https://theloadstar.com/market-insight-qa-with-steve-walker-the-amazon-threat-must-drive-a-new-4pl-model/

Thank you to The Loadstar for allowing me to print yesterday’s interview,

A good dose of realism, vision and unparalleled experience in logistics and freight forwarding is what you get every time you listen to Steve Walker, a market veteran and founder of Steve Walker Global.

Here is a recap of the topics we discussed recently, spanning Covid-19 and the impact of the crisis on supply chain, the threat posed by Amazon as the only and true disruptor, freight forwarding dynamics, regulators, winners and losers and so forth.

Thanks for joining us, Steve. To 2021 and beyond: How and why is this time different with Covid-19 from what you have seen? Can the damage be contained in the supply chain? And for how long? What about the shift in manufacturing capacity?

My generation of the baby boomers thought we had seen, dealt with and adapted through smog in the early ’60s, the labour and dock strikes of the ’70s , hyper inflation, the drive to manufacturing offshore to increase the British P&L – indeed, most things aside from World Wars. Yet now we find ourselves in a worldwide pandemic, which despite the lockdown being socially mostly accepted, we have allowed visitors to the UK to pass through our borders unchallenged. That was the one thing we ironically voted for in our Brexit decision: Control of our own borders.

There are too many soothsayers endeavouring to predict the future, but the one standout from our industry’s perspectives that every part of our sector – from all carriers, forwarders old and new, service-enhancing software offerings and all the frontline transport – have rallied to bring a resolution to the strained supply chain. And for all the over-hyped headlines, all forwarders, old and new, staff and systems, have adapted to extreme business continuity pressures to work from home and maintain our last mile deliveries through the bravery of our drivers. For the first time, we have become a key industry with key workers.

And with the expected spike in unemployment, there should be a clamour to bring manufacturing back closer to home. We have had several decades of our instant gratification being supplied from China; now we have to think of our own people, our markets and how we pay for this unprecedented period as we re-adjust our businesses.

Most forwarders were on the road to automation with AI of some description, a reason we could adapt so well to the change in our working circumstances. Our greatest assets used to come in the form of controlled transport, now it is our solutions that must create future shareholder value.

How many times have we heard that. So, are freight forwarders and, more broadly, asset-light operators sustainable and stronger than in the past downturns? Why? As you pointed out, many have invested to cope with the health crisis, looking after staff or taking decisions that were necessary while exploiting government’s support, where it applies. In all this, to paraphrase your words, Amazon is the biggest threat out there. 

If we consider where the competitive threat for us all is coming from, it is not the carriers and their offerings, the blockchain enticement, nor the ‘old versus new’ forwarders nor service-enhancing software (praised by some as disruptors). It is coming from Amazon.

Even the UK government turned to Amazon for country-wide distribution solutions at the commencement of the pandemic – by way of background, its dated Royal Mail partnership helped a lot. Amazon, of course, knows well how to deal with our government, as they meet yearly to discuss how much corporation tax Amazon is prepared to pay to the UK on over ￡10bn of revenues.

Amazon is using its own scale and techniques to attract the companies’ distribution networks, simply by using their AI data to prove the value of systems over or maybe supporting the sales teams. And those companies who have distributors or hubs through Europe, it isn’t hard to see the offer being extended to a point that international forwarders will not be needed to bring cargo into the home country. European cross-border companies, the asset-light truckers, will not be needed to truck to country specific DCs [distribution centres] and the last-mile providers will not be needed either. Amazon looks to take over all those roles, leaving the main company to play to its strength and just create new products.

Forwarders have to offer more to offset this silent approach. We need to stop offering TMS-type reports or a tweak of our extended software offering.

We need university graduates, who can talk to our customers’ C-Execs, ‘go around to their side of the table to determine what they need’, even if they don’t know themselves what they need. It is pointless for a forwarder offering only their portal. Think how many disparate portals a logistics director could be looking at, how is that helpful? The forwarder needs to move to the 4PL model to control all the data, not the freight, to bring future value. The Amazon threat must drive a new 4PL model.

Amazon is creeping up. Before the Covid-19 pandemic broke, you had a speech ready for Amsterdam which addressed several of the upcoming challenges. Is it a problem of FF vs Integrated Logistics, B2B vs B2B2C vs BSC and others – any considerations? 

Forwarders and 3PLs need to earn a living from interpreting data as our next revenue stream to bring softer savings for our clients.

If freight invoices are compliant, for example, they should be posted to the general ledger (aka “GL”). If not, they should be rejected with relevant reporting KPIs. The client will no longer pay staff to pass incorrect invoices. We need leadership from our key association, that being FIATA, advocating our role not just through this pandemic but paving a way for the future model.

I was going to write a LinkedIn post, showing how the FTA, the Freight Transport Association in the UK is assisting its members on an hourly/daily basis. FIATA, offered a link within a 27th April article requesting good news stories from its members to highlight. Twelve months ago, I wrote that in my view FIATA was not fit for purpose, one meeting and one other unfortunately cancelled due to Covid-19, and it is still not.

Sitting in Zurich, keeping a scrap book of good forwarder deeds during this pandemic is not assisting anyone and shows their inability to even trawl LinkedIn. I have described the presidency as a cork in a good bottle of red, that needs to be removed to allow the dedicated individual and knowledgeable forwarders to flow through to take their place at an industry salary level.

I believe the various freight Associations need to come together and create a pure solution hub, a commercial organisation, like the WCA [wcaworld.com], that is closer to their members’ needs whilst keeping their position in the transport regulatory.

Is it too much to expect that FIATA has Covid-19 webinars with CEOs, CIOs and CFOs of its leading members, offering debate and ideas to the greater membership?

Let’s remove the crumbling cork.

You told me we must re-define or negotiate a new definition for freight forwarders, hinting at an “information bureau” operating model. Can you explain why a change is needed and how it could work?

Hopefully the collective endeavour from all parts of the supply chain will bring our logistic parties together. It is not about protecting the status quo. That has gone.

It is about creating new fit-for-purpose services, new relationships, with new entrants to take more of the strain of the supply chain from the heavily hit manufacturers.

We need to move freight as a by-product of moving data.

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