Online Freight Marketplaces vs. Freight Forwarders

Michael Wax 06 Mar 2017 3 min read
  • Can online freight marketplaces replace forwarders?
  • Forwarders’ role extends beyond rate quotes
  • Digitization brings accuracy to rate quotes and more to reduce process costs

Freight marketplaces continue to make headlines as forwarders are viewed as not keeping with the times.  Often described as the forwarder’s replacement as a means to obtain, book and track rates, these freight marketplaces promote savings in time and efficiency without much proof.

Meanwhile, besides rate management, forwarders juggle numerous roles including maintaining compliance, managing shipper expectations and exceptions, inspections of cargo and staying abreast of market changes.

Freight Marketplaces

A freight marketplace can be described as an online site where a product or service is provided by multiple third parties with transactions processed by the marketplace operator.

But is this really the case? Perhaps not according to some shippers. Often it is found that despite the pleasing 2.0 front-end, the back-end is more likely a 1.0 and not so pleasing.

For example, what is touted to be a quicker method to obtain rate quotes, instead, online marketplaces often rely on quotes from forwarders that still use manual processes to compile quote requests.

As a result, timeliness and accuracy are questioned. For many users, the transaction abruptly ends with the quote, leaving the user to contact the forwarder by phone or email or even fax to complete the process.

The Freight Forwarder

As noted in our recent blog post, a freight forwarder is a multi-function agent/operator who assumes the role of arranging the movement of goods from point A to point B on behalf of a BCO (Beneficial Cargo Owner). The forwarder is a vital part of the whole supply chain and is common to all modes of transport – sea, air, road and rail.

Indeed, the forwarder plays a multitude of roles when arranging shipments – customs clearance documentation, warehousing if needed, inspections and more. So far, freight marketplaces are not able to handle these additional services and one-off needs.

As to the question of why forwarders have been slow to adopt technology, they are indeed adopting technology – simply not quick enough.

Supply Chain Dive suggests that small and medium-size shippers have yet to demand it, and in fact may prefer a personal relationship with their forwarder to an online quote.

Another thought is that these small and medium-size shippers do not know the potential cost savings they too can benefit from if the right technology and/or automation are implemented by their forwarding partner.


Rate quoting is certainly an important component of supply chains; but it’s definitely not the only one. As mentioned previously, customs clearance and documentation, temporary warehousing, final mile delivery and so much more emphasizes the importance and need for forwarders. But at the same time, all of these components are often done in silos and thus the processes become inefficient.

As a result, digitizing freight forwarding as well as the rest of the supply chain is very important. Once built, according to PwC, “the digital supply “network” will offer a new degree of resiliency and responsiveness enabling companies that get there first to beat the competition in the effort to provide customers with the most efficient and transparent service delivery”.

In other words, digitization takes the beauty of the automated quoting process and adds the accuracy, guaranteed integrated technology to reduce process costs. In addition, add in a professional forwarding team and local connections to assist with exceptions and ta-da! you have a digital or virtual forwarder.  

As for today’s freight marketplaces, in the words of the Wizard of Oz, “Pay No Attention to that Man Behind the Curtain”, because most of them in fact are just pretty front-ends with not much, if anything behind the curtain.

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  1. I think Freight Marketplaces will not replace freight forwarders. And Freight Marketplaces will help freight forwarders/companies to expand their business.

  2. Hey Joseph – It’s not about who is moving the freight. Forwarders don’t actually move freight either. The fact is that each Forwarder/NVO negotiates rates either on a contract or spot. There’s 8,000 Forwarders/NVOs in the US alone. Each of those has different pricing. So, although you have instant pricing this still leaves the issue of the whether the shipper thinks you have good pricing and service compared to the 10’s of thousands of Forwarders all around the world. I do think instant pricing is helpful but it’s also never going to get you the best price. I completely disagree with the statement that a marketplace is only about price. That couldn’t be further from the truth. We we have a 2 stage check process 1) automatically based of licenses and 2) We speak with them and provide full profiles to our Shippers. Each rate provided has pertinent info like transit time. The list goes on but to speak bluntly if you are a good Forwarder (service & price) marketplaces are not a threat to you but perhaps one of your best friends! As for large volume shippers, we are already working with global enterprises as their issues are just as significant as SMB’s when it comes to spot rates. And, their issues are not regarding that manual bookings process or event management that you are mentioning above. Why? Because they are already integrated with the carriers. And, using portals such as GT Nexus. It’s all on the procurement side!

    Carriers are your only threat because they are the ones that will have to significantly change the way they run their biz in order to eliminate the need for Forwarder (e.g. Maersk selling direct). Marketplaces are not looking to do the same. I also completely disagree that a Marketplace has no handling power on a shipment? We have just as much power as a Forwarder does. And, yes there was a time when people did business with one Forwarder.

    Anyway, always happy to engage in a conversation like this!

    • Hi Cory, thanks for your kind response.
      While an integrated forwarder might not give you the best price, they give you an exceptionally good price with additional benefits such as reduced processing time through an integrated product.
      I appreciate that you are trying to vet forwarders on your platform, however this still means connecting a 2.0 customer with a 1.0 forwarder as the forwarder itself is not digitized.

      With regards to shipping line integration, this is something mostly only BCOs actually have. Those in turn mostly negotiate with carriers directly. It remains to be seen how carriers will react to them using marketplace instead of going to them for spot quotes.

      What can be seen that the focus is, again, purely on ocean freight. Thus the transport is seen as a pure cost factor. However, the supply chain is so much more. Our deep believe is value can be created in a supply chain by integrating ocean transport as a key part of a wholistic supply chain. It is questionable if marketplaces or carrier can achieve this kind of deep integration across modes and steps (warehousing to last mile) as an integrated forwarder.

  3. No amount of digitization or online freight marketplaces can replace the customized solution offered by forwarders . I can say this with conviction as I’ve worked in both forwarders & liners who are moving towards digitization. Through digitization all one can offer is a standard product but most customers need tailor made solutions which only forwarders can offer due their flexible approach n asset light module of business.

  4. I’d welcome a conversation about this. I think it’s interesting that the Forwarding industry in some cases views marketplaces as a threat when in fact it’s really carriers. Forwarders are partners for marketplaces. And, I’m a strong believer that a marketplace is only as good as their partners. As for the speed and accuracy of the quote…this shouldn’t be questioned. There is no doubt that a marketplace can offer more options and better pricing at a speed that wasn’t previously possible. Lastly, if a marketplace is executed correctly it can bring your customer acquisition cost down significantly. Or, I guess Forwarders can keep sifting through trade data, making cold calls, and hoping for a meeting in 6 months 🙂

    The days of doing business with one Forwarder are dead.

    • Hi Cory,
      thanks for the comment.
      Could you elaborate as to how carriers are a threat to the freight forwarding industry? In the end the forwarders that you have quoting on you platform are using those exact same carriers to handle the actual shipments!
      I agree that the speed of quotation can be significantly improved in a lot of cases – except against forwarders (for example digital forwarders 😉 ) who offer instant quotations.

      Without a doubt it is a lot easier for a freight forwarder to quote and potentially win a client once via a marketplace. However, this actually leaves no room for differentiation apart from sheer pricing competition. Arguably not at all in the interest of either forwarders or carriers. It could also be questioned if higher volume shippers will ever go via a marketplace as there is no guarantee of the same service level from different forwarders and specific circumstances for shipments are not taken into account such as specific delivery requirements.

      When looking at the post booking process (and I am generalizing here, I know) is that the ease of a market place does not stretch to the actual shipment handling as updates are not communicated via the respective handling platform (if it even exists). This leaves the customer in the same manual processes that they knew before…

      The days of doing business only with one forwarder have never really been there as quite some customers do in fact compare multiple quotes either per lot or per quarter. It remains to be seen if a marketplace with no handling power on the actual shipment will be able to fulfill customers requirements with regards to reducing process complexity or if increased digitization of forwarders will leave them struggling for business.