3rd Generation Networking

WELCOME TO THIRD GENERATION NETWORKING

When offense is the best defense...

Written by Bill Siemens

Defense is usually about holding on to the status quo.  But when the status quo changes, sometimes dramatically, many companies still hold on tight.  Often this leads towards a slow slide backward.   In the face of a changing market, doing things the same old way can be a recipe for disaster.   Nowhere is this more evident than in the in the global freight forwarding industry. 

Over time, we have witnessed several different generations of thought with regards to networking.  It is our belief that we are now witnessing a massive shift in our industry, and this change calls for another revolution in the networking mindset.  It is time for a new generation, but not before we understand the context, and the approaches to networking that have come before.

Fifteen to twenty years ago the largest competition to independent forwarders was posed by large multinational forwarders.  According to the Research Platform, SACRA, the freight forwarding market, “is highly fragmented and competitive: the 6 largest forwarders comprise a third of the total revenue, the top 20 accounts for 70% of the market and the remaining of the market is served by 10,000’s of small forwarders.” 

Ten to Seven years ago saw the arrival of the venture capital funded digital forwarders, like Flexport, Forto, Zencargo, Beacon, Freightos, and many others.   These firms are very well funded and offer advanced technology and aggressive marketing to boot.  While some of these companies have done better than others, several of these digital forwarders continue to grow sales at an impressive pace.   For example, Flexport’s gross revenue hit 5.5 billion in 2022, up 52% from 3.3 billion in 2021.   Flexport “expects not to continue to make a profit in the years to come, as it continues to invest in growth” (SACRA Research)  Most, if not all, of this growth comes from the same markets where independent forwarders look to retain clients and grow their businesses, and Flexport is only using this to improve and expand their offering, making them only more competitive.

It is also no secret that large steamship lines like Maersk and CGM have acquired a number of forwarders and complimentary companies in an effort to become integrated door to door logistics providers.  This now introduces steamship lines as a new added layer of direct, unprecedented competition for independent forwarders.

Cleary the status quo isn’t the status quo anymore for independent freight forwarders.  The question is, what to do now? How can independent forwarders compete?  How do they go on the offense?

The global forwarding market is estimated to grow to 285.15 billion by 2031. A significant portion of the forwarding market is still controlled by independent forwarders, and clearly there are reasons why.  Outside all the investments, all the technology, and all the market hype, some shippers continue to value relationships, trust and superior service.  The flexibility and creativity these clients need is not always offered from giant size companies like Maersk, or even Flexport, and herein lies the opportunity to shift to offense.

Relationships have always been the bedrock of the forwarding industry.   Many years ago, forwarders contacted other forwarders at origin or destination to simply find ways to service their shipments.   We consider this first-generation networking.  These relationships eventually got a boost with the help of freight forwarding networks.  This evolved into increased trading, regular volume with each other, which was proven to be an effective method of building business.  This is what we would call second-generation networking, and is the status quo we find ourselves in now. 

To go on the offensive, in which independents have a unique advantage, it’s going to take some changes.  The status quo is very comfortable.  It is not safe, but it’s surely comfortable.  Without elevating one’s game, it’s hard to believe that the increasing pressure of all these threatening changes in the market in the years ahead won’t grow in all sorts of ways, as these other players get more sophisticated and integrated.

An independent’s ability to compete going forward will most likely be tied to their adeptness in networking, creativity, and collaboration. Going forward, freight forwarders will need to be more proactive, deliberate, and consistent in leveraging their strengths, and those of their partners.   

Now is the time for 3^rd Generation Networking (3GN).  3GN is all about bringing an entrepreneurial and creative approach in collaboration with as many other forwarding partners as one can.   This will take a conscious shift in mindset, and needs to be a top priority.  One should seek partners who are ready to do the same. Now is the time to identify value-adds and upgraded services for your clients, and this is not something you have to do alone, but rather in collaboration with your partners.   Offense now looks like anticipating problems, and creating the solution before the client knew they needed it, for your clients as much as your partners. 

We see examples of this often in our networks: Globalink Network and Global Value Network.  Consider the power of identifying a strong partner that has the relevant strengths, perhaps in their specific market, that would enable you to offer a better, custom-designed service.   When partners custom design a value-add, specialized service in collaboration with a great partner, all parties have a stake in its success, and everyone wins.

If your forwarding partners are not willing to engage like this with you, then it is time to find partners who will.  The time has come to “open the book,” dig into your client rosters, and see where you can suggest added service and capability even before your clients request it.  More and more forwarders are re-envisioning themselves and their roles, seeing that it is time to proactively leverage their expertise and local knowledge to identify ways to upgrade. This is what will keep customers loyal, and the competition at bay.   

As a niche operator, a specialist, and an independent forwarder, you have something all the big players in the market don’t have.  Your partners have this too, in ways that will compliment you in surprising ways.  3GN elevates what you have always had: deep local expertise, creativity, hustle, and a world of opportunity through collaboration.

It is time to go on the offense.  It is time for 3GN.

If you have comments or would like to hear more on this topic, please contact Bill Siemens bsiemens@glnk.com

Written by Bill Siemens