Forwarders can't keep giving services away

Forwarders can't keep giving services away

After 48 years in the airfreight industry, I might be expected to say I had seen everything. But I still learn something new each day. There are no experts in this business.

I started with SAS in 1955 as a warehouseman and marveled at the various commodities we were shipping. While attending college at night and majoring in economics, I began to correlate the distribution of goods with airfreight not only as a marketing tool but as a timely way to get goods into the marketplace.

As the years passed, the aircraft got bigger and faster. We began to do cost analyses comparing air to sea, and we had a specific commodity filing for almost every product. The growing know-how of freight forwarders was making them the linchpin of the business. Their expertise catapulted the business upward, and today the industry is thriving because of them.

Today, the problem with our business as a forwarder is how business is being conducted. It has become so competitive that it is almost to the point of being ruthless. The airlines have been little help with their indecisiveness in airfreight development within the industry and within their own companies. They give little support to the mid-sized forwarder, and heaven help the mom-and-pop operator. Knowing that mega-forwarders have the competitive edge, the airlines court them in the hope of becoming their core carriers.

The airlines are apparently going to keep doing it differently until they get it right. At the rate they are proceeding, however, they may very well run out of ways to do it before they get it right. Overlooking mid-sized and small forwarders will be the carriers' undoing in the long term. The more small and mid-sized forwarders that are put out of business, the more powerful and autocratic the mega-forwarders will become. They will control the carrier selection, freight capacity, pricing, market share and information services.

Unfortunately, the small and mid-size forwarders are all alone. The Airforwarders Association has no muscle, the Port Authority of New York and New Jersey is more interested in tunnels and bridges than in cargo, and Cargo Network Services is an airline organization. In trying to compete with the mega-forwarders and integrated carriers, the small and mid-size forwarders cut their pricing too low. As a result, their profit margins continue to shrink.

There is nothing wrong with competition. However as an industry we are giving away our experience, know-how and skill at bargain-basement prices. The shippers are benefiting from this airline-forwarding industry aberration. It is becoming another revenue reducer for the forwarders, and it will decrease the yield and revenue for the airlines.

I feel that the shippers value a strong forwarder community. They have always said that reliability is first and foremost, followed by cost, speed and a tracking system. The choice of airline is not necessarily important to them. Contrary to common belief, shippers do not feel e-commerce will make the forwarder redundant. It will change the way they interact with the forwarders. In order to survive, the forwarders must provide value-added services for which the shippers are willing to pay.

The airlines are not close to shippers. The carriers are neither geared to nor capable of handling the multitude of tasks a forwarder performs for his customers, including the collection of freight charges. Who in today's economy pays their invoices consistently on time? Shippers routinely pay anywhere between 30 and 120 days. Experience tells me it is more often in the 90 to 120 days range, even after many reminders. Yet the airlines are adamant in collecting from the forwarders in 30 days.

I feel the airlines should work individually with the forwarders in constructing the payment cycles rather than stubbornly insisting on things being done their way. Currently, the airlines work as a bloc, under the IATA umbrella, protecting one another. For whatever charges have not been collected in 30 days, the airlines leave the forwarders to alone shoulder the burdens of acting as bankers for the carriers' freight charges, fuel surcharges, security surcharges, etc. Incidentally, the airlines do not compensate the forwarders for the collection of the surcharges.

To a greater or lesser extent, every cargo agent in the country is facing the same challenges and the industry is struggling to reinvent itself and redefine its role.

Our strategy must be, "If I am going to do something for you, I am not going to do it for free."

Jerome C. Trimboli is president of InterJet, a New York-based forwarder. He may be reached at (718) 276-8500, or vial e-mail at jtrimboli@interjet.com.