Archive for November, 2008

In Slow Economic Times, Shippers Demand That Forwarders “Get Back to Basics”


By Chris Coppersmith

In hard economic times, it is remarkable how management at companies of every size, type, and description declare their businesses are “getting back to basics.” Not only do they assert their people are concentrating on the nuts and bolts of running a business, they are demanding vendors follow their example. As the smooth, efficient transportation of their product lines is a key ingredient in the success or failure of their selling efforts, with resultant profit or loss on their balance sheets, logistics providers are caught right in their crosshairs.

What are the basics of transportation today, whether it be by air, ocean, truck, or rail? What do customers want from their vendors?

The principal items on customers’ wish lists include competitive pricing, delivery of goods on time and when promised, rapid, accurate transmission of information from vendor to customer, and hassle-free transshipment of merchandise from pick-up on the loading dock to delivery at the final destination.

The mark of a successful forwarder remains the same in good times and bad. It is to offer the shipper a compelling blend of personal service combined with high technology. As economic conditions change, however, priorities must be modified to reflect these changes.

Of course, it is the successful freight forwarder who responds to the current needs of the shipper to offer the customer the kinds of services he may require. In today’s economic climate, however, technological hijinks become less important than the primary purpose of moving goods in a swift, expeditious manner.

Cargo people constantly are being targeted by consultants and self-described “experts” who write lengthy, techo-babble articles about the complexities of logistics. These articles, doubtless well-intentioned, generally are useless. Shippers want hard and fast answers to their shipping needs, not academic theory. In my 36 years as a freight forwarder and customs broker, I never have been asked, “is your company a total logistics provider offering seamless supply chain management services?” Yet I have been asked countless times, “What is your price?” and “What kind of services do you provide?”

In a softer economy, no one is safe. The very large international forwarders, which disdained small shipper business in the past, now compete vigorously for it. National trucking firms that traditionally have emphasized full-load shipments now fight for less-than-truckload (LTL) business against smaller, regional carriers. The package express companies, which once scorned any shipments less profitable than overnight deliveries of high-value packages and documents by air, now eagerly accept low-value, slower ground freight of any weight and type.

In this harsher climate, we forwarders require a change in our mindset. We need more shoe leather and less preoccupation with the Internet. More sales calls and less time looking at computer screens. Our business is people, not computers. Never has there been a better time than today to emphasize that truism to our customers.

Despite our best efforts, some attrition in business among existing customers will occur in these tough times. Success or failure in capturing new business may well mean the difference between a viable company and a barely breathing one. Even in good times, our industry has not been particularly successful in attracting customers who do not use air at all or use it only sparingly. We have been too preoccupied with soliciting business from each other rather than attracting new shippers to air. We seem content to generate only a 2% share of all domestic freight and 4% of international cargo. These percentages have not changed in 30 years.

As an industry, we must do nothing less than create an environment that will cause shippers to think of air not primarily as a premium method of moving goods but as a powerful sales and marketing tool. In these troubled times, we require a persuasive and compelling rationalization for the use of air. The last genuine effort to provide an economic underpinning for the utilization of air was the Total Cost Concept. That was almost 40 years ago! We require persuasive reasons for the 21st Century, not the 20th.

In a fiercely competitive environment, the first instinct is to cut rates. Suppress that instinct. Bargain basement rates, often below the cost of doing business, are at best a temporary fix and at worst the start of a slide down a slippery slope called bankruptcy.

Rather than cutting rates to the bone, forwarders must become partners in their customer’s profit-making process. Don’t be just another anonymous vendor. Show him your concern for his bottom line and how you can help in making it stronger. That may call for knowing his business as well as your own. Never take his business for granted. When he calls or e-mails with a particular problem, answer the request promptly. Never be “out to lunch” or in “meetings” when a customer calls. That’s a sure way to lose his business.

Globalization has made a world without economic borders. We have seen how the financial crisis in the United States has spread around the world at flank speed. The drop in the Dow Jones index is quickly followed by declines in stock exchanges from Hong Kong to London.

In today’s environment, shippers want direct answers to direct questions, not complicated supply chain theories. “Will my shipments move on time?” “Is there adequate lift or container bookings now available?” “Do you have offices abroad to handle my international cargo at the destination?” These are among the most commonly asked questions.

Forwarders must respond to the economic realities of today. Those companies that do so will remain successful. Those that do not, whether in business 10 months or 10 decades, will not survive.

Chris Coppersmith is head of the U.S. division of Mainfreight, a New Zealand-based transportation organization. In November 2007, Mainfreight acquired Target Logistic Services, a 36-year old international freight forwarder and logistics provider. Target was changed to Mainfreight to place all of the company’s divisions under one name. Coppersmith has spent his entire professional career in the field of logistics, starting Target in 1972 as an airfreight forwarder. The U.S. division of Mainfreight has 38 domestic offices in addition to overseas facilities in Asia, the South Pacific and Europe.