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Challenges Facing By Freight Forwarding Industry Today

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Purpose – To introduce and provide a model for customer retention in freight forwarding industry by implementing a fully integrated ERP system What is freight forwarding?

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A freight forwarder, forwarder, or sending specialist, otherwise called a non-vessel operating common carrier (NVOCC), is a man or an organization that sorts out shipments for people or enterprises to get merchandise from the maker or maker to a market, client or last purpose of conveyance. Forwarders contract with a bearer or regularly different transporters to move the merchandise. A forwarder does not move the products but rather goes about as a specialist in the coordinations organize. These transporters can utilize an assortment of transportation modes, including sea, air, land and rail, and frequently do use numerous modes for a solitary shipment.

History

The history of freight forwarding dates centuries back. As of 1800, the earliest freight forwarders were known to be innkeepers who helped hotel guest hold and re-forward their goods. This system progressed and evolved into business to business contracts over the years. One of the examples of this evolution is the Thomas Meadows and Company Limited in London England. Established in 1836, the company helped in the transportation of items through contracting with a network of local carriers. It also helps its clients with documentation and offers them information as regards customs. A historical shot of one of the first freight forwarding shippers.

Freight forwarding in today’s context

With highly volatile freight rates and oil prices, the freight forwarding market is experiencing structural changes and an ambiguous global economic situation means that forwarders need to be adjusted and reactive to macro-trends.

The study lead by Kewill and Transport Intelligence titled “The Future of Logistics – What Does the Future Hold for Freight Forwarders?” initiate that many forwarders, even some of the major, absence the tools that would provide the visibility and the alertness to succeed in this challenging market.

Competition

Freight forwarders are up against more competition than ever. Key factor is that many freight forwarding companies characterized themselves as something unique (say an as sea transporter, or even a warehousing organization) are currently giving forwarding and NVOCC type services. Also, obviously, everybody is discussing how even Amazon is getting in the diversion too – which drives freight forwarding companies to the immediate challenge.

Commoditization

Many, if not most, shippers see transportation as a ware. All they think about is that the conveyance gets made. This means, they put little value on service and a great deal on cost. This makes it difficult for forwarders to be unique from other service providers – particularly when there are dependably those who’ll attempt to win on cost. Some forwarders are learning they can better contend and keep up edges by offering new or better innovation that enhances the client encounter.

Ocean Volatility

Ocean shipping is a major part of what forwarders do. It’s likewise an extremely uneven business, in view of confounded rates and contracts that take a specialist to get it. Commonly this makes it difficult for forwarders to understand their cost structure – which clearly makes it significantly harder to provide exact and solid quotations to clients. The apparently arbitrary nature of GRI’s and extra charges just adds to the issue. There have been ongoing calls to streamline the multifaceted nature of every one of these things however there won’t be help for forwarders at any point in the near future.

Trade Management

A major piece of most forwarder’s business originates from reacting to tenders. Since the volume of these offers is so high, and each is generally so perplexing, they are a major deplete on assets. Smart forwarders are focused around enhancing their delicate administration procedure to ensure they are offering precisely and quick, yet additionally on the best kinds of business for them.

Rate of Change

There are always new market challenges for forwarders that should be represented. An ongoing illustration is the pattern for ocean carriers to form alliances. Without notice, these can influence the rates and contracts forwarders have with the carriers, and additionally benefit. The previously mentioned impact of innovation is changing how forwarders (and their rivals) can deal with their business – and also benefit their clients. Finally, showcase desires keep on focusing on ever speedier and less expensive conveyances.

For all these reasons, freight forwarders need to work harder than at any other time to separate themselves in their business – while proceeding to center around benefit. What the best forwarders know is that similarly as essential as competitive rates are giving clients better service alternatives and innovation to support decision making.

Customer retention

Customer retention comes under the activities and actions companies and organizations do to reduce the number of lost customers. In this highly competitive volatile market it is necessary to pay more attention on customer retention same as looking for new customers in order to increase the market share.

“Don’t just satisfy your customers, delight them.” ~ Warren Buffet (Avi LIRAN 02/08/2018) which has an everlasting validations under any circumstances especially under a topic of customer retention. Price is just another component of a product or a service but the experience that the customer gets takes long which is the meaning of the Warren Buffet’s statement.

“Marketing is not the art of finding clever ways to dispose of what you make. Marketing is the art of creating genuine customer value. It is the art of helping your customers become better off.” – Philip Kotler (The Economist Sep 12th 2008) which shows a way of delighting the customers. In marketing you can implement different strategies to create values towards delighting the customer which helps to customer retention. What are some examples of activities for keeping customers?

  • loyalty programs
  • reward programs
  • frequent communications and company news
  • customer birthday communications
  • referral vouchers where the giver and recipient receive money off their next purchases
  • frequent buyer points programs
  • courtesy systems
  • customer winback program
  • adding new and complementary product and/or service lines to a business’ offerings
  • corporate hospitality
  • key account management and account based communication
  • purchase reinforcement

Segmenting

Customer segmentation is the method of identifying a company’s customers into groups that shows similarity among customers in each group. The reason of segmenting customers is to find out how to service customers in each segment in order to enhance maximum benefits of each customer to the business.

  • Rating
  • Customer rating can be arranged by measuring volume, profits and credibility etc. which helps an organization to identify the service level required.

  • Rewarding
  • By certification of the customer’s contribution, can be awarded as per the best rating each customer has scored where the customer feels the appreciation levels of the service provider.

  • Entertaining
  • By making the customer to engaged more and more on industry activities such as experiencing on board a vessel, warehouse operation, port operation and company organized events, increase the relationship of all stakeholders.

Above activities has lot of information to be considered and also to critically analyze therefore in today’s freight forwarding industry evolving to get maximum use of information technology which results on ERP systems and CRM etc.

Modern world has been realized that how an ERP system could influence the business to get a competitive advantage in this highly volatile / competitive markets related to their own industries. How do different companies measure the customers they have kept?

Retention Rate = ((CE-CN)/CS)) X 100

CE = number of customers at end of period

CN = number of new customers acquired during period

CS = number of customers at start of period

You start the (week/month/year/other period you choose) with 500 customers. You lose 50 customers, but you gain 100 customers. At the end of the period you have 550 customers. 550–100 = 450; 450/500 = .9; .9 x 100 = 90. Your retention rate for the period was 90 %

What is an ERP system?

ERP stands for Enterprise Resource Planning

To integrate total process of a business’ operation into real time visibility system, many companies change their legacy system to Enterprise Resource Planning (ERP) solutions. ERP refers to process and accomplish information from all aspects of the company. ERP solutions store real time data in one database, providing businesses a streamlined look at how all their processes are functions. (Chad Brooks, Business News Daily August 28, 2013)

A software toll systematizes, simplifies, and incorporates business processes across all business functions within the organization using common data, operating on a single database. (Thomas Wailgum and Bart Perkins FEB 12, 2018)

In simplified version ERP is to streamline / capture core business processes and improve real time data visibility. In the case of customer retention ERP system plays a major role in Freight forwarding industry. (Cathy Folkes Jul 22, 2013) Biggest Challenges When Implementing ERP for the First Time (Aleksey Osintsev April 1, 2016)

  • Selection Problem
  • It is very difficult to identify what type, size, and scope of system really suites and how to select the most effective solution from the large amount of versions available on the market. What matters is the efficiency & effectiveness while keeping the eye on the cost factor as well.

  • Technical Issues
  • After a selection of an ERP system may not meet the organizational requirement as it may not the correct flow chat to integrate all the aspects & reflects real time data visibility

  • Data Quality Issues
  • This kind of issue can happen at the beginning when you transferring your legacy data/master data in to the newly selected ERP system and which definitely reflects wrong data to analyze.

  • Business Philosophy Changes
  • Very first experience brings considerable amount of changes to a company’s orthodox business model and the day-to-day practices it has been experiencing throughout the beginning. Some employees’ workforce or day to day activities may drastically increase, as with the new system it is more complicated (sometimes unbearable) to fix inaccurate data or typing errors; Business models and business processes might need immense changes because of new real-time opportunities and data availability.

  • Mind shift Issues
  • The biggest challenge to overcome. Human or the employees are reluctant to stay within the comfort zone with the experience that they observed, basically reluctant to change from their habitual practices. You cannot experience the success of implementing a new ERP system, if the employees haven’t adjusted accordingly. Advantages of having an ERP system

  • Lower IT cost
  • Total real time visibility
  • Improved reporting and planning
  • Complete customization
  • Improved efficiency
  • Data security
  • Improved collaboration and work flows
  • Deep Integration
  • Improved data quality
  • Improved data accessibility
  • Standardized business processes
  • Facilitated regulatory compliance

In today’s context most of the worldwide freight forwarding networks is having their competitive advantage among the competitors by using CRM systems as part of their ERP system by knowing the impotency of customer retention rather than targeting new customers.

What is CRM – Customer relationship management?

A term that defines to experience approaches and tools that companies use to manage and evaluate customer relations and real time data throughout the customer lifespan, with the intention of upgrading customer service relationships and enhancing in customer retention (Tim Ehrens Jan 24, 2018)

A tool that can critically analyze 360-degree view of customers and creates the opportunity to identify what communication levels to be use, offer required satisfactory level information and service. A challenging demand shows CRM attracts organizations to implement as a customer retention/loyalty enhancement tool. (Zarema Plaksij 25 June, 2018)

Comparison between ERP and CRM

It is very clear that ERP covers the total processes of an organization & CRM is a part or which can integrate / link to EPR in order to critically analyze a specific area to archive organizational goal/objectives.

Disclaimer: This essay has been submitted by a student. This is not an example of the work written by our professional essay writers. You can order our professional work here.

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