Freight Forwarding Services

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Industry Structure, How Firms Opertate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Quarterly Insight, Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 15,000 freight forwarders in the US arrange transportation for freight between shippers and carriers, and typically offer a combination of services spanning transportation modes. Companies can derive profits from the differential between the rate charged to customers and the rate charged by the transportation carrier. By consolidating cargo and purchasing space on a volume basis, firms secure favorable pricing. Freight forwarders may also charge flat fees for services, such as freight consolidation, break bulking, and customs clearance.

Dependence on Third Parties

As middlemen between customers and transportation providers, freight forwarding services must rely on third parties for physical transport and are typically still responsible for the timely and safe delivery of cargo.

Seasonality of Demand

Depending on the type of cargo, sales can be seasonal and cash flow uneven.

Industry size & Structure

The average freight forwarding contractor operates out of a single location, employs 15-16 workers, and generates about $8-9 million annually.

    • The freight forwarding industry consists of about 15,100 companies that employ about 233,600 workers and generate about $130 billion annually.
    • The industry is fragmented; the top 50 firms account for about 33% of industry sales.
    • The industry includes freight forwarders, marine shipping agents, and customs brokers.
                              Industry Forecast
                              Freight Forwarding Services Industry Growth
                              Source: Vertical IQ and Inforum

                              Coronavirus Update

                              May 17, 2022 - COVID-19 Spikes In China Will Affect Supply Chains
                              • Logistics experts say that disruptions related to China's zero-tolerance approach will ripple globally — and extend through the year — as bunched-up cargo vessels start sailing again. “We expect a bigger mess than last year,” said Jacques Vandermeiren, the chief executive officer of the Port of Antwerp, Europe’s second-busiest for container volume. “It will have a negative impact, and a big negative impact, for the whole of 2022.” We expect waiting times to increase significantly once product export activities resume and a large volume of vessels make their way to the US West Coast ports, added Julie Gerdeman, CEO of supply-chain risk analytics firm Everstream Analytics. China accounts for about 12% of global trade and COVID-19 restrictions have idled factories and warehouses, slowed truck deliveries, and exacerbated container logjams in the country.
                              • Economists at Goldman Sachs see three main solutions for manufacturers and retailers that hope to improve supply chain resilience: reshoring foreign production, diversifying supplier networks, and overstocking inventories. Overstocking, or targeting a permanently higher level of inventories, is the strategy that’s most clearly underway, especially in durable goods, the Goldman Sachs economists say. Companies analyzed by the multinational investment bank and financial services company are aiming for inventory-to-sales ratios roughly 5% higher than before the pandemic on average. Construction of new domestic manufacturing facilities “has mostly gone sideways,” the economists said. Imports of foreign parts and final goods have grown faster than domestic manufacturing output, they added, suggesting that many supply chains still depend on foreign sources for production materials.
                              • The pandemic has exposed the vulnerability of far-flung, complicated global supply chains. Some manufacturing industry experts suggest that supply chains need to be shorter to be more resilient. Simpler supply chains could reduce global freight demand and shrink the freight forwarding market. Nearly 85% of procurement professionals at North American manufacturing firms are likely or extremely likely to reshore some of their supply chains, according to a June 2021 report released by Thomas, a provider of supplier and product sourcing services. A strong majority of survey respondents plan to reshore some operations despite some challenges in doing so, including price and speed.
                              • Global air freight volumes increased 18.7% year over year in 2021, marking the second-best yearly performance on record. Freight forwarders struggled to reroute air freight in early 2022 as airlines canceled flights due in part to the rapidly spreading Omicron variant of the coronavirus, according to The Wall Street Journal.
                              • The Organization of Economic Co-Operation and Development (OECD) said in December 2021 that the global economy continues to rebound but suggested the emergence of the Omicron variant points to rising risks and imbalances in the recovery. The OECD expects global GDP to moderate to 4.5% in 2022. The threat of continued COVID-19 outbreaks may magnify existing problems, including supply chain disruptions, labor and materials shortages, and inflation, however. The OECD said that the emergence of the Omicron variant highlights the need to speed up global vaccine rollouts to prevent the emergence of additional variants. Broader vaccination efforts may also help ease supply chain logjams by enabling a wider reopening of manufacturing facilities, ports, and borders.
                              • The pandemic has caused a significant disruption in the global positioning of shipping containers, according to The New York Times. Critical medical supplies and protective equipment poured out of Asia to destinations worldwide early in the pandemic. Many of those containers became stranded as global trade slowed. When consumer demand roared back, a shortage of containers slowed trade flows and drove shipping prices higher. Shipping carriers are ramping up efforts to move empty containers back to Asia. China manufactures most of the world’s containers and is boosting production.The equivalent of more than 7 million 20-foot containers came online worldwide in 2021, bringing the total inventory up to about 53 million, according to Drewry Shipping Consultants.
                              • Sustained consumer demand for goods and the disruptive effects of the pandemic to global transportation networks continue to clog operations at US ports. Containerships have faced extensive wait times off the ports of Los Angeles and Long Beach before they could unload. Some cargo was rerouted to other US ports, including New York/New Jersey, Charleston, and Savannah, which are also facing backups. It took about 45 days in 2019 for a shipping container to leave China, cross the sea, and be collected by the importer, according to freight-forwarding tech firm Flexport. That journey took 112 days In February 2021. Some industry insiders expected congestion to ease in the new year after the busy 2021 holiday season, but hope for improvement in the first half of 2022 is beginning to fade, according to The Wall Street Journal.
                              • Russia’s invasion of Ukraine is likely to worsen the international supply chain disruptions brought on by the pandemic. The attack, and Western nations’ sanctions in response to it, are expected to exacerbate materials shortages, increase materials and transportation costs, and create logistics and capacity constraints, according to Supply Chain Dive. Even companies that do not have tier 1 or tier 2 suppliers in Ukraine or Russia face elevated risks. Market research consultancy Gartner suggests that firms diversify supply sources and logistics routes to mitigate the effects of disruptions. Key areas of likely disruption include energy, agriculture, metals, mining, high-tech electronics, and semiconductors.
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