Value Proposition in International Freight : the Contribution of the Freight Forwarder to the Global Logistics Triad
June 1, 2001 Leave a comment
By Richard Ford
The freight forwarder has been threatened with ‘disintermediation’ for years. This research looks at the relationships in the global logistics triad comprising the forwarder, the shipper, and the airline or ocean carrier. The middle-man in service industries such as freight forwarding performs the service of intermediation. He is defined as one who reduces or eliminates the need for a buyer to form exchange relationships, ad hoc or relational, with a number of suppliers by concentrating the buyer’s need for information at the buyer interface and expanding the buyer’s requirement for choice or selection at the supplier interface.
This second phase is based on Transaction Cost Analysis using an experiment-derived survey instrument. The transaction costs of searching for vendors, developing relationships with them, monitoring their performance, handling problems that may arise, and managing potential opportunistic behaviour were examined. The shipper- respondents – made up of British global exporters who used airfreight – were asked to compare their perception of these costs for the forwarder and for the airline. They were also asked about production cost/price advantages as well as demographic information that was presumed to affect these perceptions.
The differences between these perceptions of transaction costs were highly significant with the perception of offering lower transaction costs, and hence greater value, lying with the forwarder. The shippers also positively viewed forwarders regarding the production cost/price advantages. However, the demographic variables played little part in the shippers’ differential perceptions of transaction costs.
Contribution is made to Transaction Cost Theory by suggesting the inclusion of triadic relationships and the intermediary as a governance alternative. In addition, the freight forwarding industry and global distribution benefit. Finally, at the level of method, the TC comparison technique used offers a fresh approach to comparing primary and intermediary vendors.