The Hidden Costs of Using Legacy Freight Forwarding Systems

Amit Maheshwari, Softlink Global CEO
Amit Maheshwari, Softlink Global CEO

In recent years, the logistics and freight forwarding industry has confronted tremendous change, driven by tech innovations, dynamic consumer expectations, and stringent regulations. The situation is being made worse and more demanding by the Covid-19 crisis, which is impacting the revenue margin of freight forwarders.


The buzzword ‘hidden costs’ is pushing freight forwarders to rethink and redesign their modus operandi. But often neglected when they analyze the reasons for their hidden costs is the use of the legacy freight forwarding system. Apparently, using a legacy system entails many costs that go unnoticed, impacting already limited revenue margin and business profitability.


Let me explain a few hidden costs that cost you dearly when using a legacy system.


The costs of overdue and overpayment: To date, a lot of freight forwarders rely on a spreadsheet to keep records of debit and credit payments from the clients, pay invoices, track and maintain shipment status, and many more. Managing the multiple accounts of multiple carriers requires dealing with tons of invoices and ensuring balance between the debit/credit notes and invoices.


Using a spreadsheet for this is a humongous task for your team and may cause error in data entry and overdue and overpayment to customers. In contrast, the modern cloud-based freight management system is able to integrate the entire operations with the accounting system and automate the process of sending notifications for bills receivables and payment on email or phone.


The cost of delayed deliveries: Same-day deliveries are becoming the new normal, with customers even willing to pay extra for faster deliveries. Traditional methods of managing the last-mile delivery have some limitations when you’re planning efficient and cost-effective route optimization in real time. This can cost you heavily in terms of unpredictable transportations costs and customer satisfaction.


These hidden costs can easily be nullified using a cloud-based freight forwarding system which provides online route planning and optimization as per the diverse shipping patterns.


The costs of maintaining documentation archive: The traditional freight forwarding business involves a lot of documentation that is printed, faxed, and mailed. Having to deal with such huge documents and records from various stakeholders and keep these in hard copies and stored in archives is not only a tough job but is costly and risky too.


Given the current situation, it is important to have all the documents centrally stored with comprehensive backup on a cloud ERP freight forwarding system so stakeholders involved can access the documents anywhere anytime. Moreover, the world is going eco-friendly and paperless, while customs regulations now make it mandatory to process all documents online.


The cost of lack of collaboration between stakeholders: In the Covid-19 work-from-home situation, we realized the importance of collaboration in remote working. Collaborating dispersed operations, workflow, and accounting reports has cost freight forwarders dearly in terms of manual work and human errors, time lost on fixing errors, and neglected accounting notes. Organizing the accounting reports properly and bridging the communication gap between internal and external stakeholders might eventually accumulate to a huge amount of loss that it could impact the financial stability of your company.


Installing a cloud-based freight forwarding system will not only help centralize all accounting reports from multiple branch offices into one portal, without the hassle of manual work and human errors, but will also provide a proper employee workflow mechanism.


The costs of lack of data security and data utility: Current business challenges pressure freight forwarders to provide visibility, analytics, speed, reliability, and transparency within the entire operations, which requires huge data mining to utilize it correctly. Moreover, cybersecurity is a major challenge that requires massive domain expertise to make sure your systems are reliable.


A modern cloud-based freight forwarding system with an in-built control tower helps provide freight forwarders with detailed information and action plans. The freight forwarding ERP also enables you to leverage the reliability of the cloud infrastructure, freeing yourself from maintaining IT security infrastructure.


Clearly, legacy freight forwarding systems have some inherent limitations which come as hidden costs, such as lost productivity, thefts, excess fuel consumption, unhappy customers, poor compliance, and more. Undeniably, these systems were appropriate for the market’s requirements when they first came, but over time they have ceased to serve current business demands.