From Supply Chain Disruptions to Sustainability: Challengers Forwarders Face
March 27, 2023
In an increasingly globalized, hyper-connected world, managing the flow of goods can be both challenging and complicated. Some common challenges that European logistics businesses face include supply chain disruptions, changing market conditions, environmental sustainability, and communication and collaboration with multiple parties.
Supply Chain Disruptions
Supply chain disruptions can occur for a number of reasons, including labor strikes, political unrest, and natural disasters. Floods, hurricanes, earthquakes, and other natural disasters can cause power outages and damage to transportation infrastructure, resulting in delays and costs for freight forwarders. Political instability in the form of government changes and civil unrest can lead to production shutdowns, border delays, and port closures, thus causing supply chain disruptions. Similarly, supplier issues, including production delays, bankruptcies and insolvencies, and quality issues can disrupt the smooth flow of goods. As pandemics can cause production shutdowns, lockdowns, labor shortages, and transportation disruption, they can affect the supply chain.
Changing Market Conditions
Changes in market conditions can affect the logistics industry, including recessions, fuel prices, transportation infrastructure, and changes in global trade policies. The availability and quality of infrastructure, such as airports, highways, and ports, can have a significant impact on freight forwarding businesses, causing sub-quality service levels, delays, and higher costs. Changes in trade policies can also affect forwarders, including trade restrictions and changes in import and export regulations, duties and tariffs, and trade agreements. Lastly, economic conditions can affect freight forwarding operations, including currency fluctuations, price of transportation, and demand for shipping services. During economic downturns and recessions, for example, demand for shipping services decreases, leading to increased competition and a reduction in revenue. This can force freight forwarders to cut costs or downsize to remain profitable and weather the downturn.
Logistic companies are faced with an increased demand for environmental sustainability, including the adoption of green practices and sustainable modes and methods of transportation. Green practices help forwarders minimize their environmental footprint, enabling them to maintain a reputation for corporate social responsibility. Such practices include using energy-efficient equipment and digital documentation, consolidating shipments, and optimizing routing. Forwarders are also increasingly adopting sustainable modes of transportation, like hybrid and electric vehicles, which help reduce emissions.
Communication and Collaboration
Freight forwarders face a number of communication and collaboration challenges such as time differences, language barriers, cultural differences, and information management. They speak different languages and work with producers, suppliers, and customers with various backgrounds which can result in misunderstandings, errors, and delays. Shippers also operate in different time zones which makes communication in real-time difficult. This can result in delays in responses, exchange of information, and decision-making. Forwarders are also tasked with managing huge amounts of information and paperwork, including invoices, customs forms, and other shipping documents, making it difficult for everyone to access the right type of information. Lastly, there are coordination challenges because forwarders need to coordinate the movement of cargo with customers, carriers, and suppliers to ensure safe and timely delivery.