Maximum Profitability Blueprint (Part II)      The Only Possible Strategic Option

Freight forwarding is a straightforward business that doesn't rely on complex technology, design, or product decisions. Success hinges on operational efficiency and customer service quality. Today's information technology offers numerous opportunities to enhance these factors. The future success of freight forwarding companies will depend on how well they implement these IT opportunities.

These opportunities enable three categories of measures that can dramatically improve business performance:

1. Business Process Automation
2. Optimal Distribution and Organization of Labor
3. Ultra-Precise Business Steering

Business Process Automation 

The ultimate goal is to fully automate all business processes from quote to cash. For a detailed roadmap to achieve this, see the article "The Detailed Path to Becoming Fully Digital."

Optimal Distribution of Labor 

Modern information technology ensures that all relevant information is available everywhere in real-time, allowing tasks to be executed where it makes the most sense. Scalable repetitive tasks like shipment data processing, accounting, system and master data maintenance can be centralized in large shared-service centers in locations with low labor costs and qualified workforces. These tasks can be standardized to maximize economies of scale.

Simultaneously, it’s possible to maintain lean but highly qualified branch offices close to the customer. This aspect of digital transformation is often overlooked. Over the past decades, especially in large freight forwarding groups, there has been a trend to dismantle branch offices and degrade branch management, centralizing tasks at country and regional levels. Maintaining a large structure of branch offices was deemed too expensive. This development has led large forwarders to focus on large customers, leaving the often more profitable SME market to smaller local forwarders. Contrary to predictions, smaller forwarders still thrive because many shippers prefer logistics service providers that are nearby and can customize their services.

Modern information technology enables larger forwarders to tap into these local SME markets while enjoying the advantages of large-scale operations. This optimal combination of customer proximity, cost efficiency, and entrepreneurial management is achieved by:

• Maintaining lean branch offices with highly qualified sales and customer service staff, supported by shared service center staff for administrative tasks.
• Utilizing modern communication tools to ensure seamless interaction between branch office and shared service center staff, allowing for 24/7 operations and zero-defect task performance.
• Ensuring local customers interact with branch office staff, who own the customer order (file) and ensure it is fulfilled with utmost care and attention.
• Granting branch management full entrepreneurial control within standardized business processes and clear business rules, monitored by computer algorithms. This allows capable branch managers to thrive and maximize profitability, regardless of market conditions. It is an undisputed business truth: A capable branch manager will always find a way to generate substantial profits, regardless of the economic environment or prevailing market conditions.

• Radically reducing overhead structures, eliminating the need for regional management and heavy country overhead structures as outlined in the article "The Case for Eliminating Regional Management Structures ." A lean but capable global head office can interact directly with branch offices and shared service centers.

Ultra-Precise Business Steering 

Modern technology allows for precise measurement and optimization of every relevant detail. This includes the sales process—identifying target customers, contacting them, providing quotations, converting them into business, measuring sales success, and rewarding it with a precise sales force incentive scheme. It also involves electronic monitoring of every business process to ensure accurate data capture and processing, and optimizing processes like capacity utilization, shipment routing, capacity procurement, file profitability management,  warehouse and office space utilization, and workforce productivity. Every aspect of the business can be measured and optimized.

The extent to which companies leverage these opportunities determines their success. It’s a strategic journey every freight forwarding company must embark on—it’s the only viable strategic path.