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Likewise, many traditional freight forwarders and customs brokers have either been acquired by bigger competitors or have adapted their services to sell themselves as third-party logistics providers.
Although the industry has been redefined, there is still a place for traditional freight forwarders and customs brokers. And while the larger importers may have moved their business over to the bigger service providers with multiple US and overseas offices and a host of services, many small- and medium-sized importers are sticking with the smaller guys.
Finding a Niche
Many freight forwarders and customs brokers have adapted by specializing in certain commodities, geographic locations, or other areas of expertise. Some customs brokers handle mostly flowers or seafood, for instance. Others have an advantage because of their geographic location. This is true in such areas as the US-Mexico border, where a broker with experience unique to border operations can be invaluable. Not to be overlooked is customer loyalty. True, larger logistics providers may have an advantage with economies of scale, which allow them to drive prices down, but they are often criticized for their lack of personal attention and customer service. Freight forwarders and customs brokers have had to work harder than ever to retain customers, and they are many times more willing and able to outperform their larger logistics competitors to please the customer.The Internet: Friend or Foe?
Perhaps one of the biggest threats to the livelihood of freight forwarders and customs brokers has been the internet. It's understandable given the ability for importers to use dot-com companies to arrange for transportation, customs clearance, document filing, and other activities associated with international trade transactions. Besides, it's now easier than ever for buyers and sellers to match up over the internet and eliminate the middleman almost entirely. Yet, many experts say that transportation intermediaries can actually benefit from the internet.Recently, a group of graduate students from Philadelphia's Wharton School of Business launched a study of transportation brokers aimed at helping them survive in the information age. A spokesman for the group, Georgy Kirov, noted that, although there are many strategies, brokers should consider at least four options. They include: evolving into full-service online providers; becoming a "boutique" broker that specializes in a specific phase of transportation; developing specialized services that encourage customer loyalty; or pursuing a high volume of internet-driven transactions. Even Microsoft's Bill Gates has said that the internet will require service companies to either be high-volume, low-cost providers, or "high-touch, customer-service providers."
The internet can save freight forwarders and customs brokers money, too. It wasn't that long ago those companies had to spend a lot on information technology to remain competitive. Investments were made in expensive software programs, proprietary systems, networks, and hardware. The internet allows application service providers (ASPs) to make their software available over the web at a fraction of the cost. Users can buy only what they need and pay for them either by a fixed subscription fee or per transaction. The only investment is a personal computer and an internet connection.
Adding value is also an advantage of the internet. There is literally a wealth of timely and cost-free trade information on the internet that previously was harder to get and rarely given away. The US Customs Service posts compliance documents, administrative messages, and binding rulings on its website. Customs brokers not only have access to this information to help them do their jobs better, it can enhance the level of service they provide to their customers. The Department of Commerce, World Trade Organization, and a host of other trade organizations and news services also have very useful international trade information.
Despite the transformation that has befallen the international trade community, many traditional freight forwarders and customs brokers are successfully adjusting their business strategies and remaining profitable. And, given the rapid rate of change nowadays, it seems certain that they will encounter new challenges in the future.
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