Benchmark Survey: Forwarders & Brokers

Chris Jones, Descartes

Brandon Fried, Airforwarders Association (AfA)

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Safe Harbor

Safe Harbor: Certain information in this presentation

relates to currently planned or anticipated
development activities by Descartes (the
“Roadmap”). The Roadmap is subject to change at
any time at the sole discretion of Descartes, which
may include the addition or deletion of certain items
from the Roadmap, changes in the scope or expected
functionality of certain items or changes in the
projected time line for completion of such items.
Nothing contained in this presentation should be
interpreted as a commitment, promise or other
binding obligation in respect of any portion of the
Roadmap or the projected timing under the
Roadmap. Descartes undertakes no obligation to
communicate any changes in its Roadmap at any
time.

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Agenda

Who We Key Strategies Technology

Surveyed Trends & and Tactics Implications
Practices

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 Participant Make Up

• 203 participants in 2017 versus 100+ in 2016

• Majority of participants have forwarding and brokerage operations

What Kind of Services Do You Provide?

100%
(select all that apply)

80%

60%
Where Are Your Operations?
(select all that apply)
40% 90%
80%
20% 70%
0% 60%
Customs International NVOCC Domestic Other 50%
Broker Forwarder Forwarder 40%
Total Respondents
30%
20%
10%
0%
US Canada Europe Asia Rest of
World
Total Respondents

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Financial Performance

• 100% more participants in 2017, but the story remains the same –
tough market to make a buck

• As in 2016, we analyzed the rest of the questions from a “Top” and

“Bottom” financial performer perspective

How Well Financially Is Your Company Doing Today?

50%
45%
40%
35%
30% Bottom Top
25% Performers Performers
20%
15%
10%
5%
0%
Losing money Breaking even <3% profit margin ≥3% - 10% profit ≥11%+ profit
margin margin

FY17 FY16

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Shipment Volume

• Much better representation from larger forwarders and brokers in

2017 versus 2016

• Top performers tended to be the larger services providers

Yearly Shipment Volume

70%

60%

50%

40%

30%

20%

10%

0%
<10K shipments ≥10K-25K ≥25K - 100K ≥100K

Total Respondents Top Financial Performers Bottom Financial Performers

P ro prie ta r y and C o py righ t of The De sca rt e s Sy ste m s Gro up Inc. All rights re se rv e d .
Agenda

Who We Key Strategies Technology

Surveyed Trends & and Tactics Implications
Practices

P ro prie ta r y and C o py righ t of The De sca rt e s Sy ste m s Gro up Inc. All rights re se rv e d .
Macroeconomic Change

• Instability in all its forms (new president and global instability) are top
issues for all respondents

• Adopt a hedge strategy across trade lanes, commodities, etc. to

minimize impact any number of potential trade scenarios

What Macroeconomic Changes Will Have the Greatest Effect Over the
Next 5 Years? (select 2)
80%
70%
60%
50%
40%
30%
20%
10%
0%
New US Global instability Chinese economy Currency Price of oil European Reshoring
president’s trade valuation economy
& security policies

Total Respondents Top Financial Performers Bottom Financial Performers

P ro prie ta r y and C o py righ t of The De sca rt e s Sy ste m s Gro up Inc. All rights re se rv e d .
Regulatory or Industry Change

• Increasing commoditization - customers want more for less

• Increasing cargo security complexity, intrusion and costs

• Bottom performers struggle to show value

• Top performers search for the talent to differentiate

What Regulatory or Industry Changes Will Have the Greatest Impact on

the Industry Over the Next 5 Years? (select 3)
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
Pricing pressure Increasing cargo Customers 100% cargo Market Carrier viability Insourced Talent
security wanting more inspection consolidation logistics and recruitment
declarations data real-time brokerage

Total Respondents Top Financial Performers Bottom Financial Performers

P ro prie ta r y and C o py righ t of The De sca rt e s Sy ste m s Gro up Inc. All rights re se rv e d .
Forwarders and Brokers Change Preparation

• Even greater separation in the strategies of top and bottom

performers compared to 2016
 Top performers want to “double down” on their technological capacities

 Bottom performers may find themselves in a “race to the bottom”

How Are You Preparing for the Macroeconomic and Regulatory

Changes? (select 2)
80%
70%
60%
50%
40%
30%
20%
10%
0%
Investing in Offering new Staying the course Acquiring or Cutting costs Selling the company
technology services partnering

Total Respondents Top Financial Performers Bottom Financial Performers

P ro prie ta r y and C o py righ t of The De sca rt e s Sy ste m s Gro up Inc. All rights re se rv e d .
Competitive Advantage

• Service, Service, Service

• Technology, but not for technology’s sake

• Some bottom performers tout their low cost capability – really?

What Is You Greatest Competitive Advantage?

80%
70%
60%
50%
40%
30%
20%
10%
0%
High service Domain expertise Technology Low cost Trade lane Other
performance

Total Respondents Top Financial Performers Bottom Financial Performers

P ro prie ta r y and C o py righ t of The De sca rt e s Sy ste m s Gro up Inc. All rights re se rv e d .
The Competition

• Versus 2016…
 Large integrated logistics companies are now the #1 concern
 Shift away from “Global forwarders” to “Forwarders/brokers like
me” – especially for top performers

Who Are Your Greatest Competitors Today?

45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Global forwarders Large integrated logistics Forwarders or brokers like me Customers insourcing what we
companies do

Total Respondents Top Financial Performers Bottom Financial Performers

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Competitors’ Advantage

• Competitors delivering incremental value are 2 of the top 3

competitive concerns

• Competitor scale is also a significant concern for top and bottom

performers

What Is the Competition Doing That You Wish You Did? (select 2)
70%
60%
50%
40%
30%
20%
10%
0%
Value-added services More global Shipment/delivery Deep customer Serving multiple Providing forwarding
(e.g. PO operations visibility industry domain transportation modes and brokerage
management) expertise services

Total Respondents Top Financial Performers Bottom Financial Performers

P ro prie ta r y and C o py righ t of The De sca rt e s Sy ste m s Gro up Inc. All rights re se rv e d .
Agenda

Who We Key Strategies Technology

Surveyed Trends & and Tactics Implications
Practices

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Primary Growth Strategy

• Versus 2016…
 More services to existing customers and enter new markets are still the top
strategies, and more so for top performers in 2017
 Better partner management has become more important most likely to
keep down costs and address scale issues
 Acquisitions went from being a top priority for bottom performers to no
interest at all

What Is the Primary Way You Expect to Grow Your Business?

40%
35%
30%
25%
20%
15%
10%
5%
0%
Offering more services Entering new customer Working better with Acquisitions Entering new
to our customers industries logistics and carrier geographies
partners

Total Respondents Top Financial Performers Bottom Financial Performers

P ro prie ta r y and C o py righ t of The De sca rt e s Sy ste m s Gro up Inc. All rights re se rv e d .
Growth Inhibitors

• Resource capability and competency are the top inhibitors to growth

• For top performers, talent is also one of the greatest concerns for the
next 5 years

• Bottom performers have themselves in a “Catch 22” situation and are

putting themselves at competitive risk for the long term

What Is Your Greatest Inhibitor to Growth?

60%

50%

40%

30%

20%

10%

0%
Skilled logistics and IT competency/resources Tied up in manual Access to capital Lack of value added
customs resources processes services

Total Respondents Top Financial Performers Bottom Financial Performers

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Important Tactics to Improve Margins

• Process automation swaps places with more high-value services as the

top tactic

• Top performers are more focused on actions that add value to

customers

• Bottom performers are focused on short-term financial mechanics

What Are the Most Important Tactics You Are Using to Improve Your
70% Margins? (select 2)
60%
50%
40%
30%
20%
10%
0%
Automating processes to Offering more high-value Providing services further Cutting costs (people, Raising prices
react faster to customer services back in the customer’s third parties, etc.)
needs supply chain
Total Respondents Top Financial Performers Bottom Financial Performers

P ro prie ta r y and C o py righ t of The De sca rt e s Sy ste m s Gro up Inc. All rights re se rv e d .
Agenda

Who We Key Strategies Technology

Surveyed Trends & and Tactics Implications
Practices

P ro prie ta r y and C o py righ t of The De sca rt e s Sy ste m s Gro up Inc. All rights re se rv e d .
Technology Adoption Strategy

• Overall it is fairly representative

• The bottom performers perspective is hubris considering that 60% of

them selected “stay the course” as the answer for preparing the major
industry changes

How Would You Describe Your Company’s Technology Strategy?

50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Early adopter Fast follower Middle of the pack Laggard

Total Respondents Top Financial Performers Bottom Financial Performers

P ro prie ta r y and C o py righ t of The De sca rt e s Sy ste m s Gro up Inc. All rights re se rv e d .
IT Spending

• IT spend will increase for the next 2 years for 60%+ of Forwarders
and Brokers

• However, the majority of that spend increased will be consumed by

top performers!

• Compared to last year, bottom performers are 1/5th as likely to make

big increase in their IT spend

How will your IT spending change over the next 2 years?

60%
50%
40%
30%
20%
10%
0%
Up >5%+ Up 1 - 5% Same as today Down ≤5% Down >5%

Total Respondents Top Financial Performers Bottom Financial Performers

P ro prie ta r y and C o py righ t of The De sca rt e s Sy ste m s Gro up Inc. All rights re se rv e d .
Technology Importance for Growth and Regulatory
Compliance

• Technology is expected to play a significant role in Forwarders’ and

Brokers’ growth and compliance strategies

• Poor performers may struggle to delivery against their IT-based

growth strategy because of previously cited investment hurdles

How Important is General and Compliance Technology to Your

Growth Strategy?
70%
60%
50%
40%
30%
20%
10%
0%
Fundamental Highly Important Somewhat Not at all

Growth Top Financial Performers Compliance Top Financial Performers

Growth Bottom Financial Performers Compliance Bottom Financial Performers

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Short-Term IT Investment Value

• ACE and other compliance programs are keeping IT shops busy

• Multi-party is critical to enabling the top margin improvement strategy

“Automating processes to react faster to customer needs”

• Supporting value-added services is also another important margin

increasing strategy

Where Do You Believe Is the Greatest Value from IT for the Next 2
Years? (select 3)
80%
70%
60%
50%
40%
30%
20%
10%
0%
Regulatory Customer, Value-added Back office Mobile Managing HTS Denied party
compliance trading partner services (e.g. operations solutions transportation classification screening
systems and carrier PO partners
integration management &
visibility)

Top Financial Performers Bottom Financial Performers

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How Can Technology Providers Help?

• Forwarding and Brokerage domain expertise

 It’s a challenge to keep up with constantly changing government
regulations, especially for resource poor bottom performers
 Top performers are looking for best practices to differentiate and drive
financial performance

• Integration, integration… external and internal processes

How Can Your IT Supplier Help Your Company the Most? (select 2)
60%
50%
40%
30%
20%
10%
0%
Keep solutions current Lower solution costs Integrate my Integrate my Provide Provide more high ROI
with government customers, trading operations forwarding/brokerage solutions
regulations partners and carriers best practices or
consulting services

Total Respondents Top Financial Performers Bottom Financial Performers

P ro prie ta r y and C o py righ t of The De sca rt e s Sy ste m s Gro up Inc. All rights re se rv e d .
Summary

• Another tough year to make a buck

• Trade instability – need a hedge strategy

• Keeping pace with changing government regulations still a large

operations and technology focus

• Will see an increasing competitive gap between top and bottom

financial performers
 Top performers focused on customer value and higher margin services
 Bottom performers less willing to change and focused on short term
financial fixes

• Investing in technology seen as key component to address economic

and industry change

• IT spend will continue to grow, but top performers will represent the
“lion’s” share of the growth

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Q&A

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 Network Applications Community

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