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Choosing the Right Freight Forwarder
Choosing the right freight forwarder to support your export efforts never has been more critical than during the current crippling recession — despite the fact that it may be abating. Even Icelandic Volcanoes can be overcome!
Selecting the correct forwarder can mean the difference between satisfied customers and unhappy ones; efficient, cost effective distribution of your products abroad or careless, wasteful handling of them. Ultimately, whom you choose will translate into either greater company profitability or an income statement splattered with red ink.
I speak from experience. After almost 30 years in sitting at conference tables opposite literally dozens of shippers ranging in size from multi-billion dollar corporations to those with a few million in sales, and as diverse as home improvement companies to non-profit organizations, I believe there are distinct parameters that, if adhered to, will benefit both the shipper and his transportation agent.
Here are some thoughts on the criteria needed in choosing a freight forwarder, or, to use the current transportation speak, logistics provider.
Pre-Negotiations
Before even entering into negotiations with the logistics provider sitting across the conference table, analyze your own transportation procedures and determine your requirements. You probably have used forwarders in the past. What was the rationale in using past agents, and are these reasons still pertinent?
How many shipments will a new agent be handling? Will they be primarily via ocean, air, or truck? For ocean, do your shipments consist primarily of container loads, or do they sail as “break bulk” or heavyweight freight? If by air, will the predominance of your cargo fit into the “bellies” of passenger aircraft, or must it travel via the more expensive main deck configuration? If your freight moves by truck, is it a full truck load or LTL (less than truck load)? Is your cargo bound for regional, national, or international destinations — or a combination of all three? Does your cargo consist mostly of high density or lightweight freight — “bricks” vs “feathers”?
Negotiations
Don’t leave negotiations solely in the hands of your traffic people, as competent as they may be. Draw upon the knowledge and expertise of other departments in your company: finance, marketing, purchasing, and information technology. Also, involve senior management in the negotiations to determine their priorities. Be clear in your own mind what is most important in moving your freight, cost or level of service.
It is important that you make the above vital determination early on, because your search is really for the right combination of service and cost. You, the shipper, want what I call the best “value equation” in your company’s current production and distribution activities, either to links in your assembly chain or to your ultimate customers. Too many times I have sat at the negotiation table and listened to different viewpoints and priorities from a potential customer’s traffic group, only to learn 2 months later that top management had in mind other, different sets of priorities. In order to get the best value for your transportation dollar, you need to know and understand your internal value equation — the best combination of rates and services for your company. Most important, properly communicate these values to your potential service provider.
When requesting a proposal from the forwarder, insist upon clear, precise language when outlining his services. Refuse to accept vague generalities. Be clear as to what your company expects from a potential vendor. The better your logistics requirements are defined, the better and more specific the forwarder’s proposal will be.
When requesting a proposal from the forwarder, insist upon clear, precise language when outlining his services. Refuse to accept vague generalities. Be clear as to what your company expects from a potential vendor. The better your logistics requirements are defined, the better and more specific the forwarder’s proposal will be.
Learn the forwarder’s physical facilities. Does he possess a network of domestic and international offices? How extensive are they? Are the facilities located in those areas of the United States and abroad for both your inbound and outbound shipments? Are these offices owned and operated by the forwarder rather than franchise operations or wholly independent agents?
While technology plays an ever increasingly important role in logistics, the quality of the people assigned to your business still remains the single most important factor in ensuring the success of your cargo program. Does the logistics provider have a skilled, experienced workforce who not only can move routine shipments in an efficient, hassle-free manner but also have the ability to respond to emergencies with cool-headed judgement and decisive action?
This last capability is extremely important. Our company recently lost a large piece of business because our customer believed we hadn’t reacted with enough speed to a developing situation. We actually had the situation under control, but unfortunately, the customer panicked and did not trust that we would know what to do, after 30 years of managing the account. So the counterpart is that once you engage a service provider for his expertise, trust his judgment and don’t attempt to micro-manage his service.
How many of your forwarder’s personnel will be handling your type of freight? What are their experience levels? How many will be dealing directly with your company, and how many will be support people? Where will they be located? Do the people principally handling your business have experience and knowledge of your industry, and, if not, will there be a training process to learn more about your organization? How much of their time will be devoted to your company vs. other shippers on their customer list? In what manner and how often will the supervisor of your account communicate with your traffic and other pertinent departments?
How will the forwarder contact the carriers for shipment of your freight? Will it be by telephone, on-line, or via e-mail? A high percentage of “touchless” communication when booking shipments can reduce costs and heighten efficiency.
Who are the forwarder’s preferred carriers?
Are they the Maersks, Lufthansas, and FedExs of the transport world, or are they small, marginal airlines, steamship companies, and trucking firms?
Be wary of the forwarder who claims “cheapie” carriers save you money and are just as good as the leading carriers. His reasons may be disingenuous, having more to do with fattening his bottom line than moving your freight. That being said, a large carrier today does not necessarily mean service is excellent. Ask your forwarder why he uses potential service providers as opposed to “Brand X.” The more you learn about a forwarder and his way of doing business, the better you will understand whether the consolidatis a good fit for your business.
Implementation
A signature on a contract is only the start of a complex yet hopefully satisfying relationship with one of your key vendors. Don’t allow grass to grow under your feet to implement this new alliance. After signing the contract, have representatives of your company’s departments who will be involved in cargo operations meet as quickly as possible with the forwarder’s staff assigned to your business. Discuss thoroughly the processes and procedures detailed in the new agreement. Develop a realistic work schedule to which both parties can adhere to, a schedule that clearly defines implementation steps and responsibilities. Circulate the schedule to senior executives for their comments and evaluation.
Both shipper and logistics provider live in an increasingly complicated and litigious society. Choosing the right forwarder will go far in avoiding many of the problems inherent in shipping millions of dollars worth of cargo. It will allow the shipper to focus attention on broad management strategies and not the nitty-gritty business of moving freight.