A business that is up and running has its cycle of boom and bust. These are the periods when business is doing well and poorly, respectively. Just like any business, the freight forwarding industry also has its own challenges. These are obstacles that hinder the proper functioning of the freight forwarding industry. Some of the challenges completely stifle the operations of a cargo industry forcing it to liquidate and close. A well-organized cargo industry must anticipate such challenges and have strategies in place to combat them when they occur. A freight forwarding industry that waits for such challenges to manifest before making adequate preparations is contributing to its own failure. There must be mechanisms to cover any unforeseen event that could tend to paralyze the business. This includes setting aside funds to address emergencies and risks that cannot be predicted with certainty. The challenges facing the freight forwarding industry include the following;
Rising fuel prices have been a major factor negatively affecting the freight industry. Increased fuel means increased business operating costs. However, the freight forwarding company may not be increasing its freight rates every time there is an increase in fuel prices. This would mark a company as highly unreliable and unnecessarily expensive. This means that a trucking company must balance stabilizing trucking rates and making a profit at the same time. Therefore, the established price must cover all expenses and leave some profit at the end. If the established freight rates are high, one would lose customers due to the stiff competition prevailing in the freight forwarding industry. Therefore, the increase in fuel poses a great challenge for the freight industry, since all its ships run on fuel.
Maritime transport faces adverse weather conditions, usually unpredictable. The very strong tides and waves make it almost impossible to carry out maritime transport, since it would run the risk of a ship sinking. During such cases, shipping is idle while waiting for calm to resume. In addition, shipping has also been affected by the threat of pirates hijacking cargo ships and demanding ransoms before the ship can be released. This has caused serious losses in the freight forwarding industry which has driven most of the operators out of business.
Additionally, the credit crunch has had a negative impact on the freight forwarding industry. This has led to reduced activity in commercial terms, therefore a low season for transport companies. During the economic crisis, the level of trade was significantly reduced across national borders, meaning that there was little that could be transported from one country to another. This was made worse by the weakening of the dollar, which meant that the freight industry had to receive less in terms of advance payments from its customers. If the price of a certain shipment was fixed at a certain price, the weakening of the dollar had a negative impact on the exchange rate for those who did business internationally.