Alibaba and the pirates
Last week, the Chinese Internet giant Alibaba entered into an alliance with the Danish container giant Maersk Line. With one simple mouse click you will now be able to book container space on a vessel of the shipping company. Should the current intermediaries, the freight forwarder brokers, suffer heart palpitations as a result? I do not believe so.
Antwerp enjoys the attribute of being a ‘forwarding agents’ port’. In total, over two hundred freight forwarders account for some 5.000 jobs. When Alibaba, via its online platform, opens the possibilities to turn the booking of containers on the Maersk Line ships into mere child’s play, alarm bells start ringing. Suddenly, the forwarder agents have become the next service sector to face the axe because of the remorseless and ruthless disruptive drive of the large high-tech corporations. With the Freight Forwarders Association (VEA) as their mouthpiece, the agents were not tardy in voicing their fears but, in reality, are such fears quite justified? No, not in this instance. The freight forwarding sector cannot in any way, shape or form be compared to the travel sector at the emergence of Booking.com.
Alibaba does not turn the clock ahead but rather back
The comparison instantly hits a snag in the face of the current evolution in the sector. The industry is continuously on the look-out for integration into the logistics chain with a view to eliminating inefficiencies. It is the logistics providers that, historically, have undertaken this role. These ‘supply chain integrators’ offer the industry one single contact point (‘one-stop shopping’) and that role is not likely to disappear. One example is the prior inspection to determine whether or not a shipped product meets all of the legal standards in the country of its destination. This is neither a task nor concern to occupy a shipping line. Maersk Line is going against the trend towards integration and is circumventing part of the integration solution. What we are facing is not a disruption but simply a turning back to square one. Neither has this so-called disruption within our sector ever in the past amounted to much. Platforms such as Freightos and iContainers have entered the market in true Silicon Valley style, but in the background their actions are actually identical to those of a traditional integrator.
Making bookings in the absence of information is risky business
One important element of the integrated solution that forwarding agents are currently offering is the exchange of information. This goes a lot deeper and beyond the already mentioned inspection of legal standards. Just think of the transport of foodstuffs and the accompanying documentation, or of the transport of hazardous goods in the chemical industry. Likewise for products of greater dimensions than those of a container, the Chinese-Danish idea presents a risk. As it does for the more complex logistical models that make last minute decisions to divert products to other inventories. One may, without exaggeration, ask what products can still be transported without the need for clear and comprehensive information. Containers filled with waste products? Forget it. These too you just do not ship indiscriminately to any country. It is therefore well nigh unthinkable that the process of physical movement of goods could possibly be conducted without the exchange of information and documentation.
The freight forwarders are on track
A third argument that contradicts the idea of a disruption is the current status of the shipping and forwarding agents. In the reporting of the recent deal they were rather summarily dismissed as minor operators, insignificant SMEs, powerless to stem the onslaught of the mighty giants, suffering, in addition, from being limited in their repertoire of digitised materials. That is hardly borne out by the facts. Providers of logistical services are not at all averse to investing in digital platforms while, as integrators, they are in an optimal position to do so. In addition, the forwarding agents are ever increasingly reaping the fruits of their investments in specialisation. In the course of the past decade they have grown in assuming “ownership” of the ocean freight leg as it became integrated into the first and last miles (and in the more complex distribution models). In many specialisations you thus can notice that the share of the logistics providers is unquestionably on the rise.
Human capital yields the greatest returns
It is for all of the above reasons rather strange that a shipping company like Maersk Line should be taking this initiative, yet understandable at the same time. Strange since they are biting the hand that feeds them. Even though this is not the first time it has happened and, also in the past, it all came to nought. Understandable as the shipping lines themselves have not failed to notice how investing in knowledge and human capital by the forwarding agents is yielding results. In contrast, we may note their less profitable asset multi-million investments and a decreasing interest in the knowledge of the goods flows. During the past few years, the shipping companies have distanced themselves from the cargo yet, in spite of that, now want to manage the transactions. That is not possible: they have to choose either the one or the other. It is therefore difficult to understand why the freight forwarding sector is reacting somewhat hysterically to the news about Alibaba and Maersk Line. The proposed and acclaimed computerisation only promotes and favours turning the transport of freight into a commodity. And that means: even less human involvement, decreasing service. This is an evolutionary gamble against which we are holding all the aces.
China is hardly Antwerp
And, finally, China figures as an important factor in the explanation why the comparison with the traditional disruption à la Booking.com gets off the rails. The question why Maersk Line launched this initiative precisely in China has not been addressed sufficiently in the past few days. China is a case apart and the Chinese freight forwarding sector can simply not stand comparison with, for instance, the one in Antwerp or Europe. China is awash with an excess of forwarders of questionable status that offer little or no any added value in matters concerning knowledge about the goods carried, safety, or customs formalities. To compare that system to the Antwerp logistics sector is senseless and offensive. In Antwerp, we can offer enormously more added value in terms of logistical services. A business that wants to enter into a new market does not address itself to a shipping company to ask what logical initial steps to take. A shipping line is focused on operating excellence in the transport of freight between ports. It is with this idea in mind that one who fears disruption will find the soundest advice: focus on what added value you have to offer. Freight forwarders all, do not allow yourselves to get the wind up: the plan of Alibaba and Maersk Line is going nowhere and bound to founder on the rocks of its own inherent inadequacies.
This article was originally posted by Steve Alaerts on LinkedIn.
Steve Alaerts is Director, Marketing and Sales and Board Member at foodcareplus, an international logistics service provider for the food industry. He started his career in the shipping industry with Hyundai Merchant Marine and joined foodcareplus in 2004, where he has applied his knowledge of containerised shipping to develop new markets and services for key players in the food industry. Steve is a founding member of the Port of Antwerp Reefer Expertise Group, where he leads the “First Port of Call” workgroup.
