Building value in forwarder relationships

Building value in forwarder relationships

Does it feel like you are frequently in crisis management mode — forced to make ad hoc decisions, reacting to unpredictable ocean freight rates, equipment and space shortages, and transit time variability? You are not alone. In such a dynamic environment, we constantly analyze our global supply chains, redefining which pain points matter and what we are doing to actually lessen the strain. I suggest we should also be evaluating our service providers, to make sure our values and goals are aligned and that they have the capability and motivation to reliably meet our service level expectations.

As in any alliance, relationships often fail because the two parties have different expectations, do not communicate well, and perhaps are just not naturally aligned. Say you are the global logistics manager of a smaller US importer — perhaps you would be better served by a niche forwarder who appreciates your 2,000 TEU annual volume and will strive to meet your expectations; whereas the major freight forwarder (or even carrier) might take your volume for granted. Also, if you are primarily sourcing from Southeast Asia and the challenges you face are occurring in that region, it may behoove you to work backwards and interview a few forwarders based there, and secondarily concern yourself on their US representation for documentation release (the easier part). For example, if the Vietnam-based forwarder is the one negotiating with the carriers on rate and space commitments, would you not be better off dealing directly with them? If you ask a few of your Asian suppliers to recommend a couple of local forwarders and you find a common name match from more than one of your suppliers — bingo.

While I am not a fan of polygamy, I do encourage my peers to maintain two forwarder service providers and one back-up (eager to prove their capability to come through in the clutch). What you may quickly learn is that each forwarder has their own carrier contracts and it’s likely that one is tighter with the 2M Alliance (Maersk and Mediterranean Shipping Co.) and the other has a better relationship with the Ocean Alliance (COSCO, CMA CGM, and Evergreen), and yet another has contracts with THE Alliance (Hapag-Lloyd, Ocean Network Express, HMM, and Yang Ming). Thus, it makes sense to learn this during the interview process and to purposefully pick forwarders with divergent allegiances. On a given week, if one forwarder reports that the vessel is full, you can check with your other forwarder(s) to see if their allied carrier has space.

Aside from strategically selecting your forwarder partners, it is important to prioritize your own wants and needs. For example, during a space crunch, you may be willing to pay a large premium over the spot freight rate; however, if your provider still cannot get you space, it would be for naught. Again, this is a conversation you should have with your forwarder before that situation happens — to state your needs in advance so that you and your partner already have a Plan B in place for that eventuality. If one of your needs is an accurate tracking system which alerts you whenever there is a deviation to the ETA, then make this priority need known in advance. How can you reasonably expect the forwarder to meet your needs if you do not elaborate on what those needs are?

“When evaluating a freight forwarder,” said Michael Crotty, president of Golden Pacific Fashion & Design Co. “I look for honesty and trustworthiness, fast and accurate response, creativity in offering options, and their reputation in the trade.”

Loyalty and trust from a shipper go “a long way” from the forwarder’s perspective, said Daniel Grimes, vice president at Janel Group. “We had a long-time shipper leave us because he was promised lower rates and guaranteed space by another forwarder. Three weeks later the client returned to us and said that the other forwarder couldn’t keep their promise. Right now, it’s about getting bookings. We used to see requests for pricing (RFPs), but now we are seeing some shippers sending out requests for bookings (RFBs).”

There’s a danger in using different forwarders for different trade lanes if the resultant volume on a particular lane is insufficient to warrant the provider to invest sufficient resources to manage service challenges, said Mike Gottlieb, cofounder and vice president of international at ShipTech.

“In this current market where flexibility wins, many of the medium and large forwarders are stuck with only utilizing their own ocean contracts. Smaller and more nimble forwarders can leverage strong origin co-loaders with huge buying power to get their clients’ freight moving at competitive rates,” said Gottlieb.

He added that China rates are changing weekly if not daily, requiring shipper customers to pull the trigger once they know they need a booking and not wait for approval from higher-ups. “In the current market, the space will be gone if a decision isn’t made to book within a couple hours,” Gottlieb said.

Capital Transportation & CHB is prioritizing customers providing steady volumes and on routes where it can serve them efficiently, said Frank Neves, general manager at the forwarder. Unfortunately, many carriers haven’t been able to honor their commitments in this chaotic environment.

“Carriers are issuing bookings and shipping orders only to cancel them a few days later, with unprecedented excuses of lack of equipment, blank sailings, no space,” Neves said. "Meanwhile, shippers may try to make bookings elsewhere, but inevitably come back as all forwarders are ‘in the same boat.’”

A turbulent environment does have the potential to make a shipper-forwarder relationship stronger, but only if that partnership has a solid foundation built on common expectations, capability, trust, and flexibility. It is healthy to compare and contrast your existing forwarder versus a few others, and there’s every likelihood that you’ll come to the realization that they were your best match all along, as long as both parties communicate honestly and openly.

Daniel Krassenstein, supply chain director for industrial packaging firm Procon Pacific, can be reached at daniel.krassenstein@outlook.com.