Price Transparency in Logistics – Elephant in the Room

by Sarfaraz Alam | CEO & Co-founder HashMove / Monday, 11 MARCH 2019/ Published in Logistics, Marketplace
Price Transparency in Logistics – Elephant in the Room

It is difficult to believe that even in today’s day and age a large chunk of freight forwarding continues to remain manual. Besides functional inefficiency, it throws in another challenge for the sector – lack of price transparency.

Let us try and understand this from an online retail experience of ordering a product, knowing the price points fully well. Then try and imagine a scenario wherein a much larger consignment critical to your business is probably overpriced because of lack of transparency.

One is bound to feel exploited, more so because this can get rectified if service providers looked at the bigger picture and looked at adopting technology to iron out inefficiencies.

There are indeed steps being taken to usher in more transparency, but they are far few and far between. Price transparency is indeed the elephant in the room for logistics and needs to be addressed by the marketplace inevitably.

A FleetOwner report, based on Freightos polling of 70 major freight forwarders, said that around 57 percent of forwarders today believe that “shippers are driven by price to choose forwarders today.”

According to the report, they believe that will decrease to 35 percent by 2022, while the importance of customer service in selection will grow from 11 percent to 28 percent.

This report and wisdom acquired from different segments of the sector backs-up one basic argument – digitalization paves a cost-effective path to customer service, and pricing is its major component.

Pricing to rating

Pricing and rating may not necessarily be interdependent, but they complement each other. Transparent ratings change customer interactions. More importantly, freight firms wanting to maintain good ratings will have no choice but to distinguish themselves by providing a comprehensive customer focus.

Freightos’ poll puts another significant component of the industry in perspective – Internet of Things (IoT) technologies. If the survey reflects the truth, tracking and monitoring can transform traditional freight transportation companies into consultants that acquire and disseminate an enormous amount of information that is required to run smooth operations.

Suppliers are already taking steps in this direction. They are said to be leveraging Big Data and IoT to develop services to enhance productivity and reduce shipment cost. While this is a sign of things to come, whether it succeeds, in the long run, will be determined by the scale at which it is made available.

Since system efficiency is a guaranteed method of reducing costs, price transparency will only add to the value propositions in the logistics industry. Some of these trends, according to the World Economic Forum, have the potential to ensure logistics savings of up to $789 billion by 2025.

As and when that happens, one can safely predict that shippers, in the long run, will no longer be driven only by pricing as digitalization and transparency will help forwarders focus more on customers. This is more likely to start service competition rather than price competition.

This is the elephant in the room and is undoubtedly the way to ensure that customers remain the king.

(Sarfaraz Alam is CEO & President of TEXPO, a global technology company based in Dubai).

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