FREIGHT FORWARDING INDUSTRY - THE CONTEMPORARY

ROLE AND DEVELOPMENT TRENDS IN SERBIA

Đurđica Stojanović a,*, Marko Veličković a

a University of Novi Sad, Faculty of Technical Sciences, Serbia

Abstract: The freight forwarding industry has been changed and developed through the
history, as a result of the development in trade, transportation, other related industry
sectors, logistics and information technologies, laws, and other social, economic and political
changes. By using the available literature and analysing the statistical data of EU and Serbia,
we examined briefly the current role and development trends in the freight forwarding
industry, following the NACE industrial classification of economic activities. The results
confirmed that this subsector has a crucial importance within the logistics sector and,
consequently, in the national economy on a whole. In the same time, it is highly diversified
on the market, "hidden" and underestimated in the classification of activities, and not
precisely recognized by current NACE classification. Further, the freight forwarding industry
in Serbia shows some specificities comparing to the EU experience.

Keywords: Freight forwarding industry, Development trends, Sectors classification, EU,

1. INTRODUCTION

The freight forwarding (FF) industry has been changed and evolved during the centuries.
Many factors have contributed to these changes. In the recent period, the most influential
factors are trade development, globalization, and rapid changes in transport and logistics
technologies, information technologies and legislative which regulate different stages of
international trade [1]. These impacts are so high, that some authors hypothesized the
extinction of traditional freight forwarders in the forthcoming period [2]. Additionally,
other social, economic and political changes may also strongly impact the development of
the freight forwarding market. For example, in some former socialist countries,
privatization, economic transition, and entrance to the open and global markets put
additional significant challenges in the business operations for freight forwarders [3].
The purpose of this paper is to explore the evolution and the current role of FF within the
logistics sector in the case of the Republic of Serbia and compare it, as much as possible,
to the EU experience. For the theoretical considerations, we reviewed briefly the academic

* djurdja@uns.ac.rs

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literature and the viewpoints of The International Federation of Freight Forwarders
Association (FIATA). Some of the main characteristics of the FF industry evolution,
practice and experience are more or less applicable worldwide. For the empirical part of
the research, we used the available statistical database about the firms in the logistics
industry in order to compare the role and significance of FF to other activities within the
logistics sector. The current classification of logistics companies according to NACE and
national classifications and the position of the FF companies is also reviewed.
The paper structure is as follows. In the second section, the evolution of companies in the
market of the FF industry is briefly presented. The methodology for empirical analysis of
the role of the FF industry within the logistics sector in EU and Serbia is described in the
third section. Here is also stressed the position of freight forwarding industry from the
perspective of the current NACE classification of activities. The main empirical results are
presented in the fourth section, whereas discussion and concluding remarks are
presented in the fifth section. The conclusion is given in the last section.

2. THE ROLE OF FREIGHT FORWARDING INDUSTRY

The development of the FF industry and the changing role of a freight forwarder are
strongly related to many complex impact factors, such as globalization, a rapid increase
of international trade and technology development, including information technology.
Due to the development of IT-based supply chain integration, value-added service
offerings and increased requirements for cargo security, the traditional freight forwarder
is being forced to evolve, or else risk extinction [2].
Traditionally, freight forwarding is an economic activity responsible to manage moving
goods, typically in international trade. Freight forwarders are responsible for planning
and organization of moving goods, networking of all parties involved in delivery and
coordination between them, controlling all processes and actors from the departure to
the point of delivery. They care about all administration and documents handling. They
may have warehouses or transport fleet, but transport and storage are considered as
additional, support activities to the main task. However, due to the increasing complexity
of activities which perform different intermediaries and evolving the most developed
freight forwarding companies into logistics integrators, the definitions of freight
forwarders has started to be changed in scholar books, by the most relevant international
FF associations, in the national and international legislation and regulative instruments.
The contemporary approach assumes that freight forwarding comprises all activities
related to managing and performing logistics activities and other supporting activities to
transform the goods through the time and space, reaching the 7R's logistics objectives
(the right goods, at right quantity and in the right conditions, at the right time and right
place, with the right price, to the right customer) [4]. The evidence may be found in
changing terminology by the national and international freight forwarding associations.
Also, the changes have been recorded in their terms and regulations related to the basic
freight forwarders roles. The last definitions of the most important freight forwarding
organization FIATA (The International Federation of Freight Forwarders Association)
completely reveal the complexity of the industry:

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“Freight Forwarding and Logistic Services" means services of any kind relating to the
carriage (performed by single mode or multimodal transport means), consolidation,
storage, handling, packing or distribution of the Goods as well as ancillary and advisory
services in connection therewith, including but not limited to customs and fiscal matters,
declaring the Goods for official purposes, procuring insurance of the Goods and collecting
or procuring payment or documents relating to the Goods. Freight Forwarding Services
also include logistical services with modern information and communication technology in
connection with the carriage, handling or storage of the Goods, and de facto total supply
chain management. These services can be tailored to meet the flexible application of the
services provided.
(FIATA, 2004) [5]
Freight Forwarding Services means services of any kind relating to the carriage,
consolidation, storage, handling, packing or distribution of the Goods as well as ancillary
and advisory services in connection therewith, including but not limited to customs and
fiscal matters, declaring the Goods for official purposes, procuring insurance of the Goods
and collecting or procuring payment or documents relating to the Goods.
(FIATA, 2007) [6]
These definitions do not offer a clear boundary between the logistics and freight
forwarding services; they rather point out their interdependence and overlapping in
industry practice. Freight forwarders may be all kind of intermediaries in moving goods,
but also parties which perform the delivery and offer the whole package of services. Thus,
the research question is: how to differentiate freight forwarders from other logistics
providers and what is their role in the logistics industry?
Today, successful freight forwarders may be enterprises of all sizes, from the micro-sized
ones highly specialized for a particular market niche to global logistics companies who
offer "door-to-door" delivery. They operate as a wide range of intermediaries, with
different roles in different legal systems (principals, a wide range of agents, carriers,
customs brokers, multimodal transport operators). The diversity of their activities is high,
from customs brokerage, over arranging all transport operations by rail, road, sea or air,
including multimodal transport, to performing all logistics operations to provide "door-
to-door" delivery. Some of the traditional freight forwarders from the end of XIX century
have been evolved into the regional and global 3PL and 4PL providers and integrators,
and the most powerful companies in the logistics industry in the XXI century [1, 7]. As
some authors noticed, "logistics intermediaries come in different forms and under
different names, but they all have the same goal: to provide help to companies in the
transportation, storage, shipment and the distribution of goods from the seller to the
buyer or the final consumer..." [8]. There is no doubt that their role is crucial in
international trade flows. FF companies support approximately 95% of international
trade flows in Serbia [3].
The freight forwarding market is still fragmented everywhere, with a mix of global
providers and many small competitors [9]. Authors Kilibarda et al. [3] figured out three
types of freight forwarding companies in Serbian market: two out of them are basically
intermediaries (customs brokers, or brokers in transport and organization of trade flows)
and the last group comprises the companies that provide a wide range of logistics services
(packing of goods, consolidation, transportation, storage and reloading of goods,

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preparation of documents, customs clearance, transportation insurance). On the market,
they are both competitors and partners. In many cases, multinational providers outsource
part of services to medium or small-sized freight forwarders, custom clearance agents and
logistics providers to expand their business. The evolution of freight forwarding
companies, as well as the typical players in the modern market, is shown in Figure 1. The
positions of the various players in Figure 1 merely, although not inevitably indicate their
relative size.

Figure 1. The evolution of freight forwarders (adapted from [2, 4])

All freight forwarders on the market have to cope with many challenges. The challenges
or their priorities partly depend on the type of FF company. However, some challenges
are common for all players: the competition and risks are higher than ever before,
customers’ relationships are evolving and more demanding than ever, there is more
dependence on the integration of processes, and the value of information is increasing [2].
Small enterprises additionally have to cope with the power of bigger players around them,
whether they are competitors, customers or other contractors in the same supply chain.
Moving into the next-level category may be through company size expanding (e.g.
acquisition and merging), but also through networking and collaboration. However, small
freight logistics providers can be successful in their market niche if they provide
competitive service. The new entrants in the market are usually new customs brokers and
smaller freight forwarders.

3. METHODOLOGY - A CASE OF SERBIA

We used the data obtained from the Serbian Business Registers Agency (SBRA) and
available by the Eurostat to perform empirical analysis and answer on the research
question. All codes which cover moving, handling and storage goods as the primary
industry according to the Statistical classification of economic activities in the European
Community (NACE) are included in the analysis. It has to be pointed out that the data are

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different from those shown in the Statistical Yearbook, due to different methodology. The
Official Yearbook does not have data which cover particular activities in the logistics
sector, as given in Table 1.
Currently, according to the NACE, the logistics sector comprises activities with codes from
49 to 53 (Table 1). Passenger transportation is excluded from the analysis. Pipeline
transport is also excluded due to its high specificities, although it belongs to the logistics
activities.

Table 1. The list of activities which belong to the logistics industry (according to NACE
Rev. 2 H-N and S95)
Codes and classes Codes and classes
49 - Land transport and transport via pipelines 52 - Warehousing and support activities for
49.2 - Freight rail transport transportation
49.4 - Freight transport by road and removal 52.1 - Warehousing and storage
services 52.10 - Warehousing and storage
49.5 - Transport via pipeline 52.2 - Support activities for transportation
50 - Water transport 52.21 - Supporting activities in land transport
50.2 - Sea and coastal freight water transport 52.22 - Supporting activities in water transport
50.20 - Sea and coastal freight water transport 52.23 - Supporting activities in air transport
50.4 - Inland freight water transport 52.24 - Handling
50.40 - Inland freight water transport 52.29 - Freight forwarding
51 - Air transport 53. - Postal and courier activities
51.2 - Freight air transport and space transport 53.20 - Other postal and courier activities
51.21 - Freight air transport
51.22 - Space transport

It could be expected that the group 52.2 – " Support activities for transportation" does not
include logistics activities, but rather infrastructural and similar activities (e.g. roadside
assistance, railway stations, etc.) [10]. However, the group 52.29 – "Other transportation
support activities” mostly contains freight forwarding companies and logistics providers
both in Serbia and the EU. Actually, supporting activities, except freight forwarding
(52.29) and handling (52.24) are related to both, passenger and freight transport and
cannot be clearly assigned to the logistics sector. Consequently, all indicators related to
this subsector has the methodology limitations.

4. RESULTS

The role of FF in the logistics industry in EU 28 and Serbia in 2016 is presented by three
indicators in Table 2 – the number of enterprises, overall turnover and the workforce
volume, as well as its share in the total logistics industry. In the EU, freight forwarding
was the second largest sector in the number of employees and the number of enterprises
in 2011, with the share of 17,4% in the total number of enterprises and almost one-third
of employed persons in the logistics industry. The class "road freight transport" had the
highest share in the number of logistics enterprises (75%) and the highest share of the
employed workforce (45%) operating in the EU market [10].

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 Table 2. The main indicators of logistics industry in EU and Serbia in 2016 (Data
sources: [11, 12])

Class No. of enterprises Overall turnover in % No. of employees

EU RS EU RS EU RS
49.20 692 13 1,85% 3,62% 135.126 4.004
49.41 575.000 3.125 31,34% 45,85% 3.154.630 19.988
50.20 5.203 5 7,81% 0,18% 80.455 22
50.40 5.736 40 0,46% 2,22% 83.773 916
51.21 735 - / / 22.316 -
52.10 22.505 129 8,35% 13,35% 599.707 1.279
52.21 38.058 238 7.47% 7,15% 517.744 13.530
52.22 9.564 20 2,18% 0,16% : 95
52.23 5.132 25 5,11% 5,79% 301.013 3.137
52.24 11.291 43 2,67% 1,00% 250.917 709
52.29 71.978 1.226 25,41% 18,29% 1.112.722 8.573
53.20 77.665 43 7,36% 2,38% 867.419 2.265
Total 826.860 4.907 100,00% 100,00% 8.091.410 54.518

The crucial importance of FF group of activities in the EU was also recorded in 2016. It
kept the position of the second important class of activities in turnover (share of 24,27%)
and employed persons (share of 13,75%) in the logistics industry. It should be noted that
compared to the recorded number of enterprises and the employed workforce of the class
49.41 - Freight transport by road, the turnover in the FF industry was achieved by much
fewer resources.
However, compared to the reached turnover of EU countries in 2011 in the same class of
activities [10], there is a significant decrease. Among the main reasons for such big
discrepancy, the changes in the logistics market seem to be more influential than the EU
enlargement for one country. For example, the EU logistics sector recorded a significant
increase of the market of couriers, express and postal industry (the class 53.20). This is
important from the perspective of FF industry because this class also comprises logistics
integrators, such as DHL, TNT, FedEx etc. They offer globally “door to door” service, and
usually own significant logistics resources and infrastructure to provide high-quality
service worldwide. The importance of these players in the European logistics sector
certainly increase. Though, this class of activities also covers the courier service and the
increased importance of this industry cannot be simply related only to the increased
importance of integrators. The reasons for changes are probably not exhausted and it
could be interesting to explore them more in-depth in the future.
In Serbia, FF is also the second important class of activity (after road freight transport),
with 24,98% share of FF firms in the total number of logistics firms, and the third
important in the total logistics industry workforce with 15,73% share of employees [11].
The share of turnover (18,29%) is also on the second place, after the road freight
transport. It is lower comparing to EU experience, whereas the bigger share of smaller
enterprises is also recorded (persons per enterprise employed, Table 3). On a whole, the
numbers indicate a dominance of small freight forwarders in Serbia, with less turnover

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and workforce than the ones in EU, which may imply a less power compared to the freight
forwarding enterprises in the EU. Regarding the workforce skills, a survey conducted by
EU in 2011 [10] revealed that 40% of freight forwarders consider a shortage of skilled
staff in the FF industry as a question of “high or very high relevance”. The comparative
research for Serbia was not performed, but the one of rare research on FF service quality
in Serbia, conducted in 2011 by Kilibarda et al. [3], revealed that the logistics service
quality of freight forwarding companies in Serbia is not at a satisfactory level. Although
the underlying reasons are not explored, it could be supposed that the workforce skills
may be among the main ones.

Table 3. The comparative overview of the role and significance of freight forwarding
sector (class 52.29) in Serbia and EU – the share in the logistics sector in 2016
Number of
Share of Share of Share of
employees per
enterprises turnover employees
enterprise
Serbia 25% 18% 12% 7
EU 2016 9% 24% 14% 15

Warehousing is usually another big contributor to the added value of outsourced logistics
activities in the EU, after land transport [10]. In Serbia, this is the third important activity
in turnover and number of enterprises, and the second one in the workforce. One may
notice that both road freight transport and warehousing services are usually among the
basic logistics services of freight forwarders and there is a possibility that some of the
important freight forwarders are also “hidden” within these classes, in cases where the
freight forwarding services are classified as the ancillary activities.
The European experience also confirmed that some of the most important players in the
logistics sector like Schenker, Gefco, Hoyer, Hermes Logistics, DHL Freight, and some
other companies, which are among the biggest logistics service providers in Europe, are
classified mostly as the Class 52.29 [10]. In Serbia, the 10 best freight forwarders were
Milšped, Kühne + Nagel, MSC, ASV, PRO TEAM, Transportšped, Transprom, Cargo Agent,
Eurologsystem and Same & Same, are listed regarding their profit in 2016 (source: SBRA,
2018). Among these firms, small enterprises prevail, whereas most of them realize a range
of additional activities rather than belonging to the traditional freight forwarders. Also, it
should be noted that the size of an enterprise does not reflect necessarily the real role of
SMEs on the market. For example, many global companies have local subsidiaries
registered in Serbia like SMEs (i.e. the Kühne + Nagel doo Beograd), although in reality,
they are part of the global logistics providers. This is an additional limitation to the
assessment of the real role of SMEs in the FF industry.

5. DISCUSSION

Two main conclusions raised from the results. Firstly, the sector classification and
statistical data do not reflect the real role and the real state of freight forwarding. Some
other authors also indicate this discrepancy between the FF role in the logistics industry
and its current position in classification (e.g. [13]). The presented results underpin such
a viewpoint. Secondly, current classification does not fit to the FF practice. Small freight
forwarders may provide also basic transport and warehousing services, medium-sized
may be also exporters or importers, whereas the biggest players are integrators which

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may be classified into express and courier companies. The companies which perform
other activities than logistics may also act as successful freight forwarders on the market.
Other logistics, or even trade and manufacturing companies may have developed freight
forwarding activities as the very significant source of the turnover, but still be recognized
as the ancillary activity. The freight forwarding activities in such enterprises are invisible
within the current statistical methodology. For the purpose of statistics, companies will
be classified according to the most profitable activities.
As a result, we have a blurred picture of the enterprises in the FF market, and a lack of
accurate statistical data. There are many limitations which indicate that statistical
numbers have to be used carefully in analyses and policymaking. The main reasons for an
unclear picture about the role and importance of freight forwarding activities may be as
follows:
• The evolution of the freight forwarding industry, especially in several last decades,
• The official statistical methodology limitations,
• Changing laws and regulations on the freight forwarding industry, which are not
followed by changes in sectors classifications.
All three reasons may contribute to the dispersion of FF enterprises throughout several
classes. Additionally, the serious weakness of NACE classification is that such an
important group of activities is not clearly recognized. Freight forwarding should be
recognized clearly in classification and methodology description, as a separate class. It is
too much important to be classified as the “other activities” and coupled with enterprises
which are not in freight forwarding sector. Currently, there is still a possibility that firms
with other activities than FF could be classified in this group and thus cause additional
bias in different analysis.
In the future, it is expected that the freight forwarding market will remain to be a mixture
of companies with different size, diversified services and competitive resources, as well
as with a number of market niches. The enterprises will be both competitors and
“complementors” (firms contracted by the main FF company to perform
complementary/supporting services) on the FF market in their efforts to design,
coordinate and perform complex supply chains and networks. The niche markets will be
determined by the FF companies’ size, the group of activity, industry and geographic focus
in international trade, etc.
Presented research has some limitations. The analysis is not quite consistent with the EU
ones. The EU also includes pipeline transport. Still, it is not expected that enterprises in
this class have a significant role in the Republic of Serbia compared with total logistics
sector. The class “53.10 - Postal activities under universal service obligation” was also
excluded from logistics sector, although there could be noticed the efforts of universal
postal operators to find a new, more competitive role in the courier and express market.

6. CONCLUSION

It could be concluded that the freight forwarding subsector is very significant and, at the
same time, surprisingly underestimated in the official statistical industrial classifications,
or not exactly covered by this classification. Recent research showed that in the EU and
Serbia, this is the second important logistics class of activities in the turnover and the

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number of enterprises (after the road freight transport). Also, in both cases the share in
the logistics workforce is among the top three classes.
All results suggest a necessity to consider the classification improvement for the freight
forwarding, careful usage of the statistical data by the policymakers, and more careful
approaches in research related to the freight forwarding industry. Some of the companies,
which belong to the most evolved freight forwarders (“integrators”), are usually classified
into the class “Other postal and courier activities”, which has recorded increase in the
recent period. Other methodology limitations also contribute to the misperception of the
FF role in logistics industry and, consequently, for the national economy on a whole.
Finally, following high diversity of the market, limitations of official NACE classifications
and wide definitions of the most prominent international associations, one may ask how
to differentiate freight forwarder from all other logistics providers in the logistics
industry. The answer may be as follows: if the logistics provider act as any kind of logistics
intermediary in supply chains, he or she may be classified as the freight forwarder (in a
wider sense), recognized on the market and may join related national or international
associations, if interested. If freight forwarding activities prevail among a variety of
activities, such kind of company will be also recognized in official NACE classification. But
if logistics providers offer only basic transport, storage, package or other logistics
activities which need assets (warehouses, fleet, plants, equipment etc.) they cannot be
mixed with freight forwarders anyway. Bringing the main value may be facilitated by the
owned infrastructure and assets, but not based on basic services. The added value is also
the main distinctive characteristics between different kinds/evolution levels of freight
forwarders in the market.

ACKNOWLEDGEMENTS
This research was supported by the Ministry of Education, Science and Technological
Development of the Republic of Serbia [project No. TR36030].

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