A new report sees the freight forwarding industry facing low growth as road transport companies compete harder for business in this sector. The amended report from Ibisworld updates information about how freight forwarding is developing in Australia.
In the five years up to 2013 freight forwarding companies saw a contraction in their business of 0.9 per cent. The report does predict an improved result in the coming years, growth of 2.7 per cent is expected for the current financial year.
The business contraction and weaker growth are not only due to conditions in the general economy, the report sees structural change in which the business moving freight crosses from forwarding operators to road transport companies, as they move into new areas to consolidate business.
In the past freight forwarding customers were able to access lower freight costs by dealing with the operators who were consolidating loads before negotiating freight rates. The GFC stimulated the road transport industry to compete for the work to keep freight volumes up during the slowdown.This has had the effect of eroding the advantage of using forwarders and the savings gained from consolidation.
At the same time, the larger trucking companies have become more sophisticated about freight flows, making it possible to replicate forwarders savings.
“Integrated logistics operators that are primarily involved in road freight transport have expanded into the industry’s major markets,” said IBISWorld industry analyst Stephen Gargano in amending the report.
As freight growth increases in the next five years, trucking companies are expected to pick up an increasing proportion of the freight forwarding market, outperforming their freight forwarding competitors.