Mapping the high-intensity growth of the Freight Forwarding Market

air freight

As an intermediary between a shipper and various transportation services, freight forwarders have always been at the forefront to enable smooth and efficient logistics. During the pandemic, they were also the first to take the hit and witnessed a significant contraction as countries across the globe went under lockdown. As people adapted to the new normal to enable efficient deliveries of essentials, the forwarders adapted to innovations and pushed new landscapes. Now, as we move forward, we see the industry standing on solid grounds and stepping into a brighter future.

After the World Health Organisation (WHO) declared COVID-19 as a pandemic in early 2020, countries across the world went under lockdown, and among many others, the freight forwarding industry was the first to reel under the effects of the pandemic.

According to Statista, the global freight forwarding market in 2020 witnessed a significant contraction of 8.7%.

While the closing of borders within the nations in different containment zones and reverse migration affected the road freight severely, the grounding of passenger planes and the cancellation of flights took a toll on the air freight segment.

“In Air Freight, as a large part of passenger planes were grounded, the belly-hold capacity was missing, and the total available capacity was more than 20% below pre-COVID-19 levels. The demand for air freight exceeded available capacity on most trade lanes, leading to historical high-rate levels,” said Cyrus Katgara, Partner, Jeena & Company.

“The contraction was surely on the cards, and I believe we are still lucky that the same was below double digits,” said Mahesh P Trikha, Managing Director, Aargus Global Logistics Pvt Ltd. while supporting the above argument.

On that same note, sea freight, which for the longest time has been used as a cheaper alternative means of transport at the expense of timely delivery, also felt the impact of the virus as many suppliers shut down their operations.

While sea freight also faced the burns of the pandemic, it was much less than that faced by the air freight market.

 “The market volumes declined 5-7% compared to 2019-20. Due to efficient capacity management by the carriers, rates were high during 2020-21and during Q3 and Q4, the rates reached record levels on several trade lanes’, Mr Katgara said.

With barely anything to transport, and empty containers stacking up at ports, the ever-busy ports were seen serving as docking ports for many cargo liners in the initial days of the lockdown.

However, Ashish Asaf, Managing Director & CEO – S.A. Consultants & Forwarders said that “Contrary to expectations, demand for container shipping (ocean freight) has grown during the pandemic, bouncing back quickly from an initial slowdown.”

Besides all these, another major hurdle in the way of operations was the lack of manpower.

Working at 5% and especially for essential goods, the industry faced a delay in getting bookings/space confirmation & responses in both air and sea freight. The clearance process was also delayed, even after the gradual ease in restrictions due to the backlogs.

Giving an overall gist of the challenges faced by the air and sea freight, Mr Trikha said, “The challenges are acute shortage of Containers and Space for Air Shipments. The most benefited segment being Air Charter operators and Shipping lines who got into action and due to very high demand of space the freight rates got doubled or trebled too.”

Adding to the same, Mr Asaf said, “Although the pandemic disruptive nature is at the core of the container shortage, the escalations in freight made the carriers reap historic profits in these times. Overall, all disruptions were bad for end customers but were beneficial to carriers and forwarders.”

The freight forwarding market came face-to-face with many unexpected challenges during the pandemic. But at the same time, it also made businesses realise the prime role of freight forwarders in delivering commodities through international supply chains and pushed new landscapes in the sector.

Digital Freight Forwarding Market in India

As markets show signs of recovery, majorly backed by the manufacturing and e-commerce segment, it paves the way for the digital freight forwarding Market, especially in a developing nation such as India, which was growing at its own pace.

Although the digital freight forwarding landscape in India was constantly evolving, it was only during the pandemic that the much-discussed concept of decades came into prominence.

“The industry now understands the freedom given by the cloud-based logistics, and freight forwarding software wherein the managers can control the operation remotely in real-time, and all the members have the access to current updates,” says Mr Asaf

As people were forced to stay indoors, online shopping gained more popularity across the world, giving a boom to both domestic and cross border e-commerce in developing markets like India. The COVID circumstances and the increased access to the internet also pushed the manufacturers to shift from traditional freight forwarding to digital freight forwarding.

This is an abridged version of an article that was originally published in the Anniversary Special – August Issue of the Logistics Insider Magazine. To read the full story, grab your copy now.

Leave a Reply

Your email address will not be published. Required fields are marked *