Recent price growth has the result of rising freight rates, trade, industrial production and consumer spending.
Los Angeles, CA (PRWEB) June 20, 2014
Freight forwarding services have a buyer power score of 3.4 out of 5, where a higher score represents greater buyer power. Moderate buyer power is the net effect of several market traits that favor buyers and several that favor suppliers. “Buyers benefit from the vast number of forwarders that operate in the market, which heightens competition,” says IBISWorld procurement analyst Hayden Shipp. While freight integrators (i.e. door-to-door carriers such as UPS and FedEx) and other vertically integrated suppliers that also carry freight have significant market share, most market firms employ less than 10 people and cater to buyers from small and mid-sized organizations. A buyer typically has greater negotiating power when dealing with a smaller forwarder, as smaller forwarders depend more on an individual buyer's business.
Due to the market's high level of competition, price growth has occurred at a subdued pace over the past three years despite moderate growth in trade, industrial production and consumer spending. “Price growth has also been restrained by falling oil prices,” says Shipp. Falling oil prices have lowered upstream carriers' fuel costs, curbing the extent of price increases for outsourced cargo transportation. Such transportation is forwarders' primary cost. Price growth is expected to remain minor during the next three years, and prices will continue to be nonvolatile. Low price volatility helps buyers accurately forecast future spending on ad hoc purchases. The freight forwarding services market's pricing structure also favors buyers, as freight forwarders bundle multiple services into their quotes, eliminating the risk of significant hidden costs.
Buyer power is curbed by forwarders' high level of specialization. Suppliers customize their services to fit buyers' needs, taking into account product type, shipping route and shipping priority. Most buyers cannot cost-effectively provide freight forwarding services in-house due to the complexity of many tasks that forwarders perform and the market's licensing barriers. Also, freight forwarders pass carriers' fuel surcharges, which can fluctuate significantly due to volatile fuel prices, on to buyers. The effect of fuel surcharges on total shipping price varies with transportation mode. Major suppliers in this market include C.H. Robinson Worldwide Inc., CEVA Group PLC, Deutsche Post AG and Expeditors International of Washington Inc.
For more information, visit IBISWorld’s Freight Forwarding Services procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of freight forwarding services. Freight forwarders handle the logistics of cargo movements and ensure that products are picked up and dropped off at the specified locations and times. Freight forwarders arrange transportation and tracking, negotiate freight charges, prepare documents, arrange customs clearance, insure goods, arrange warehousing and consolidate freight services on behalf of their customers. Freight forwarders generally do not provide transportation services themselves. Instead, they subcontract freight carriers (i.e. trucking companies, rail carriers, cargo airlines and waterborne carriers) to transport buyers’ goods.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Buying Lead Time
Key RFP Elements
Buyer Power Factors
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