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 Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

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

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

Industry Profile Excerpts

Industry Overview

The 15,100 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 from 1-2 locations, employs 17-18 workers, and generates about $13-14 million annually.

    • The freight forwarding industry consists of about 15,100 companies that employ about 268,000 workers and generate about $200 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

                              Recent Developments

                              Feb 2, 2024 - Firms Cut Prices
                              • Freight forwarding services significantly decreased their prices during 2023, according to the US Bureau of Labor Statistics. Labor costs decreased slightly during the first 11 months of the year, as employment and average wages for nonsupervisory employees decreased slightly during the period, according to the US Bureau of Labor Statistics.
                              • The US Bank Freight Payment Index registered a 10.9% year-over-year decrease in shipment volume by truck in Q4 2023, with two regions showing a decrease of more than 14%. Traffic sank in all regions, from a relatively moderate 2.9% decrease in the west to a 14.5% decrease in the south-east and an 18.2% decrease in the south-west. Shipments have decreased for the past six quarters. Freight spending decreased 13.5% year over year in 2023, reflecting flagging demand and falling rates. “The truck freight market is feeling the impact of companies reducing inventories significantly, as well as consumers continuing to spend more on experiences over goods,” said Bob Costello, SVP and chief economist of the American Trucking Associations.
                              • Attacks on cargo ships in the Red Sea and drought affecting the Panama Canal have created a “perfect storm” of disruption in global shipping, according to Mike Giambrone, an account executive at logistics provider OEC Group. The Red Sea is a critical shipping lane for cargo traveling through the Suez Canal, which accounts for about 12% of global trade, according to Giambrone. Approximately 30% of global container traffic traverses the Suez Canal, transporting $1 trillion of goods per year, according to the Government of New Zealand. Drought conditions in the Panama Canal, worsened by a severe El Nino, have severely impacted container ship traffic through that key trade route. October 2023 marked the driest October on record for the Canal watershed, according to the Panama Canal Authority, and officials have cut the number of transits. The Panama Canal accounts for about 7% of global seaborne trade, according to the Wall Street Journal. “It’s really the East Coast and Gulf Coast markets that are going to see the results of this,” Giambrone said. He noted that when there’s a problem on the East Coast, shippers can transfer their capacity to the West Coast, but this can bring additional problems. Giambrone cited the post-COVID shipping surge that resulted in “a parking lot of container ships” at West Coast ports in 2021. Some ships were diverted to the East Coast to ease the congestion. “Then the East Coast started having serious congestion.”
                              • Freight forwarding services that are benefiting from reshoring may also benefit from nearshoring, according to the Reshoring Initiative (RI). Harry Moser, founder of RI, says that if a product is so labor intensive that you can’t bring it to the US, then companies are sometimes surprised to find that wages in Mexico are far lower than in China. The average Mexican manufacturing worker earns $4 an hour, while the rate in China — where wages have been gaining 10% to 15% a year — is currently around $7, and in the US, it’s roughly $23. Products coming from Mexico end up with an average 40% US content, while in China they have 5% US content.
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