International Freight – Adapting to Global Challenges

The international freight industry has benefited from an increasingly globalised world economy in recent years.

The development of extended supply chains has led to significant growth in levels of international trade and this has of course led to growth in the freight forwarding industry.
The growth in profitability for freight forwarders has led to many changes in what used to be a very conservative industry.

Recently, there have been a large number of mergers and acquisitions from which a small number of global shipping companies have emerged.

The asset light nature of the freight forwarding industry, combined with the high level of profitability, has made it attractive to investors. So private equity has been playing an increasing role in the development of freight transport.

A freight company also has the ability to increase margins at times of economic downturn, which gives it a big advantage over other segments of the logistics market. A shipping company can be nimble on its feet and adapt to changing arket conditions in a way that many other businesses cannot. This makes the freight transport industry better able than many others to withstand the challenges of the current global economic crisis. As some economies are cooling, others are growing and the international freight industry will adapt to accommodate this.

The current economic crisis and in particular the decline of the US economy will have a significant impact on the trans Pacific and trans Atlantic freight transport trade, but growth of intra Asian volumes are likely to go some way to offset this.

As well as the growing importance of the China import market, India is an important new market for shipping companies as their economy expands. India has one of the world's fastest growing economies and currently imports more than £2 billion worth of goods and services from the UK.

Despite India's inadequate transport infrastructure, the Indian freight forwarding industry continues to expand and a number of Indian shipping companies have expanded their logistics operations recently. So India is being touted as the new land of opportunity for international freight services providers, on the back of a retail boom and economic growth predicted at 9-10% in next few years and a logistics market predicted to grow at 7-8%. But India is hampered by a poor transport infrastructure. The poor condition of roads pushes up operating costs and reduces the efficiency that can be achieved by any shipping company . The National HighwaysHhh are being upgraded but they account for only 2% of the total road network, so significant challenges will remain.

The country needs to invest in railways, which are cost effective and environmental friendly, as well as inland waterways. However, there is no question that as the infrastructure improves, shipping companies will adapt to improve customer service.

As well as India and the China import market, another key driver of the freight industry in recent years has been the expansion of the EU. As companies have revamped their pan European distribution strategies in response to the challenges and opportunities of the recent expansion of the EU, so freight forwarders have increased their own knowledge and networks to provide new services in response to customer demand.

The UK is now the most advanced market for contract logistics in Europe. In the last couple of years, the freight forwarding market has experienced a huge degree of volatility due to a number of factors - including advances in technology, regulatory changes and increased competition. Now the global credit crunch and economic crisis adds a new challenge. But amongst all the uncertainty and gloom, it is certain that with the high degree of resourcefulness, adaptability and sheer entrepreneurship to be found in today's UK freight services industry, freight transport companies will rise to the challenge.

Stephen Willis is Managing Director of RW Freight Services a UK based freight transport company, established in 1971 and operating worldwide freight forwarding services

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