Want to learn the problems associated with freight forwarding and how freight forwarding automation can solve it? Read our article…
Logistics is incomplete without freight forwarding. It is the industry that is responsible for smoothening the entire supply chain. However, there are certain hiccups that the industry has to deal with.
Automation in freight forwarding is the way to solve them, therefore to tell you about it, we have written this article so read ahead…
Freight forwarding is a logistical operation that caters to moving of shipment, product, or freight from one location to another. It can be local, national, and international. It deals with the planning and movement of shipments on behalf of the shippers.
The work of freight forwarding is done by freight forwarders.
Freight forwarders also known as freight agents can be entailed as individuals and companies that are responsible for moving freight from the manufacturer to the final location or customer.
There are various roles that a freight forwarder plays in the supply chain of this aspect. These are:
Negotiation of Rate: Freight forwarders negotiate the rate at which the freight will be moved from one location to another.
Tracking of Containers: They track the location of containers or freight at every node of the movement.
Documentation for Customs: Freight forwarding is customary to multiple document verification carried out at customs. These documents are prepared by the freight forwarder.
Freight Aggregation: They are responsible for aggregating or consolidating all the freight that is moved from one location to another.
Aside to this, there are multiple roles & responsibilities that a freight forwarder carries out. These responsibilities can differ from company to company, and nation to nation depending upon the type of freight and service demanded by the customer.
There are various challenges that a freight forwarding service or a freight forwarder face during the operations. These are:
As mentioned before, freight forwarding is heavily reliant on paperwork. A majority of these documents produced are unstructured in nature. It gives rise to difficulties in processing them using a general OCR solution.
An international logistics company Drewery estimated their revenue to be around $166 billion in the year 2017. It consolidated over 1.26 billion freight invoices that were to be issued, verified, paid, or reconciled. This kind of work requires entire teams for handling the invoice data and data entry.
The inefficiencies in the process and lack of trust could have been accumulated to an annual sum of $34.4 billion spent.
Each of these figures are stipulated due to a series of issues with the invoicing and reconciliation process.
There are several factors that are mentioned while handling the Drewery case study. These are:
The levels of automation for issuance and reconciliation of invoices are particularly low in small to medium scale enterprises. The invoicing in these enterprises is done primarily using manual processing. In fact, the amount of time spent on one invoice can range from 2 to 15 minutes on spot checkup. This is only when the data is accurate. However in case of small enterprises, the amount of error-prone invoices are close to 30%.
Practices such as ‘Cash against Documents’ are standard and prevalent in the industry. The case is similar even for new relationships. This is a highly paper-intensive practice and requires loads of manual checkup for paperwork. It is estimated out of the $34.4 billion spent on inefficiencies, about $30 billion is spent on it.
These are practices primarily due to the lack of trust between the parties. However, there are multiple modern solutions that can cater to it.
Taking on new customers is always risky due to ongoing bankruptcies. Bad debts represent almost 2-3% of small freight forwarders and 0.5-1% for small to large shipping lines. This is the reason, the industry has stuck to its orthodox ways where a decent amount is represented in terms of bad debts via unpaid invoices. However, a slower approach i.e. manual process ironically increases the chances of not coming through such issues early on.
Other than this, there are various other reasons in terms of manual processing such as huge volumes, data inefficiencies, low productivity, and realization of faster processing that clearly proves the need of automation in freight forwarding.
There are multiple ways automation can benefit freight forwarding. Here are some reasons why should consider it:
Costly Operation: Previously, we’ve only mentioned the statistics of one large freight forwarding company and it was crossing a billion. Considering the time required for processing a single invoice i.e. 2-15 minutes (with accurate data), the operational becomes a lot more than it should be. With automatic reconciliation of invoices, freight forwarders need not to worry about the process and simply focus on other productive tasks. This would reduce tons of money in terms of manual reconciliation. Also, the associated teams would be able to provide more productivity even with a smaller team to handle invoice data leading to reduced costs.
Enhanced Customer Service: The story is the same across industries and not just freight forwarding. Much of the delays that happen in a single transaction is due to inefficiencies and hiccups during the documentation process. It can be negated as it provides a physical record of the transaction that took place. However the more time an organization takes to process a single transaction the larger the gap becomes in terms of providing adequate customer service. As mentioned before, customers today want everything fast and relying on automation for documentation workflows is going to improve multiple impediments in realizing the need.
Accessibility to Data: Freight forwarders are not only responsible for moving the shipment but also tracking and providing other substantial information. For this, they require easy access to data real-time. However with a manual system, it is simply not possible but a SaaS based solution or a cloud based infrastructure can do so.
Speed and Scalability: The purpose of automation in freight forwarding is primarily to speed up the task. It is because humans have a bandwidth of work and beyond that the chances of producing inaccurate data is imminent. However, digital systems don’t suffer from the same issue. Adding to it, scalability is another really big issue. For instance, there are times when business is slow while there are also times when the existing staffing simply seems inadequate because of the rise in business. Automation systems are scalable in nature and can promptly adjust to the required need.
Freight forwarding requires a series of documents that needs to be processed. VisionERA is an Intelligent Document Processing (IDP) platform. It provides automation of document processing operations such as data extraction, data validation, application of business logic, and storage. It can automatically process batches of structured to unstructured documents with the source of truth by the user. This can be the existing data in the database or copies of documents submitted for the same.
With VisionERA, it is possible to automate freight forwarding use cases such as bills of lading, customs documentation, packing list, etc end-to-end. VisionERA provides the capability of custom DIY workflow allowing users to create their own workflow or update an existing one.
Use our Free trial to upload your documents and test out the platform.
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