CHALLENGING THE
ZERO-SUM MINDSET
A perspective on how to improve the relationship
between Carriers and Freight Forwarders
Jesper Adeltoft and Christian Kongerslev Reich
WHITE PAPER
INTRODUCTION
Intermediaries are known in many industries such as travel
agencies and insurance brokers. In most cases, the intermediary is either exploiting market imperfections and/or
bridging complexity.
The national energy markets in Europe is an example where
an intermediary plays an active role. Energy markets have
been deregulated and interconnected allowing for energy
trading across boarders and sources. Price differences between time of purchase, production and consumption as well
as non-transparency allow brokers to exploit the imperfections and earn large sums on arbitrage.
In many industries, the supply side views the intermediary as
a (temporary) necessary evil that should be fought every day
and eventually made redundant. At first glance, container
shipping is no different. Freight Forwarders act as intermediaries and market makers; consolidating volume, pressuring
Carriers for better rates and taking a 'cut' in the process.
So why look closer into this relationship?
THE CURRENT RELATIONSHIP DYNAMICS
BETWEEN CARRIERS AND FREIGHT FORWARDERS ARE DESTROYING VALUE
First of all, because the current relationship dynamics are destroying value.
Once you scratch the surface, it is evident that the relationship between Carriers and Freight Forwarders is actually far
from black and white. It varies across companies, people and
even distinct commercial situations. Sometimes they are suppliers and customers, sometimes partners and sometimes
competitors.
Such ambiguity of the working relationship is sub-optimal in
many ways. It means that all parties are inconsistent in their
approach to each other and to the market. In addition, it appears to drive a very short-term and transactional approach
to each other.
It does not have to stay this way. Through clarity, dialog and
even unilateral steps, there seems to be significant untapped
potential in the Carrier/Freight Forwarder relationship, benefitting not only the players themselves, but also the Shippers.
THERE SEEMS TO BE SIGNIFICANT
UNTAPPED POTENTIAL IN THE
CARRIER/ FREIGHT FORWARDER
RELATIONSHIP. BENEFITTING NOT ONLY
THE PLAYERS THEMSELVES, BUT ALSO
THE SHIPPERS
Secondly, the container shipping industry is currently undergoing an interesting development that potentially could have
a radical effect on the working relationship between Carriers
and Freight Forwarders.
The container shipping industry has embarked on a journey
toward online booking, greater transparency, online aggregators, etc. All Carriers and Freight Forwarders we talked to had
their individual online strategies.
THE CONTAINER SHIPPING INDUSTRY IS
SLOWLY BUT SURELY MOVING ONLINE –
POTENTIALLY REDEFINING THE ROLE OF
THE INTERMEDIARY
In multiple other industries, such changes have resulted in the
demise of the 'middleman' or at least in a significant redefinition of the intermediary role. The big question is therefore
how this development will affect the Freight Forwarders' role
and the working relationship between Carriers and Freight
Forwarders.
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HIGHLIGHTS
PART 1: THE BACKGROUND AND CONTEXT OF THE ANALYSIS


24.9%
Our approach
A few facts on the industry
CONTROLLED BY
FORWARDER
PAGES 5 TO 7
75.1%
CONTROLLED
BY BCO
PART 2: THE COLLECTIVE INDUSTRY VIEW ON THE RELATIONSHIP BETWEEN CARRIERS AND FREIGHT FORWARDERS





The current relationship between Carriers and Freight
Forwarders is blurry – at best
Counterproductive behavior and zero-sum mindset
Digitalization and transparency from the Carriers will be
welcomed by many and be a catalyst for new value creation in the industry
The Freight Forwarders' position in the industry is currently not threatened, but the role and the revenue
model must change
The courage to invite for co-creation of mutual value will
most likely define the winners of the next decade
FREIGHT
FORWARDER
CARRIER
SHIPPER
PAGES 8 TO 16
PART 3: OUR CONCLUSIONS AS WELL AS OUR PERSPECTIVE TO THE
STAKEHOLDERS



Create a bigger pie (for the industry), rather than just
taking a bigger piece
Work together for mutual benefit
Create more clarity in your respective relationships and
act accordingly
PAGES 18 TO 21
CARRIER DEPENDENCY ON FFW
4
Customer
Sales partner
It doesn't matter much
The Carrier could serve the
shipper directly but value
the Freight Forwarder’s
role. The relationship
becomes that of a sales
partner
what Shippers the Freight
Forwarder serves because
the Carrier can't reach
them. The Freight Forwarder effectively
becomes the customer
3rd party sales
Competitor
The Carrier has no
dependency on the Freight
Forwarders, but value the
volume they can access if
the terms are right.
The Freight Forwarder
becomes a reseller
The Carrier has no need for
or value from the Freight
Forwarder, making it a
competitive relationship
CARRIER ACCESS TO SHIPPERS
INDUSTRY
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METHODOLOGY
OUR APPROACH TO THE ANALYSIS
Having encountered the ambiguity of the working relationship between Carriers and Freight Forwarders on several assignments, we decided to dedicate significant time and efforts to understanding it further. The combination of mutual
dependency, competition and new market dynamics toward
greater transparency made it especially interesting.
What strategies would be best for either or both parties in
the future?
Many preferred to be anonymous in order to speak more
freely; the rest are listed in the 'credentials' section in the back
of this white paper. All quotes used in this paper have been
reviewed by the respective people, and potential misunderstandings have been double- checked.
We have defined our approach and ambition as follows:
Current collaboration
 Who do you work with, what works well and what needs
to be improved?
 Are you competitors, partners or is it a supplier/customer relationship, and why?
We focus on container shipping and the ocean freight.
This is where we had the highest number of observations and
the most interrupting dynamics in play.
We combine desk research with in-depth interviews.
Opinions matter, especially in a shipping context where the
personal relationships to a great extent define and shape the
interactions between Carriers and Freight Forrwarders.
We talk to the right people, in the right companies.
The result is significant insight from the most influential Carriers and Freight Forwarders.
We get a customer's perspective.
The Shippers' view on the relationship between Carriers and
Freight Forwarders (including their preferences and expectations) is important in terms of how changes in the industry
are likely to play out.
It has been quite evident that we are not alone in wanting to
investigate this relationship further. Once approached, most
major Carriers and Freight Forwarders welcomed the dialog,
and many referred us to others in the industry, whose perspective they would also appreciate to be included. Finally,
some of the interviewees have reverted with questions and
reflections in anticipation of the results.
We have interviewed 50+ managers and executives from 30+
companies across Shippers, global and regional Carriers as
well as global, regional and local Freight Forwarders in Europe, the Middle East and Asia.
WE HAVE INTERVIEWED 50+ MANAGERS
AND EXECUTIVES FROM 30+ COMPANIES
The interviews have typically been 1-2 hours, face-2-face conversations focused on three areas:
Market dynamics
 What trends influence the working relationship?
 Have there been any changes lately?
 Do you expect to change the relationship in the foreseeable future, and if so why?
Future models
 What changes (if any) do you foresee in a future (online)
business environment?
Finally, we rounded the dialogs off with questions like the following:
 What should Carriers/Freight Forwarders do more or
start doing?
 What should Carriers/Freight Forwarders do less or stop
doing?
It is important that this white paper is not a transcript of the
interviews conducted. Rather, it is our synthesis of the findings, combined with our subjective view of the working relationship between Carriers and Freight Forwarders. Not everyone will agree with all conclusions – but then again – not
everyone should.
NOT EVERYONE WILL AGREE WITH ALL
CONCLUSIONS – BUT THEN AGAIN – NOT
EVERYONE SHOULD.
Hopefully, readers will find interesting, valuable and useful
guidance in the following pages. We invite everyone to discuss and challenge the findings, opinions and conclusions. We
are always up for a good discussion.
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A FEW FACTS
FIG 1 DISTRIBUTION OF CONTAINERISED OCEAN TRADE VOLUMES
135
34
25%
CONTROLLED BY
FREIGHT FORWARDER
Top 10
Rest
Top 10
65
46
35
54
Rest
75%
CARRIER VOLUMES
Million TEUs
CONTROLLED
BY SHIPPER
FREIGHT FORWARDER VOLUMES
Million TEUs
Top 10 Carriers
Top 10 Freight Forwarders
Maersk Line
MSC
CMA-CGM
Evergreen Line
Hapag-Lloyd
Cosco
CSCL
Hanjin
MOL
Hamburg Süd
Kuehne+Nagel
DHL
DB Schenker
Pantos
Panalpina
Expeditors
Sinotrans
Damco
DSV
CEVA
Note:
Source:
Market shares for Carriers are based on size of operated fleet by January
2014 (Alphaliner). Carrier volume 2014; Freight Forwarder volume 2013
Container Trade Statistics; Alphaliner statistics; Transport intelligence
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THE CURRENT RELATIONSHIP BETWEEN
CARRIERS AND FREIGHT FORWARDERS
IS BLURRY – AT BEST
Carriers and Freight Forwarders work closely together and
depend a great deal on each other in their daily business.
However, when interviewing (and working with) them, it is
evident that the nature of their current business relationship
is far from clear – misunderstandings and unmet expectations
being a catalyst for distrust and value destruction.
IT IS EVIDENT THAT THE NATURE OF
THEIR CURRENT BUSINESS RELATIONSHIP IS FAR FROM CLEAR
Some of the questions that come to mind are:




If Freight Forwarders are customers (as many Carriers
say), why do Carriers exclude them from buying certain
products and why do the Carriers send their sales people to call on the Freight Forwarders' customers?
If Freight Forwarders are an extended sales channel
(which many of them say they are) – why don't they
market the Carrier brand like a sales channel would and
should?
If Freight Forwarders are competitors (which is what we
hear from the Shippers), why do Carriers offer the
Freight Forwarders excellent long-term contractual
terms, volume discounts and (for some) even include
them in the Key Account program?
Etc.
The fact is that most of them find themselves playing all roles
at different times, but few (if any) are conscious of the difference, differentiating deliberately and consistently
MOST OF THEM EXPERIENCE PLAYING
ALL ROLES BUT FEW (IF ANY) ARE CONSCIOUS OF THE DIFFERENCE, DIFFERENTIATING DELIBERATELY AND CONSISTENTLY
In the interviews, the dominant views among Carriers and
Freight Forwarders were as either customer or sales channel.
They are all conscious about not describing the other as a
competitor even though they sometimes compete for a given
business.
Shippers, on the other hand, have a different perspective.
Freight Forwarders have special products e.g. freight management/3rd party logistics, but otherwise Carriers and
Freight Forwarders are competitors vying for the same business.
I DON'T CARE WHAT EITHER SAYS – I
CONSIDER CARRIERS AND FORWARDERS AS COMPETITORS FOR MY
BUSINESS
Shipper
s
He is a
customer
I am a sales
channel
CARRIER
FREIGHT
FORWARDER
SHIPPER
They are
competitors
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A joint sentiment seems to be that Freight Forwarders are
best (bring most value) with the small/medium customers
and in complex settings. With the large Shippers and/or
point-to-point trades, Freight Forwarders provide little value.
Yet, they have significant business on these customers and
trades.
A JOINT SENTIMENT SEEMS TO BE THAT
FREIGHT FORWARDERS ARE BEST
(BRING MOST VALUE) WITH THE
SMALL/MEDIUM CUSTOMERS AND IN
COMPLEX SETTINGS
The nature of this working relationship matters because if all
were conscious, explicit and consistent in how they interacted with each other, there would be multiple benefits for
everyone – also Shippers, such as:
 Improved predictability on vessel utilization – improving
supply security for the Shippers
 Both Carriers and Freight Forwarders spending time and
resources on creating value for the Shippers instead of
managing and counteracting each other
 Opportunities for making minor adjustments that could
benefit the Shippers' supply chain efficiency (administratively or operationally)
 Significantly reducing administrative waste in commercial and customer service organizations for both Freight
Forwarders and Carriers
While recognizing the issues, most interviewees also emphasize the impediments they will face, if they try to do something about it.
The most common arguments are:

Our counterparts are not ready/willing

Our counterparts will consider an approach a weakness
and stab us in the back, first chance they get

International competition law prevents us from doing
anything
Talking together can pose a legal challenge and is certainly
ground for concern. Many of the industry players have both
recent and impactful experiences in this regard
To address this, we have sought legal counselling on the
specifics, but also tried to emphasize the unilateral initiatives
from either Carriers or Freight Forwarders that we believe
will bring value to the industry.
Notes on the legal aspect
We have tried to shed some light on the legal issues
that could occur when Freight Forwarders and Carriers discuss their working relationship by asking legal
professionals.
It quite fast became evident that the only clear answer we could get was "there is no clear answer".
There seems to be a common agreement on a few
overall observations and guidelines:

mainly related to Freight Forwarders talking to
each other or Carriers talking to each other

From a general perspective, Carriers and
Freight Forwarders are serving two different
markets and are thus not competitors

Depending on the situation, a specific Carrier
and a specific Freight Forwarder could be considered potential competitors and would thus
be violating the law by making lateral agreements on their relationship

The first two are primarily rooted in the traditional counterproductive behavior and zero-sum mindset of both Carriers
and Freight Forwarders. It will not be easy to change this,
but it appears that there is significant willingness. We will
address this in the next section.
The issues many have seen or experienced are
Internal discussions on the commercial logic of
the relationship are fine but have the individual
case evaluated legally before engaging in a dialog with a counterpart
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COUNTERPRODUCTIVE BEHAVIOR AND
ZERO-SUM MINDSET
The right mindset can be a catalyst for amazing achievements and development, while the wrong mindset can be an
overwhelming barrier for change.
The container shipping industry is full of examples on counterproductive behavioral patterns that everyone knows and
acknowledges as such:






Freight Forwarders double (or triple) book to ensure
space on the vessel
Carriers overbook vessels and roll cargo
Contracts are only honored by the party benefitting
from the contractual terms versus current market conditions
Freight Forwarders try to play the Carrier's own complexity against them, e.g. combining many local agreements, local rebates, special commodity rebates, etc.
Carriers avoid bidding on a tender that is currently
served by Freight Forwarders, in fear of repercussions
Freight Forwarders offer long-term rates to Shippers,
undercutting Carriers and then revert to the Carriers to
help fulfill the won contract
The behavior seems to be the result of a zero-sum mindset –
a perception that taking money from someone else is time
better spent than creating value on your own.
ZERO-SUM MINDSET – TAKING MONEY
FROM SOMEONE ELSE IS TIME BETTER
SPENT THAN CREATING VALUE ON
YOUR OWN
An example brought up by many is a recent trend where
Freight Forwarders target large Shippers on long-term contracts, undercutting Carriers in the tenders. Subsequently
they turn to the Carriers to help honor the contracts at the
settled rates.
The Shippers do not complain, but no value is created. The
Freight Forwarders have basically taken money from the Carrier and given it to the Shipper.
The result is a fundamental distrust and it becomes difficult
to discuss and negotiate the things that really matter, e.g. optimizing and simplifying flows, creating new specialized products for the customers, etc. By going for the short-term win
for themselves, Carriers as well as Freight Forwarders forego
the opportunity to create long-term wins for everyone.
BY GOING FOR THE SHORT-TERM WIN
FOR THEMSELVES, CARRIERS AS WELL
AS FREIGHT FORWARDERS FOREGO THE
OPPORTUNITY TO CREATE LONG-TERM
WINS FOR EVERYONE
Everyone we interviewed agrees that breaking these patterns
would benefit all. Many have good ideas and see multiple opportunities just waiting to be harvested. However, they consistently point to someone else to take the first step.
From an outside perspective, it seems to be up to the largest
players to lead the way. They have the most to gain and sufficient mutual dependency to promote a trustworthy atmosphere.
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DIGITALIZATION AND TRANSPARENCY
FROM CARRIERS WILL BE WELCOMED BY
MANY AND BE A CATALYST FOR NEW
VALUE CREATION IN THE INDUSTRY
The container shipping industry is notoriously behind most
of the world when it comes to digitalization, automation and
transparency. In most industries, we have been able to find,
book, order and pay for products and services online for the
past ten years, as consumers as well as businesses. In shipping, we are still only scratching the surface.
Online aggregators have tried to consolidate shipping information making it available to everyone. For the small, low
complexity shipments, they have made a difference. For the
large majority, however, the information available cannot
bridge the complexity of multiple national standards and intermodal networks that is the reality.
Everyone in the industry expects different aggregators to
continuously attempt to crack the code for global transparency, and while they recognize that some might eventually
be successful, they remain very skeptical. Rather, most people believe transparency has to come from within the industry, driven by Carriers and Freight Forwarders.
TIME HAS COME AND GONE FOR THE
ONLINE AGGREGATORS – THEY WILL
NOT MAKE A REAL DIFFERENCE IN THE
INDUSTRY
Freight Forwarder
The last movers in the industry are Carriers. It seems there are
three dominating reasons for this:
1)
2)
3)
It is more complex than it may sound, e.g. to make realtime, relevant quotes in an industry with such rate fluctuation and global complexity
There are virtually no clear standards for products, services, charges, etc. making digitalization (and product
comparison) quite challenging
The Carriers are concerned that the large Forwarders
will see it as an aggressive move
Testimony from this analysis shows that the last reason is a
misunderstanding.
Actually, the large global Forwarders welcome the transparency. All emphasize the complexity surrounding the sea voyage and that their ability to manage this complexity is their
primary value-add. Thus, the adverse effects of transparency
are by far outweighed by the administrative savings and
speed to market.
ONLINE TRANSPARENCY FROM THE
CARRIERS WOULD BE A GIFT – ENABLING US TO CREATE MORE VALUE FOR
OUR CUSTOMERS
Articulated in different ways by all large Freight Forwarders
interviewed
Many actually also emphasize that digitalization pushes Carriers to streamline their internal processes. Such improvements would also be welcomed by all.
I THINK THAT ONLINE TRANSPARENCY WILL HELP OR FORCE CARRIERS
TO A NEW LEVEL OF EFFICIENCY
Shipper
When asked who might be adversely affected by digitalization and transparency, many point to the less advanced
Freight Forwarders.



Large Freight Forwarders have multiple revenue streams
and manage the global complexity for their clients
Small Freight Forwarders deal with (local) customers
who would never book directly with a Carrier anyway
The less advanced, medium-sized Freight Forwarders
primarily work as market makers, and the ocean freight
mark-up is their primary revenue source. Transparency
will certainly place significant pressure on this model
Finally, most interviewees also emphasize that the Freight
Forwarders should revisit their revenue model to align pricing
with real value-add. This will be the focus for the next section.
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THE FREIGHT FORWARDERS' POSITION IN
THE INDUSTRY IS CURRENTLY NOT
THREATENED, BUT THE ROLE AND THE
REVENUE MODEL MUST CHANGE
Is container shipping like the travel industry where the travel
agent became redundant when the online services took off?
None of the Shippers we have spoken to can imagine a
world without Freight Forwarders.
NONE OF THE SHIPPERS WE HAVE SPOKEN TO CAN IMAGINE A WORLD WITHOUT FREIGHT FORWARDERS
First and foremost, Freight Forwarders play a unique role in
freight management, having experience from multiple supply
chains and access to knowledge that can help Shippers realize untapped potential in their own supply chain. Secondly,
shipping is still very complex, and Freight Forwarders make
the world easier for Shippers, removing many concerns and
enabling the Shippers to think of their own business rather
than shipping.
FORWARDERS BRING IN A LEVEL OF
KNOWLEDGE, EXPERIENCE AND FLEXIBILITY THAT IS CRUCIAL TO OUR SUPPLY
CHAIN AND THAT WE CAN'T GET ANY
OTHER WAY
Shipper
One would think that information technology and aggregators like Shipstr.com would threaten the Forwarders. However, the industry is saturated with inconsistent standards
making it virtually impossible to automate on more than a minor part of the world at a time. Lacking standards on everything from customs clearance to transportation time and surcharges makes large-scale automation impossible. Attempts
at streamlining are being made by several shipping associations, but there is nothing indicating that global standards will
emerge anytime soon.
Freight Forwarders relieve Shippers of the agony of complexity in a way no other industry player can at the moment.
CARRIERS SOMETIMES FORGET THAT
THE OCEAN LEG IS THE LEAST COMPLEX
PART OF OUR SUPPLY CHAIN
Shipper
There is, however, a significant mismatch between where
Freight Forwarders add value and where they make their
money today. A significant part of the revenue comes from
services where the Freight Forwarder redistributes value
from Carriers to Shippers, but has limited value-add.
Almost all Shippers and Freight Forwarders we have talked
to seem to recognize that this is not a sustainable situation
and the Freight Forwarders' revenue model will have to
change – sooner rather than later. Aligning the Freight Forwarders' incentive with the value they create for their customers appears to be a win-win for the entire industry.
I PAY THE LEAST FOR THE SERVICES
THAT ARE THE MOST VALUABLE – BUT
THAT IS THE FREIGHT FORWARDERS'
OWN FAULT
Shipper
When speaking to Shippers, it is evident that they do not expect to take over more of the logistics themselves. Rather
they expect Freight Forwarders to continue bringing new and
more value to the table. Also, they clearly indicate that the
Freight Forwarders who cannot keep up will be left on the
shore. The single most articulated expectation is that the
Freight Forwarders will use their unique access to information
to create significantly better understanding of the Shippers'
own industry dynamics and the patterns of the supply chain.
Thus helping the Shippers create value in their own business.
OPTIMIZATION OF THE SUPPLY
CHAIN IS ONE OF THE BIGGEST LEVERS
FOR COST REDUCTION WE HAVE LEFT –
WHOEVER CAN HELP ME REALIZE THAT
HAS A BRIGHT FUTURE
Shipper
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THE INDUSTRY IS SATURATED WITH
INCONSISTENT STANDARDS,
MAKING LARGE-SCALE AUTOMATION
IMPOSSIBLE FOR NOW
SOME OF THE ISSUES ARE INDIVIDUALLY INSIGNIFICANT, BUT THE NUMBER OF THEM IS OVERWHELMING
Customs clearance:
There are no global standards for how customs clearance should be made or by whom
Transportation time:
There are no standards for how to measure transportation time making product comparison a manual process
Surcharge and VAS:
The same surcharge can have as many different names as there are Carriers and the same name for a value-added service
can mean as many different things as there are Carriers and Freight Forwarders
Deviation/delay:
There are no standards for who monitors deviations/delays, who notifies the Shipper (when and how) or who takes charge
of corrective actions
Port/terminal codes:
There are no global standards for port or terminal codes or whether/when to use local language or English
Invoicing format:
Invoices come in as many formats as there are suppliers and there are no global standards for terminology
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THE COURAGE TO INVITE FOR
CO-CREATION OF MUTUAL VALUE WILL
MOST LIKELY DEFINE THE WINNERS OF
THE NEXT DECADE
Some of the changes we have touched upon can be done or
initiated unilaterally, but many will require dialog, listening
and collaboration.
Significant value lies in improving the interfaces between Carriers, Freight Forwarders and Shippers, e.g.


Shippers, Freight Forwarders and Carriers each have many
opportunities to capture new value by sharing it with others.
Sharing is counter-intuitive and there are multiple good arguments not to do it, but the industry is running out of old-world
options to break out of the zero-sum mindset.
In our interviews, most ideas circle around these three keys
Shipment patterns that put constraints on a Carriers' asset utilization. The Shipper could change the pattern, often with no consequence to itself, but is unaware of the
problem and has no incentive to change it
Shippers tying up a lot of capital in shipments and/or incurring unnecessary costs in the supply chain due to inoptimal network configuration. Individually, the Shippers
can change little and they are unaware how pooling
knowledge with others could unleash untapped potential
What these and many other examples have in common is that
releasing the value will require much more sharing with counterparts and co-creation of solutions.
FREIGHT FORWARDERS SHOULD ENGAGE ACTIVELY IN HELPING US OPTIMIZE OUR LOGISTICS
Shipper
to value creation:
INFORMATION SHARING
For one player to openly share how value/cost is created in
their business, what are the main pain points and what are the
hypothesis on how collaboration could potentially help?
CO-CREATION
Re-thinking the dynamics of the current collaboration, what
can we do together to mitigate the pains or unleash new potential?
VALUE SHARING
Being open to the fact that new added value preferably
should benefit all parties. This means that efficiency gains,
quality improvements, etc. should be shared between the
players. It requires discussions on how improvements can be
measured and how value can be shared to incentivize all involved parties in an aligned manner.
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CONCLUSIONS AND
RECOMMENDATIONS
The insights from this study suggest that Carriers and
Freight Forwarders can do a great deal (both unilaterally
and together) to improve their working relationships and
create new value in the industry.
In the following, we have written our recommendations directly to the Freight Forwarders and Carriers, respectively,
under three common headers:
1.
2.
3.
Consider what you can do in your own business to create
a bigger pie, rather than just trying to take a bigger piece
Work together for mutual benefit
Be clear on the relationship you have with each other and
act accordingly
CONSIDER WHAT YOU CAN DO IN YOUR
OWN BUSINESS TO CREATE A BIGGER
PIE, RATHER THAN JUST TRYING TO
TAKE A BIGGER PIECE
Freight Forwarders
Focus efforts on where you add the most value

Shippers with complex shipping patterns

Smaller Shippers without strong supply chain functions
Start aligning your revenue model with your value creation
(efficient freight management creates a lot of value, negotiating lower rates creates no value).

Ensure that you actually charge for the services where
you add the most value

Consider additional revenue streams based on where
you add the most value to Shippers
Carriers
Reduce complexity in the operating model, e.g. the number
of micro-decisions and surcharges a Shipper faces even on a
simple shipment from port to port.
Work with other Carriers and industry authorities to create
industry standards, e.g. on shipping documents, quoting and
surcharge terminology.
WORK TOGETHER FOR MUTUAL BENEFIT
Freight Forwarders
Help Shippers identify value potential in their respective supply chains and help them realize it.
Invite Shippers and Carriers in for co-creation of innovative
solutions and approaches to shipping in the future. If you
wonder why Carriers do not invite you in to hear all your good
ideas – stop wondering and take the initiative.
Carriers
Invite Shippers and Freight Forwarders in for co-creation of
innovative solutions and approaches to shipping in the future.
There are multiple avenues to pursue, many of which have no
competitive implications e.g. back-office alignment. If you
wonder whether you should invite a Freight Forwarder in to
share ideas – stop wondering and get started.
BE CLEAR ON THE RELATIONSHIP YOU
HAVE WITH EACH OTHER AND THEN
ACT ACCORDINGLY
Two dimensions seem to explain the logical relationship between a Carrier and a Freight Forwarder:
Carrier dependency. For most carriers, there are some
Freight Forwarders who (can or do) provide enough volume
to create some level of dependency on the asset utilization
and thus profitability.
Carrier access. The volume that Carriers get from Freight Forwarders sometimes comes from Shippers that the Carriers
could not access efficiently on their own and other times it
comes from Shippers they could just as easily have served
directly.
These two dimensions provide good guidance for the dynamics of the relationship and are illustrated on the next page.
CARRIER DEPENDENCY ON FFW
WHITEPAPER
Customer
Sales partner
It doesn't matter much
The Carrier could serve the
shipper directly but value
the Freight Forwarder’s
role. The relationship
becomes that of a sales
partner
what Shippers the Freight
Forwarder serves because
the Carrier can't reach
them. The Freight Forwarder effectively
becomes the customer
3rd party sales
Competitor
The Carrier has no
dependency on the Freight
Forwarders, but value the
volume they can access if
the terms are right.
The Freight Forwarder
becomes a reseller
The Carrier has no need for
or value from the Freight
Forwarder, making it a
competitive relationship
CARRIER ACCESS TO SHIPPERS
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Carrier
Freight Forwarder
Carrier
Freight Forwarder
 Key Account treatment
 Contact
 Focus on own
brand
 Commoditizing the
ocean product
 Loyal to Carrier VP
and segmentation
 Use Carrier brand in
offering
 Equipment
 Honor agreements
 Free time
 Loyalty to supplier
 Educate FFW in VP
 Provide sales support, e.g., online collaboration, incentives
 Shipper dependent
offering
 Co-creation/longterm mindset
 Premium offerings
 Premium terms
 Prove the value
CARRIER DEPENDENCY ON FFW
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Customer
Sales partner
It doesn't matter much
The Carrier could serve the
shipper directly but value
the Freight Forwarder’s
role. The relationship
becomes that of a sales
partner
what Shippers the Freight
Forwarder serves because
the Carrier can't reach
them. The Freight Forwarder effectively
becomes the customer
3rd party sales
Competitor
The Carrier has no
dependency on the Freight
Forwarders, but value the
volume they can access if
the terms are right.
The Freight Forwarder
becomes a reseller
The Carrier has no need for
or value from the Freight
Forwarder, making it a
competitive relationship
 Honor agreements
 Co-creation/longterm mindset
CARRIER ACCESS TO SHIPPERS
Carrier
Freight Forwarder
Carrier
Freight Forwarder
 Short-term focus
 Capacity filler
 Differentiated pricing
 Focus on own
brand
 Commoditizing the
ocean product
 Fight for customers
 Position against
Freight Forwarder
 Arm's length
 Transaction mindset
 Capacity filler
 Fight for customers
 Position against
Carrier
 Commoditizing the
ocean product
 Loyal to incentive
 No leniency
 No loyalty
 Arm's length
 Standard terms
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Reality is such that a Carrier and a Freight Forwarder would
most often have a mix of all four relationship types. It might
not be practically possible to simply narrow down the relationship to one or the other. It could easily vary across
trades, regions, commodities, etc.
However, the closer the parties can get to obtaining clarity on
what game is being played and what rules each party can be
expected to follow, even within a subset of the total cooperation, the higher the value potential.
Some of the questions that both Carriers and Freight Forwarders should ask themselves in this process are:
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Is it sustainable to have three of four different relationship types with the same counterpart?
Is it preferable to have multiple relationship types with
the same counterpart?
What logics could be used to clarify the relationship
types with specific counterparts? (Dependency vs not;
Shipper segments; Trades/Geography)
What relationship type should apply to whom and
where?
What behavior should be experienced as consistent in
each relationship type from our side?
What behavior would we expect as consistent in each
relationship type from our counterpart?
How will we show these expectations through own actions?
Even though many agree that engaging in this dialog will benefit the whole industry and the Shippers in particular, there is
an widely spread reluctance to do so. The main reason is fear
that authorities will interpret it as a violation of free competition. While each individual case must be subject to its own
legal evaluation, the overall legal feedback is that there are
many opportunities for dialog within the boundaries of the
law.
That said, perhaps this could also be a call out to the authorities: "The righteous focus on fault play has become counterproductive for the development of the industry, and actually
destroys value for the shippers – it is time to revisit it!"
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CREDENTIALS
This perspective would be of no interest without the generous and open contributions from all the companies and people involved.
We are very grateful and would like to extend our thanks to
every single one of the contributors. Many have asked to be
anonymous in order to share their view and opinions more
freely. The list below thus only represents a fraction of the
companies that have contributed but the gratitude goes to
you all.
Contact
For further information on this report and related themes,
please look at our website www.qvartz.com or contact
Jesper Adeltoft
[email protected]
MEC Intelligence has provided market data and insight as well
as supporting interviews and we thank you for the effort.
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CMA-CGM
COSCO
DAMCO
DB SCHENKER
DSV
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GT-NEXUS
INTRA
JYSK
KUEHNE+NAGEL
MAERSK LINE
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METSO
TESCO
UASC
UNIFEEDER
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y
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