis

Trend analysis is another important technique that can help save costs and manage risks during market volatility. Analyzing trends is the process of identifying and evaluating the patterns and changes in the market conditions over time. Which in turn can help anticipate future scenarios and prepare accordingly.

Some of the trends that freight forwarders and carriers should pay attention to are:

• The shift to e-commerce: Consumers have increasingly been shopping online for convenience and safety. This creates new opportunities to offer faster and more flexible delivery options, such as express, same-day, or last-mile delivery. However, it also poses new challenges, such as increased demand volatility, and higher customer expectations.
• The rise of sustainability: The environmental impact of freight transportation is becoming a major concern for both regulators and customers. Freight forwarders and carriers need to adopt more sustainable practices, such as reducing carbon emissions, optimizing fuel efficiency, using renewable energy sources, and minimizing waste. This can help them comply with the environmental regulations, improve their brand reputation, and attract more eco-conscious customers.
• The adoption of technology: Technology is transforming the freight forwarding industry by enabling more automation, digitization, and innovation. Freight forwarders and carriers need to embrace technology to enhance their operational efficiency, customer experience, and competitive advantage. Some of the technologies that freight forwarders and carriers should consider are:
• Artificial intelligence (AI) and machine learning (ML): AI and ML can help freight forwarders and carriers automate various tasks, such as pricing, routing, scheduling, forecasting, etc. AI and ML can also help freight forwarders and carriers generate insights and recommendations from data, such as customer preferences, market trends, risk factors, etc.
• Cloud computing and big data: Cloud computing and big data can help freight forwardersand carriers store, process, and analyze large amounts of data from various sources, such as internal systems, external platforms, sensors, etc. Cloud computing and big data can also help freight forwarders and carriers access data and applications from anywhere and anytime.

Conclusion

Freight forwarding is a dynamic and complex industry that requires constant adaptation to the changing market conditions. Freight forwarders and carriers can use dynamic pricing, customs data, and trend analysis to save costs and manage risks during market volatility. These strategies can help them optimize their prices, routes, modes, compliance, delivery options, sustainability practices, and technology adoption.

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References

McKinsey. (2020). Getting the price right in logistics. Retrieved from https://www.mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/getting-the-price-right-in-logistics

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