The Forwarding Metric that Matters
Welcome to the 23rd edition of The LogTech Letter, a weekly look at the impact technology is having on the world of global and domestic logistics. Last week, I discussed how visualization tools might help shippers think beyond static or disconnected data points. This week, I’m looking at a metric that might well define the value of technology in the world of forwarding.
As a reminder, this is the place to turn on Fridays for quick reflection on a dynamic, software category, or specific company that’s on my mind. You’ll also find a collection of links to stories, videos and podcasts from me, my colleagues at the Journal of Commerce, and other analysis I find interesting.
For those that don’t know me, I’m Eric Johnson, senior technology editor at the Journal of Commerce and JOC.com. I can be reached at eric.johnson@ihsmarkit.com or on Twitter at @LogTechEric.
The value of technology in any circumstance generally needs to be defined by a metric or set of metrics. Sometimes, those metrics can be intangible and hard to actually measure: likeability, aesthetics, positive feelings engendered. But most of the time (and almost universally in logistics), a metric related to technology has to be numerically measurable.
So then, the question becomes, which measurable metric to use. Cost savings or revenue growth? If it’s cost savings, where did the cost savings come from? Reduction in employees, or less time per employee spent on a task? Reduced spend to suppliers? Similarly, if it’s revenue growth, what type of revenue growth? Expansion of customer base, or expansion of revenue within the existing customer base?
Obviously, the answers to these questions will depend on which type of company we’re talking about and then, based on the problems the individual company is out to solve. So let’s get more specific and talk about a metric that is, and will increasingly, drive technology adoption from forwarders: productivity per employee.
This is not purely about single solutions, but about a basket of software that enables forwarders to: a) secure capacity from their carriers in all modes more efficiently; b) acquire and retain customers more efficiently; c) refine internal operations; d) automate backend functions; and e) accurately capture those metrics and how they perform over time.
To be clear, there’s no one system that does all those things, much less does them all extremely well. But investing in any one of those areas is really about wringing as much value from each employee as possible. Lip service will be paid to the customer being the most important thing, but it’s really about serving customers in the way they want to be served at the lowest, leanest cost possible. Technology, realistically, is the only bridge to get from here to there.
This is a hard metric to base a forwarding business around, simply because forwarders, in aggregate, have largely decided that the best way to build a meaningful business is to hire people and put those people in front of customers. There’s a reason the large global forwarders have tens of thousands of employees despite not owning the cargo or (m)any assets. Not all of them are in sales and not all of them are in engineering. Many are in customer service or support functions, stepping in to hold a hand when the shipper most needs it, or providing cargo when a carrier needs it.
But at a certain point, that default point of view falters under the harsh light of the productivity per employee metric. When you calculate sales against the number of people you employ, and measure that over time, you can start to gauge whether you are becoming a more efficient company. Juxtapose that metric over technology spend - and, just as crucially, adoption - and you start to understand whether your forwarding business is adapting to where things are going.
It’s not a simple linear metric either. Bursts of hiring in a particular period may throw the productivity measure out of whack, even as the forwarder decides that investing in new people in a particular area is likely to yield long-term benefits. But the trendline should look decisive over a longer period of time. There’s not one defining threshold either. A forwarder focused in a high-touch, high-value goods sector is necessarily going to need to have more people per dollar of revenue than one in a more commoditized and competitive area.
There is no shortage of technology options for forwarders anymore - this infographic doesn’t even come close to representing the entire landscape - and so buyers in the market need to think of how these solutions will help them serve customers, of course. But they also need to think of how (or if) these solutions will help them increase productivity per employee. And that means more sales per person. It might seem draconian and counter to all that is sacred in forwarding to think that way, but forwarding is not getting any less competitive and the market won’t get any less crowded.
Here’s a roundup of pieces on JOC.com the past two weeks from my colleagues and myself (note: there is a paywall):
The European truckload market doesn’t function at all like that in the US, which makes sennder’s ongoing progress in building a US-like, digitally-oriented brokerage all the more interesting. The Berlin-based company got a $160M Series D round this week. Interestingly, a source told me the company has gotten so big, employee-wise, that it is moving into that tricky space where it’s less of a disruptive startup and more of a new version of a traditional intermediary. Which isn’t the worst place to be.
BlueX Trade’s progress continues, via a partnership with Portrix that resembles one it tied up with fellow rate management software provider Catapult in December. Vivian Chiang, BlueX’s COO will join me on a panel on Feb. 25 at TPM to talk about adoption of instant quoting tools in ocean freight, and what the next evolution of this might look like.
Breakthrough COO Heather Mueller joined me on JOC Uncharted (our weekly show with industry leaders) to explain how better use of data - mostly out of a shipper’s grasp - can help cargo owners reduce their need to rely on surface transportation spot rates, and the price premium those rates often bring with them.
And here are some recent discussions, reports, and analysis I found interesting:
Alibaba-affiliated logistics firm Cainio has started its own air and ocean freight booking service.
I’ll be moderating a panel Jan. 25 at SMC³’s Jumpstart conference about how companies in the logistics industry can protect themselves against a furious and constant onslaught of cyber attacks. Experts from Dependable Supply Chain Services and Roadrunner Freight will join me. Considering the hit to 3PLs and container lines in 2020, this is a really timely topic. My colleague Bill Cassidy is moderating multiple sessions at the same event, including a sit-down with XPO’s Brad Jacobs.
Like cybersecurity, carbon footprint reduction is another major issue that’s moved from pesky distraction to full-on corporate mandate. As I mentioned two newsletters back, it will be a big focus throughout TPM21. But on Jan. 28 I’ll also be moderating a panel with Nestle, CMA CGM, BuyCo and SeaRoutes to discuss how shippers can use technology to manage the sustainability of their logistics operations. It’s at 10 am CET, so that’s 4 am for the early birds on the US East Coast and 1 am for the night owls on the West Coast. The session is, of course, available on demand.
One more plug: I’m moderating a session with Henning Schleyerbach, COO of Digital Container Shipping Association (DCSA), Pascal Ollivier, chair of the IAPH Data Collaboration Committee, and Julian Abril Garcia, of the IMO, on the future of ship-to-shore data sharing at ports.
Weekly moving update: still not moving to Florida or Texas.
Weekly Keith Rabois update: money is uninteresting and commoditized.
🚨 TPM21 registration is live, and so is the agenda. We’ll have two days of #LogTech focused programming Feb 25-26, ahead of the main program, which kicks off March 1. Each week until TPM, I’ll be highlighting a tech-focused session we’ll be hosting.
This week, I’m focusing on a panel where we’ll discuss technology neutrality. Should a shipper manage its international shipments in-house, or outsource some or all of that function to a 3PL? And more pertinently, whose system should a shipper use to do so - the 3PL(s) it uses or an independent platform? There's the added wrinkle that the lines have long blurred between pure technology providers and pure 3PLs. We'll take a crack at this age-old question for shippers at #TPM21 through the prism of three different approaches toward managing shipments. Joining me will be Shaizad Shroff of Sealink International, Hagar Rips of Ladingo, and Carl Lauron of Buyco.
Disclaimer: This newsletter is in no way affiliated with The Journal of Commerce or IHS Markit, and any opinions are mine only.