Forwarders move from information to integration

There’s little value in simply moving goods from Point A to Point B, according to Frank Scheibner, president of Hellmann USA (www.hellmann.net). That’s a strange admission for a freight forwarder.

The whole industry is changing. Just 10 years ago, says Scheibner, “The key success factor was moving a shipment successfully from say Miami to Munich. Get it on an aircraft, move it, that’s it.”

There may be 1,200 forwarders in New York and 1,100 – maybe all 1,200 – can handle an air freight shipment from Miami to Munich, continues Scheibner. The value creation in this becomes rather limited, and the freight forwarding industry must change.

Value creation, in Scheibner’s view, comes in two areas. First, there’s always an advantage in bundling capacity, planning capacity and consolidating cargo – the traditional role of the forwarder. Second, Scheibner suggests greater involvement in the supply chain – the forwarder as supply chain integrator and consultant.

If you’re only looking at your own supply chain, you can build solutions and cut costs, he says. But, there’s a cost to build those solutions which may not be warranted for a company that needs a solution or tool once or twice.

The role of the forwarder has totally changed. It’s more about providing information and communication to the customer. Forwarders need to build that infrastructure while they deal with new challenges such as more complicated security issues, decreased capacity with commercial airlines, longer procedures at ports and shippers’ demands for faster delivery.

Satisfying shippers’ needs today and into the future will take more than track and trace capability. Track and trace is a reactive measurement, says Scheibner. It will tell you what happened to a shipment from Australia in May, but that doesn’t really help – except with long-term planning and some root-cause analysis. What is truly needed is active monitoring.

In a world that is increasingly compliance minded, correct and timely information is critical. “Part of managing data is to try to isolate and manage by exception,” says Adrienne Graddy, director of compliance solutions for BDP International (www.bdpint.com). “If you’re not managing the data, you can’t manage a customer’s supply chain,” she continues.

Any hiccup in paperwork and any time you don’t have visibility to the paperwork, even if it is correct, will cause delays, costs and possible service failures in the supply chain, she explains.

Third parties with access and visibility inside the organization have an advantage in helping to identify cost savings, efficiency improvements and, importantly, compliance issues. While both Scheibner and Graddy speak of the importance of monitoring vendor compliance and performance of service providers, Graddy offers an example of the kind of monitoring and responsiveness that is more important in a post-Sarbanes-Oxley environment and given the heightened security awareness following the September 11, 2001 terror attacks.

Graddy describes an import shipment which was reported to the Food and Drug Administration (FDA). The importer said it was not FDA regulated, that it was just a chemical that removed impurities. From what does it remove impurities, asked the FDA. Water, said the importer, but it’s not drinking water. OK, said the FDA, where is that water used? It’s used in machinery. Would that be machinery used for food preparation, the FDA rejoined. Yes, was the answer. Suddenly, Graddy points out, this chemical the importer didn’t think was regulated actually fell under FDA jurisdiction.

Many companies don’t have enough information from further up their supply chain, says Graddy. They put themselves at a disadvantage because they don’t understand their commodity [from an import compliance perspective]. Like Scheibner, Graddy sees the need for involvement deeper into the supply chain. “Experience tells me we have importers who don’t have enough information further back in their supply chains.”

One challenge forwarders face comes from established third party logistics companies. Many have been adding trade services capabilities through acquisitions. Only a few of the larger forwarders may have the means to add the supply chain management expertise they need through acquisition. While many are still focused on building or acquiring the information systems they need to meet current demands, further expanding skills to include supply chain management – and then earning the trust to enter that business – speak to a continuing challenge.

Scheibner and Graddy agree that there will always be a role for freight forwarders – just as travel agents have not disappeared despite the proliferation of Internet flight booking services. But who will survive and how are the questions shippers will decide based on which forwarders have chosen to expand their capabilities in line with market needs. With a handful of large forwarders and thousands of small forwarders, consensus may be slow in building. LT

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