Recession-Proofing Your Business as a Freight Forwarder
The freight forwarding industry is highly susceptible to the impacts of economic downturns. During a recession, businesses cut costs to survive, and the demand for goods and services decreases. Fortunately, there are steps you can take to recession-proof your offering and come out stronger on the other side.
In this blog post, we’ll discuss how to invest in resilience for your freight forwarding company by reducing costs, building trust, and enhancing your offerings to add value for your shippers. By taking these steps, you’ll be able to weather the storm of a recession and position your company for long-term success.
How recession impacts the freight forwarding industry
A recession impacts the freight forwarding industry in a variety of ways. The most prominent effect is a decrease in demand for shipping services as consumers begin to curb their spending. This overarching trend will have ripple effects across the entire forwarding business.
Reduced shipping volumes
As businesses look for ways to cut costs, they may reduce their shipping volumes or delay shipments, which can result in lower revenue for freight forwarders. This can be especially challenging for smaller forwarding companies that may have less financial backing than their larger, more established counterparts.
Because of the economy-wide emphasis on cost-cutting, you’ll also see a shift in how companies make purchasing decisions. For instance, many businesses will have increased price sensitivity and a greater emphasis on value. In turn, freight forwarders that are able to offer competitive pricing and value-added services may be better positioned to win business during a recession.
Shift in negotiating power
As shipping volumes decline, shippers may also have more leverage in negotiations during a recession. As a result, freight forwarders may need to be more flexible in their pricing and service offerings to compete for business. Shippers may also go to greater lengths to ensure that their shipments are being handled efficiently and cost-effectively, avoiding unnecessary fees and damage. In other words, many will start to demand more transparency and communication from their freight forwarders.
How to prepare for recession as a freight forwarder
Preparing for a recession as a freight forwarder involves taking proactive steps to reduce costs, build trust with customers, and provide value-added services. By addressing these areas, you can equip your company to perform more effectively in all market conditions.
The first step in evaluating your company’s preparation for an impending recession is taking stock of your recurring expenses. From there, you can go through and reduce costs wherever possible.
If your business isn’t already entirely paperless, that can be a great place to start. While it may require some transition costs, shifting your manual operations to digital is a worthwhile investment in your company’s efficiency in the long run.
In addition to supporting sustainability and enabling remote work, cutting out paper can save money in many ways, including:
Decreased printing and storage costs: Reduce the cost of physical materials that add up over time, such as office supplies and filing cabinet space
Reduced human error: Cut down the need for manual data transfer and file creation, which can lead to costly mistakes
Time savings: Enable your employees to operate with greater efficiency by using technology to create documents, organize information, and communicate with customers
Fewer postage costs and mishaps: Eliminate the cost of sending physical mail, and avoid incurring additional fees from mail delays and losses
Scaling with tech
A strong tech stack is a must-have for freight forwarders going into a recession. However, researching and implementing the right solutions can involve a major investment of time and money. That’s why when it comes to creating a software ecosystem, the sooner, the better.
In building a tech stack to help you succeed in a recession, you’ll want to prioritize scalability first and foremost. In other words, how will this digital system help your company grow efficiently? The best combination of technologies will augment the efforts of your existing staff. In turn, you’ll be able to scale your business without adding headcount, helping you stay lean and competitive.
Related articles: Logistics Tech 101: TMS vs. CX Platform
Researching your carriers
When thinking about how to cut costs, you’ll want to consider your highest expense: your carriers. As your shippers are thinking more about maximizing value, you should be too– and that goes beyond simply negotiating down prices when signing a contract.
In order to secure the best array of partnerships, you’ll want to get into the habit of evaluating your carriers. From there, you can determine whether the relationship is worth continuing. Some forwarders even develop a system to assess shipping lines, from pre-screening to continuous analysis.
Related articles: How Freight Forwarders Can Use Data To Evaluate Carriers
Of course, you’re not always going to be able to get your pick of carriers– particularly when shipping demand is high. However, in certain conditions, you’ll be able to be more choosy. When the time comes, it’ll be beneficial to have a process in place to seize the opportunity.
During a recession, building trust with your customers is essential. In times of uncertainty, shippers are seeking a partner they can count on. Therefore, strong relationships and a solid track record can go a long way.
In a recent webinar, Logixboard SVP of Revenue Jimmy Speyer cited his formula for trust: “transparency times consistency, over time.” In other words, it’s not enough to simply complete one successful delivery. To win over a shipper, you need to show them that they can count on you long-term, even in challenging circumstances.
You can also accelerate the trust-building process by focusing on the transparency piece of the equation. By providing prompt updates about their shipments and any issues that arise, you can give them greater confidence throughout the shipping process. If they’re assured that they’ll be kept in the loop, they won’t need to spend time stressing about potential issues that may arise.
Some tech solutions can even help you take this transparency a step further by providing real-time tracking throughout the shipment journey. With a self-serve visibility platform, you can give your customers an even greater sense of control by enabling them to access their shipment information on their own time. By cutting out the middle man, it can also give them assurance that they’ll be immediately informed about any major updates.
Provide value-added services
Freight forwarding as an industry can sometimes get mislabeled as commoditized, especially as competition grows tighter. For that reason, many forwarders believe that they need to compete on price in order to win business. However, experts are finding that that might be less important than we believe.
In a survey by Logixboard and FreightWaves, shippers reported that price ranked third in the most important factors in choosing a forwarder, below customer service and cutting-edge technology.
Logistics experts report that this trend can be even more pronounced in market conditions when shipping rates can reach zero, or even go negative. Once forwarders are no longer able to compete on price alone, providing value-added services is necessary for differentiating your offering and winning business.
Prioritize customer experience
Putting your customers first is key to business success in any industry. In freight forwarding especially, shippers value a partner who prioritizes their service. Some of this can certainly be achieved by traditional methods like providing personalized support and promptly answering calls. However, offering tech-enabled solutions like a customer experience platform can significantly elevate your shipper experience.
With the right tool, you can simplify your customers’ day-to-day operations to save them time and curb frustration. In turn, they’ll be more likely to maintain and expand their partnership, even in the face of rising prices.
Help your customers save money
Another way forwarders can stand out to customers is by helping them save money on shipments. While some achieve this by lowering their own pricing, others opt to minimize additional costs along the journey.
For instance, many forwarders use route optimization software to map out the most efficient trade lanes. Not only will this reduce fuel costs, but it can also shorten delivery times.
Similarly, many logistics providers also aim to reduce customer costs by helping them avoid excess charges. For instance, detention, demurrage, and customs fees can add up quickly due to miscommunication and documentation errors. However, since many of them are easily avoidable, forwarders can help cut this down by providing shipment tracking and real-time execution capabilities.
Become a strategic partner
The best way to retain shipping customers in market downturns is by making the shift from a vendor to a strategic partner. By working to push your customers forward, you can help them improve efficiencies and grow their business. In turn, they can then expand their shipping volumes with you. That’s all to say, it’s a win-win.
In your transition to position yourself as a strategic partner, focus on aligning your interests to places where you can both win. For instance, instead of cutting their rates at the expense of your profits, work with them to identify where they’re incurring the most costs on their shipments.
Whether they’re paying a lot of demurrage fees because they don’t know when their container arrived, or their shipments are always delayed because the paperwork is late, there’s like some external issues that you can identify together. From there, you can use your own expertise to work together to address those problems.
Related assets: QBR Presentation Template for Freight Forwarders
The freight forwarding industry is not immune to the impacts of a recession. However, by understanding the challenges and opportunities that arise during an economic downturn, freight forwarders can take proactive steps to prepare for the inevitable.
By implementing the right strategies ahead of time, you can even set up your company to thrive in economic hardship by establishing yourself as a strong partner.
Ready to recession-proof your company? Connect with our team to find out how you can reduce costs, build trust, and add value to customers with Logixboard.
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