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Issue #591

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Terminal Operators

Air Cargo Quarterly

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2014 Media Kit

Simplify or diversify operations? Forwarders must choose

By: | at 08:00 PM | Transport Intermediaries  

The following article was written by Brad Dechter, President & CEO at DHX-Dependable Hawaiian Express and its sister divisions, DGX-Dependable Global Express and DAX-Dependable AirCargo Express.

To simplify your business, to get “back to basics,” or to take the opposite tack by changing and diversifying your services to the customer is a critical dilemma facing forwarders of every size, type and description in these perilous times.

Solving this dilemma could mean the difference between future success or failure for hundreds of forwarders now struggling to remain viable while experiencing the sharpest decline in the transportation business for the past sixty years.

Until the middle of last year, the US was experiencing a mild recession, very similar to most post war economic declines. Despite a weakening economy, most forwarders managed to grow their businesses at a modest pace and remain profitable. Despite intense competition and low yields, the majority of forwarders remained optimistic about future growth. It seemed nothing could stop the’trend toward globalization of business. The increasing interdependence of nations meant growing trade for all. Greater amounts of commerce between nations required direct carriers and their agents to supervise and transport ever-growing mountains of goods traveling by land, sea and air.

To accommodate this seemingly inexhaustible supply of goods, shipping lines and air carriers went on a buying spree. Billion dollar orders were placed for new equipment. Ocean carriers ordered dozens of new container ships with massive 10,000-TEU capacity. In the air, orders for new wide-bodied, long-range cargo aircraft poured into Boeing and Airbus.

It seemed nothing could stop the march to greater world trade with its accompanying prosperity. Advanced nations were building consumer-driven, prosperous societies unequalled in human history. Emerging nations were sharing in this worldwide boom to a greater extent than at any time in the’past. For the first time in human events, billions of people who had lived barely above the subsistence level for thousands of years, began to enjoy a reasonably decent standard of living.

Then came last year’s “black September.“‘In that month, seemingly without warning, an economic tsunami hit developed and developing nations alike. What had been a relatively mild downturn became an economic catastrophe unseen in 80 years.

Freight forwarders were in uncharted waters. How to react to this unprecedented downturn in world trade? How to retain a forwarder’s customer base and ensure that his services would continue to be of value to shippers?

To keep existing business and harness new customers, I believe the forwarder now faces three choices; each seemingly antithetical to the others.

One is to return to the “stone age” of forwarding. To go back to the nuts and bolts of running a forwarding business. To offer the customer a superior combination that consists of the “basics” of our business. These basics include competitive pricing,‘delivery of goods on time and when promised, accurate transmission of information from forwarder to customer and transshipment of goods from loading dock to final destination. To conduct the forwarder’s own operation in a leaner and meaner manner than at any time in the past when’he opened his doors’with nothing more than a telephone, typewriter and tele-type machine.

A second alternative is to reinvent yourself. To become less of a “delivery merchant” and more of a management and’business consultant. To become embedded in your customers entire logistics system; inventory management, supply requirements, current and future production volume, and outsourcing. By offering these value added services, the forwarder heightens his role from “just” a transportation agent to an involved and integral part of his customer’s business. In this scenario, the forwarder’s creed becomes, “I must know my customer’s business even better than my own.”

A third choice is to become a niche player. To become a special