Transition in platforms step #4
In my previous post I discussed the trends in two types of digital freight platforms. The freight exchanges and the transport management system (TMS) platforms that are active in Europe. The focus was, in particular, on the third-party intermediaries in the freight transport and logistics industry. The take away is that businesses are using several of such platforms.
This article looks into transitions of the third-party digital freight forwarder business model in Europe. The aim here is to first gain a broad understanding of
what is the current state of the third-party digital freight forwarder business model, and
what strategic choices are these platforms making in their partnerships (mainly logistics and technological innovation) to add value to their services.
State of the third-party digital freight forwarder business model in Europe
#1. A general search of such platforms shows that there are many of them operating in Europe. For example, as per recent information from the Tracxn database, there are 756 digital freight forwarders operating globally. However, this number also includes private platforms.
For the discussion, I have narrowed my choice to 3 digital freight forwarders, each with its own niche. These were founded in Berlin, Germany in the years 2015 and 2016. The data collection is revised using their respective websites*.
sennder (road freight transport, 2015, focus FTL),
InstaFreight (mainly road, and intermodal transport using rail and road freight, 2016, focus FTL, LTL & LCL). The move to rail transport has been an addition in recent years.
Forto (air, ocean, road and rail freight transport, 2016, FCL & LCL, within and outside Europe).
(FTL: Focus on Full Truck Load, LTL: Less than a Truck Load, LCL: Less than a Container Load, FCL: Full container Load)
There are several interesting examples, some of which are mentioned below. The information includes details on the country each platform was founded in, the transport modes, and the founding year.
Flexport (US, air, ocean and road freight, 2013),
Shypple (The Netherlands, air, ocean, road and rail freight, 2016),
Zencargo (UK, air, ocean and road freight, 2017) ……
#2. Both single mode and multimodal digital freight forwarders exist.
#3. Some movement away from digital freight forwarding also appears to have taken place. Cargonexx has now moved away from being a digital freight forwarder to being a TMS.
#4. The digital freight forwarders in single mode are also capable of organizing intermodal transport, e. g. with rail freight.
On taxonomy of digital freight platforms, the difference between a digital freight forwarder and a freight exchange business model may sound trivial now, but this was not the case some five years ago.
#5. The definition of the digital freight forwarders has gained clarity. For example,
sennder: "Digital road freight forwarders use technology to coordinate and control the transportation of goods, including activities like carrier sourcing, vetting, tracking documentation, pricing, data analysis, and reporting".
InstaFreight: "In contrast to other digital services like freight exchanges and transport management systems, digital freight forwarders are the contact person and contractual party for both shippers and carriers".
Forto: is "Digital logistics and freight forwarding". The platform changed its name from FreightHub to Forto in the year 2020.
Outside these, the definition is similar.
Shypple: "A digital freight forwarder, also known as an online freight forwarder, is a company that provides logistics services for the transportation of goods with technology. These services arrange for the movement of cargo by air, sea, or land and, in some cases, provide warehousing and storage solutions".
To remove any ambiguity, platforms also clarify which type of business model they are not. Examples of platforms from this post and the previous one are:
InstaFreight indicates in its FAQ that "it is not a freight exchange".
Transporeon (TMS) indicates that it is "neither a broker nor a forwarder". The TMS now uses its own transport exchange.
With regards to value proposition,
sennder using its products and services, offers its carriers an "access to enterprise-level shipments (on its freight exchange), to avoid empty trucks and kilometres, and to plan fleet operations more efficiently with load booking that takes minutes". And in this way aims to “save money for its shippers” while “reducing carbon emissions”.
InstaFreight offers to "connect medium and large shippers with smaller carriers across Europe with the aim of reducing empty truck runs and creating an efficient and sustainable European market for land transport". The platform states to be a “reliable partner for road freight across Europe”, that “differentiates through digital innovation”.
Forto "promotes the vision of a highly transparent, frictionless and sustainable supply chain" by catering to the needs of “leading brands” e.g. in “fashion and furniture to electronics” in international transport. It offers its customers to “Own your Supply Chain” and “Go beyond freight forwarding and move on to logistics services super-charged with visionary technology that takes your supply chain operations into the future".
#6. This also implies, that digital freight forwarders have several functions in common to freight exchanges and transport management systems: in particular the matching of supply and demand . For example,
sennder with its online marketplace/freight exchange (sennder’s carrier platform) offers the "possibility to carriers for finding orders or managing transports"; further, it "automatically matches the shipper’s order demand against carrier availability and capacity in a process known as digital freight matching".
InstaFreight, apart from freight forwarding, also offers transport management to its shippers. sennder and InstaFreight offer Contract, Spot and Charter for FTL and LTL transports within the EU.
Forto, extends its (e. g. container related) services beyond Europe while offering a five step process. Of this the quote and booking (based on matching) is the first step. The multimodal services include ocean, air, road, and rail freight (e.g., between China and Europe).
#7. Thus, transitions in the landscape of digital freight platforms are ongoing. The digital freight forwarders, differentiate themselves by ensuring the execution of the transport and related services that were finalized in the matching on the platform.
What strategic choices are these platforms making in their partnerships (mainly logistics and technological innovation) to add value to their services
The value proposition of the digital freight forwarder business model to ensure the transport execution also implies a deep dive into the end-to-end transport chain. Challenges emerge while accessing and integrating data from different actors at each process step.
#8. These challenges enable collecting insights for creating and pushing new innovative solutions in the market that actors along the transport chain can profit from.
Hence, through strategic partnerships, the digital freight forwarders appear to increase their geographical (network) reach, and with this scale their growth. Further they push the adaptation of technological innovation (e. g. electrical vehicles, alternative fuels towards higher sustainability) in different ways to create a future demand for these innovations.
sennder to speed up its growth, acquired Uber Freight (in 2020) to extend its network outside Europe to the US and Canada, the French Everoad (also 2020) and set up a joint venture with Poste Italiane (2020), Italy’s largest logistics operator. It also acquired the Dutch operator Cars & Cargo (2021). Further, sennder with its proprietary technology, formed a joint venture with Scania for premium electric truck (2023) has introduced a pay-per-use model for carriers. This is crucial as it offers the access to electric truck solutions that the carriers may otherwise have to invest to fulfil the changing demands of the shippers in light of reducing CO2 emissions.
InstaFreight transports Shell lubricants from Germany to Shell warehouses in Europe by road and rail freight (2021). It tied up recently with DPD (2023) so that all national and Europe-wide more transports can be organized via the platform. Recently, Flender also adopted the InstaFreight's transport management function.
Forto has entered into several partnerships to achieve higher sustainability for its customers. For example, with Goodshipping (2022), it aims to reduce the scope 3 emissions of companies’ supply chains by facilitating a fuel switch to biofuel. Thus, customers booking on FCL sea freight shipments with Forto can access Good-Shipping’s decarbonisation services. With Hapag-Lloyd (2022) also Forto launched a biofuel program for ocean shipping customers to reduce transport emissions. The use of rail freight between Asia and Europe, should also contribute to higher sustainability.
To summarize, businesses are also finding benefits and adopting the digital freight forwarders. The integration of rail freight on the platforms can be observed here as well, however in all, there is scope for more.
With this, the discussions on business models however are not yet complete. I’d like to some write on other platforms in a different context in the upcoming posts.
Do you have views you would like to add/share on this post? What discussions on freight platforms would you find helpful in this regard? Follow this link to read more about my research work and other articles. More to continue in coming days!
*The data collection from 2020 is revised till 14. November 2023 for this article.
**These are author's personal views. The data collection is based on the public sources available on the internet. The author takes no guarantees for this information.
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