Tag Archives: freight forwarder

freight forwader tag indicates a post is related to common freight forwarding services

Do forwarders understand their customers?

Recently I have read report published by Eyerfortransport which has been researching through various aspects of the relations between shippers and forwarders. As the link to the report download is not working anymore, I take the liberty to provide link for downloading the report here.

I would like to focus here at only one of the graphics – The Key Reasons Why Shippers do not renew Existing 3PL contracts.

Below please find a table which I have extracted from the diagram which is provided at page 15 of the report, which you can download from here.

Reasons Shipper 3PL
1 Cost creep 1 8
2 Poor Service 2 2
3 Alternative 3PL provides better service 3 5
4 Hidden cost 4 9
5 Alternative 3PL provides lower cost 5 1
6 Relationships management issues 6 3
7 Inefficient management by 3PL 7 4
8 Loss of logistics innovation capacity 8 10
9 Clashing firm cultures 9 11
10 Unrealistics expectations of 3PL from customer 10 6
11 Too high dependence from 3PL 11 12
12 Problems at evaluating the 3PL performance 12 7
13 Loss of control over 3PL 13 13
14 Latent Information assymetry 14 14

What impressed me most is the gap in perception for reasons for the shippers and forwarders.

In the first row we see that for the shipper the main reason for discontinuing 3PL contract is the Cost creep, where for the forwarders this is of less importance and they have rated this at 8th place. Strange isn’t it. Regretably the report does not deepens in how the shippers see cost creep. Sometimes they see the increase of the fuel surcharge and BAF  and involvement of Peak Season Surcharges as something which is done with only idea to have the shipper’s money staken without understanding the reasons for the increase – often being correct that there is no reason at all.

The other big gap is how shippers and forwarders see the Hidden costs. Shippers put it 4  place where for forwarders it goes on 9 place which is not a surprise knowing how many forwarders still practice this “techniques” especially from China to  Europe. I am personally have lost many deals because it has been difficult form me to explain to customers why the transparent prices are much better and at the end more effective as they give you clear picture on the transportation cost related to the “lower” hidden costs which you never know how much they are. I am sick of this practice, and as I see the shippers are sick as well. Why forwarders do not understand this – I do not know – do you ?!

Third big difference between the customers and forwarders is my favorite. The price issue. It appeared that from forwarers prospective customers are looking for nothing else but lower and lower prices. And here come some players that start pushing market down covering behind the slogan of – “agressive selling rates”. I hate this. It is strange how we forwarders detiriorate our own market and this is without push from the customers, because for them the price issue is graded at just 5th place.

Please look at the table and think on what is behind the figures. May this will help us to understand our customers better.  Any comments are welcome.

For more information on KG CARGO freight forwarding service please contact us.

The Resources of Small Size Forwarders

I would like to continue the topic about the small sized forwarders.  We all agree that the SME forwarders are more flexible than the bigger forwarding companies however they lack the resources and the buying power of the bigger forwarders. But is this the real case.

Should the SSF maintain a warehouse?

Should the SSF pay huge ammont for CRM and Order processing systems ?

Should the SSF pay huge software license fees for Microsoft products?

Should the SSF maintain huge employees department in order to have dedicated employees for various activities – like customs brokerage, inland deliveries, airfreight operations etc. ?

NO, NO and NO !!!

Believe it or not but a clever designing and planning of operations can compensate for the lack of various resources.

Here you are several advises and examples:

Bonded Warehouse

I am sure that all of you know what is the price to establish and maintain warehouse operations. In Bulgaria for example if you want to establish and maintain  the smallest bonded warehouse – for example to handle your inbound airfreight traffic you need to plan at least 60 000 eur annually – this is the smallest ammount. And it is a fixed cost. That means that whether you have traffic or not you are to plan these funds. But here comes the trick with the transformation of the fixed costs to variable cost. How, very easy – outsource this activity to a company which operates such a warehouse and which is relatively neutral.  Doing so you will pay only on a per shipment basis which makes you very flexible and competitive.

Customs brokerage department

In order to maintain a steady and smooth customs brokerage for your customers you would need to hire at least two customs brokers who know very well the procedures and daily follow the changes in this dynamic matter. I leave to you to calculate how much this costs – for salaries, social and medical insurances, training, hardware and software and other equipment. And you never know how long these employees will work for you.

If you sub-contract this specialized activity to several highly seasoned customs brokers you can easily transfer their professional experience into processing of your customers orders. Again on per shipment cost but not per employee cost. And the quality of your service will increase. If you monitor and control the process of course.

You can apply the above approach even to the level that you have a special company to handle your exports – physically at the airport.

Software and hardware

CRM, OMS, ERP etc. all these abbreviations bring the accossiation with payment of high license fees. Yes, correct … but only if you are MS dependend.

My advise – avoid Microsoft products as much as you can. This will save you huge money. Let me give you some examples:

Choice of Operation system – Ubuntu vs Windows –

after I get aquainted to the Ubuntu Linux distribution I should admit that Windows is no more.

Ubuntu is much lighter operatinal system than any MS operational systems (any of MS crap).

Ubuntuworks perfectly even on older hardware (especially on older hardware).

Ubuntu is very stable.

Ubuntu is far more secure than the MS expensive dirt.

and

Ubuntu is FREE. You pay zero for licenses. The only funds you would eventually pay are for the installation and training and this is only if you are not able to do it by yourself.

And Ubuntu comes fully equiped with the last Open Office distribution which I preffer to the heavier and more expensive MS Office.  For e-mail client you have a very wide choice but I recomend you choose between Evolution and Thunderbird.

CRM (Customer Relations Management)

There are many CRM solutions on the market but I will recomend you ZOHO CRM.

This CRM system has very good free version which in many of the cases will do a perfect job for your busines and will automize and streamline your marketing and sales processes. And  if you operations are not very sophisticated even your operational processes.  Though it has been made mostly for the computer services industry, it can be easily accustomed to your needs in freight forwarding.  I am using it and I ready to assist any of you in implementing it in your daily job.

I hope the advises here will work well for you and your business. And I want you to never forget one thing:

Forwarder is a Designer. Never stop to be one !!

Your comments, sharing and recommendations as well as critics are more than welcome !!!

For more information on KG CARGO freight forwarding service please contact us.

Cooperation between Small Forwarders

Mr. Mark J Willis from AFL Ambassador has commented on the post Small Size Forwarders that one of the ways for the SME Forwarders to stay at the market is to unite in some form of consortium.  I would agree to some extend but we should admit that cooperation between businesses is not an easy task.  Though the positive effects of such a cooperation are obvious especially for SME Forwarders, for one reason or another it is very difficult to build partnership in an integrated manner.  What I understand in integrated manner it is that you and your partner work like you are same offices but not two different companies,  sharing the costs, problems and at the end the benefits of course.

And believe me it is not only with two small forwarders. Same is valid when two offices of the same big company work to each other.  And in the bottom line it is – lack of trust.  So the question is actually not How to build successful cooperation but should be – How to build trusted relations.

Here are some ways to cooperate and increase your business.

1. Becoming agent of a big company

One of the ways for a SSF to benefit from wider network, eventually centralized billing system, sales leads generation and additional business generation is to become exclusive or official agent of some of the big guys. This however has its negative sides. Majority of the big guys sees the agents like potential competitors and cooperate with them on an adversary mode. I can share quite an experience here. Well there are also exceptions but they are very few.  At the end the big guys either want to buy the SSF for peanuts or simply enter the already explored and matured market.

2. Join a Forwarder Network.

This is a good approach for a SSF to increase its global reach without loosing its independence.  There are several things, however, which the SME should consider before joining such a network:

* Check the network site and find how reliable the network is.
* Try to assess whether the annual network fee will be justified by the potential business you might generate by joining it
* Find out whether the network can issue their own HBL and HAWB and how members can use this opportunity
* Check whether there are some strict ethic standards
* Check how payment among members is arranged – is it no member to member basis or there is clearance procedure in place.

Checking all this will save you the unpleasant feeling you might experience if you find that you have paid 2500 USD annual fee for a membership in a network where the number of members for certain area is unlimited, you still have to issue your own HAWB and HBL and network can not assist you in a dispute you might run into with another FFN member.

3. Build own partnership network

Another way is for SME to start building up its own network of partners.  Very tough and time consuming process.  But this at the end can benefit you with very good partners – again SSF in their locations – with whom you can start building integrated network based on trust.  The third approach is good one but it is very time consuming. So if you want to have a network build on trust – start it now

4. SEKO approach

I really like it. Connecting independent forwarders under common brand. I think this is the most integral way of cooperation where the strengths of SME forwarder are combined with the strengths big forwarders have.

I would appreciate your input and your comments.

For more information on KG CARGO freight forwarding service please contact us.

The Small Size Freight Forwarders

I am receiving a good deal of news concerning the freight forwarding and logistics. In all this news however, the word is about only the big names in our industry.  Yes, exactly  the guys that boast with their hundreds of millions or billions dollars of annual revenues who handle big traffics for big manufacturers and traders worldwide. I understand this as these big players at the end are the industry leaders. But what about the small sized forwarders. Those with up to 5 employees personnel. Shall we continue underestimate them.

The small size forwarders (SSF) – these guerrillas at the market battlefield, carry more value than you can imagine. Most of the big guys were SSF’s ones. Have you forgotten this. The SSF presents very important part of the freight forwarding market. Well, they are not the market leaders, but very often they are the niche developers. And often niches become markets, sometimes big ones.

But what stops the SSF to become bigger?

SSF’s are so much operationally concentrated that they often forgot to look around and miss the big picture. In order to save money they have cut some important activities like knowledge interchange.

Being on a tight budgets they often neglect the opportunities the new technologies present to them. And for a very stupid reason – the SSF believes that new technologies are available only to the big guys as only the big guys can afford them. Which is absolutely wrong.

The SSF readily accepts new customer orders but rarely makes pro-active efforts in attracting new customers.

I believe that if the SSF succeeds in overcoming the above three issues it will grow to an extend where the big guys must pay them respect.

And to the big forwarders I would say – beware the SSF because they are much more dangerous than your main competitors. The day the SSF realizes how to grow further is the day the big forwarders will loose big market share.

Your comments and discussions on the topic are more than welcome !!

For more information on KG CARGO freight forwarding service please contact us.

Freight Forwarder is a Designer

In nowadays international transportation of goods is a complex activity where many players participate in what the customer sees as one service.

This is where the freight forwarder steps in in the role of an architect of the transportation chain by coordinating, monitoring and managing the set of activities, responsibilities and liabilities which at the end result in successful delivery of customer loads.

Imagine a Bulgarian seller has a contract with buyer in Shanghai for delivery of milk analyzers.  The contract is on CPT Shanghai airport commercial terms which means that the seller is responsible for delivery of the goods to the airport of Shanghai and undertakes all risks untill landing of the goods at the airport. The Seller is based in Pleven some 130 kilometers from the main airport of Bulgaria Sofia and there are no direct flights from Bulgaria to China.

That means that the goods must be delivered to the airport, customs cleared and delivered to the airline for further transportation to Shanghai and the Seller has to contact at least 4 suppliers:

– domestic linehaul carrier – for arranging the pick-up
– customs broker – for customs processing of the freight
– the airline handling agent at the airport – to deliver goods ready for carriage
– the airline cargo office or GSA to arrange the booking of the freight

Well, except for the airline handling and booking the Seller could arrange for local pick-up and customs clearance but in the majority of cases the only thing the Seller should do is to place the order to the Forwarder engaging them with the organization of the whole transportation.  Thus Seller, saves time and respectively money and what is very important – headaches with multi-supplier communication and coordination.

All this together with the risks related to the transportation is transfered to the Forwarder, who accepts the order from the Seller to organize the overall transportation and all accompanying activities.

That was a simple example. Now imagine that you have more complicated moves where goods need to be delivered door-to-door with special customs requirements in destination  etc.

Can the goods owner do this by themselves? I doubt it.
It is the Forwarder who designs the whole chain coordinating and managing various sub-contractor activities and risks. This is what the main role of the forwarder is – Designer of the transportation chain.

For more information on KG CARGO freight forwarding services, please contact us.