Saturday 10th Dec 2016 - Logistics Manager

Fast forward to globalisation

Stiff competition from international logistics companies and more demanding market conditions are driving change in the business of freight forwarding. JESSICA DAVIES reports on how this is having an impact on recruitment and training.

Freight forwarding has exploded in the past ten to 15 years. Globalisation and the outsourcing of manufacturing to low-cost markets around the world, has changed the nature and structure of the business. As customers look more and more towards global solutions, what is clear is that the time when traditional freight forwarders were seen as travel agents for boxes, is gone. And this is having a significant impact on company strategies for recruiting and training staff.

Over the years the definition ‘freight forwarder’ has become clouded. Many have changed their branding to include logistics, which has meant that, for some, the terms logistics and freight forwarding are now interchangeable.

To keep astride with more demanding market conditions the pace and sophistication of freight forwarding has changed. For some, the term no longer accurately defines what they do. Larry Woelk, managing director, George Henderson International, reckons the term freight forwarder has become outdated and is not considered dynamic enough in the UK.

Over here we tend to favour more on-the-job training, as opposed to the more structured and educational approach taken by other countries such as Germany. Larry WoelkHistorically, it was much clearer. The market was split into three parts – the freight forwarders, the carriers, and the third party logistics providers – and each took care of its own specialised service. But the mushrooming of global logistics giants, for who freight forwarding is a mere fraction of the service they provide, has left them all jostling for the same space.

Consolidation is ongoing and is likely to dominate the market for some time to come. Big names in the freight forwarding business, such as AEI, Exel, WTC, EGO, BAX Global, have all been acquired over the past ten years. With a lot of the smaller forwarders being swallowed up or merged, it raises the question – is there still a place in the market for the traditional freight forwarder?

Ray Hennessy, managing director of global freight forwarding and logistics company Schenker Ireland, says some of the larger freight forwarders are now putting more capacity into the market. In some cases this involves chartering their own planes. “This is accelerating even more as a result of rocketing fuel prices, and with airlines struggling themselves. But it means the traditional freight forwarder is left behind.”

Hennessy points out that the biggest challenge for the traditional freight forwarder is competing with the mega international logistics companies, who partake in aggressive pricing. He says that in the last decade, “there have been seven or eight top players competing for the big contracts, and the traditional freight forwarder has been squeezed out”.

He says that customers expect more from a freight forwarder, especially those with large contracts. They want to hand over more responsibility to the freight forwarders, and one of the results has been the introduction of performance contracts, which gives the customer the power to monitor the service they receive.

Gravitate

But the local freight forwarder provides an invaluable service for its local customers. Peter Quantrill, director-general of the British Industrial Freight Association, says: “Even the major companies don’t always gravitate towards the big logistics companies, because they want a more niche service.” This certainly explains why so many of the big logistics companies are buying up freight forwarders.

The overriding long-term advantage of traditional freight forwarders is their flexibility. Global companies can be more rigid. “Freight forwarders are very light on their feet and quick to react,” says Quantrill. This goes in their favour when up against the giant logistics companies. “They are not locked into fixed resources,” he says.

Because of the nature of the challenges forwarders face, recruiting the right people is crucial. Kirsty Middleton, director of recruitment consultancy Forward Prospects, says the larger companies are more open to employing people with fewer skills. “Part of the reason for this is computerisation. There’s less ducking and diving involved than with the traditional freight forwarder. It’s much more structured than the old style.”

The industry is crying out for good sales people. Larry Woelk reckons it is difficult to find people with good skills, particularly on the sales side, “because of the UK’s habit of not training people. Over here we tend to favour more on-the-job training, as opposed to the more structured and educational approach taken by countries such as Germany.

“20 years ago freight forwarders had in-house management training programmes. Nowadays they don’t do that. Rather than train their own sales people, they prefer to pinch them from other companies,” says Woelk. “The art of selling has become more complex. Companies need people who can talk about more than just the cost of transport. They need to be able to really sell the value of the service that is provided, and those people are hard to find.”

Calibre

Schenker’s Ray Hennessy says the calibre of people working in freight forwarding is high. “Freight forwarding employees are internationally more aware than people in other forms of work. Whenever any changes in the Middle East or China occur, whether political or otherwise, we have to know about it and understand it to do our job. Changes such as inflation in certain markets and exchange rates, have a direct impact on our margins.”

Some of the required skills a freight forwarder needs have changed as a result of certain countries taking a tougher line in security matters. For example, Woelk says in the US all freight that arrives must be pre-advised, or it won’t be accepted. “This can result in costs piling up in the supply chain to deal with these sorts of hold-ups, and companies need people with the expertise to handle it.”

One of the biggest changes in the past few years has been the advancement in computer skills knowledge. “Go back 20 years and everything revolved around paper. Now, computer skills are the most fundamental skills your people will need,” says Woelk. Multi-lingual skills have also come to the fore.

Philip Stephenson, joint managing director of Davies Turner, and chairman of BIFA, says: “There are certain constants in international trade. But the essence changes less than you’d imagine.”

Core skills, such as proficiency in import and export and cross-trade, remain as important as they have always been. Woelk says: “The skills set is virtually the same as it was 20 years ago, it’s just that more people are needed to do the job.”

When it comes to competing with the global logistics companies, and even global forwarders, who also offer logistics, investment in technology is the best way to level out the playing field. It is technology which guarantees smooth information flow – a fundamental part of all forwarding activity. To remain competitive a freight forwarder must be able to bring visibility to the table. “This hasn’t excluded the smaller operators, who can emulate their own tracking systems and visibility,” says Quantrill.

Stevenson says: “It’s a business that is very demanding on investment but the payback is good. Survival is all about modern technology and having the right people. If a freight forwarder wants to develop it must invest in training, software and equipment.” He says part of adapting to market changes is investing in systems that are accessible to overseas partners and customers.

Technology will by no means stand still in the coming years. RFID technology is still in the trial stages, but Hennessy reckons in the future RFID technology will become more like GPS technology, in the tracking of freight. The traditional freight forwarder may be muscled out of the larger contracts, but confidence in their survival is high among industry There are certain constants in international trade. But the essence changes less than you’d imagine.

Philip Stephensonplayers. Stephenson says: “Freight forwarders of all sizes have everything to play for.”

“Deciding between a traditional freight forwarder and a large logistics company is similar to choosing between shopping at your local grocer, or the nearest supermarket,” says Hennessy.

Ironically, the first freight forwarders in the 19th century provided door-to-door end-to-end supply chain services. Larry Woelk says they slipped into providing just transport services in the 20th century. Now they’re back where they started – providing door-to-door end-to-end supply chain services.”

This is accelerating even more as a result of rocketing fuel prices, and with airlines struggling themselves. But it means the traditional freight forwarder is left behind – Ray Hennessy

Even the major companies don’t always gravitate towards the big logistics companies, because they want a more niche service – Peter Quantrill