New practicesHow SMEs can gain from corporate governance help2

NOVEMBER 2012 SERVING THE INDEPENDENT FREIGHT FORWARDING COMMUNITY No.012

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BUT while the western world generally looks on and dreams of strategies 20 years down the line India, and particularly China, are literally buying up Africa and investing heavily in infrastructure, logistics and natural resources at an amazing rate. Independent forwarders in Africa are in the frontline of this invest ment, but are sending out a clear warning that unless partner com panies across the globe act now, a golden window of opportunity will pass by.

It is vital that the indepen­dent sector does not get left behind in this land of great oppor tunities. The multinationals have already woken to the fact that Africa will become a major key global growth market quicker than

originally anticipated and are heavily investing in reinforcing their presence in key markets.

However, the independent sector has a major advan tage in having the local expertise and wide ranging reach in every country.

Yet reputable and high­quality independent freight forwarding companies in Africa are exasperated that partner companies across the world are

still showing reticence about com­mit ting their business to Africa and fear that unless the indepen dents engage more

fully the whole sector could miss out on a huge opportunity.

Speaking to a range of African agents at the Sino International Freight Forwarders Conference

in September, it was clear that they were all frustrated at the opportunities that the indepen dent sector were letting slip.

Dan McKorley, Chief Executive Officer of McDan Shipping Company said that most partners they talked to had no idea of the potential and that they should be directly targeting Africa. “Volumes are increasing day by day. The Chinese have a 10­20 year plan for Africa and they are not being conservative. The investment is huge and the infrastructure projects almost unlimited in scale.”

“The Chinese have been very daring and taken risks, the EU and US have, until now, been very conservative, but are now realising that they are being left behind. Major western companies are planning big invest ments and the signs of these investments are already

starting to appear.“The three major

growth drivers: external investment, government projects and humanitarian projects are all driven by effective logistics solutions and we as independents have to prove that we can deliver these solutions more efficiently than the multinationals.”

Based in Ghana, Liberia and Sierra Leone, McDan has had some major succ esses, but needs full engagement with partners and their clients abroad to maintain the momentum.

It is vital that the independent sector does not get left behind

Africa – are independents missing the boat?

Continued on page 2

We have all heard that Africa has great potential, but great challenges. The data and figures from international trade bodies show that investment is rising across the continent and some of the rich potential is beginning to be realised

Airlines criticisedMajor shippers call for more respect from airlines4Iran trade

Increased risks of exporting goods as sanctions intensify3

Trust is the keyEd Zarach calls for closer cooperation between agents7

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McDan has numerous examples of the opportunities ripe for independents. “For example almost all global telecommunications companies are buying out local operators in Africa and massively investing in infrastructure. In Ghana we have the contract with a number of major companies, such as Vodaphone, that are laying thousands of miles of fibre-optic cables. There is serious expansion plans for telecommunications so that everyone, even the remotest farmer, will be able to use a mobile phone – there will be penetration into the remotest parts of Africa. The

companies are building masts everywhere and this is a once in a generation opportunity. Then this whole infrastructure has to be maintained and combined, this translates to millions of tons of freight by air and by sea.

“Another example is the investment in oil and gas in west Africa that runs into billions of dollars. These are serious projects and companies like SDV and DHL know the potential and are using their name and lobbying power to their advantage. The independent freight forwarding community and especially our network partners are slow to realise what is happening.”

Mustafa Issa, Executive Chairman of Mombasa-

based MIM Logistix echoes the sentiments

of the African agents interviewed. “The Chinese

are investing all over Africa and our

fellow agents in Europe and North America should be

informing their clients of the potential. I would

not like to see Europe and the US left behind. Agents

and their customers should no longer fear investing in the African market, for example it is now very easy to do business and set up efficient supply chains here in Kenya.”

Issa says the acceleration in major projects in East Africa is well underway and that local agents provide a great sounding board for partner agents and their clients in discovering where they should and should not concentrate their efforts and invest.

McKorley says potential clients are asking for more solution-based providers that can cover a range of logistics needs. “How do we do this? We start by providing competitive rates that compete with the multinationals. Then we compete to our strengths. The big logistic companies offer sweet words to the clients but often do not have the local expertise to deliver. For example we recently had a large road shipment that took 80 trucks from Ghana to the Ivory Coast through rebel-held territory. The roads in places are so bad and the terrain dangerous there is no way a multinational could do this. We knew the safest

route to take, who to contact as escorts and which roads and tracks could accommodate the trucks. Without this level of local expertise the shipment would have been impossible.”

McKorley also says an intimate knowledge of local Customs is vital and an independent agent is much more likely to be able to move a shipment through quickly and efficiently. He says multinationals in many parts of Africa do not understand the nature of Customs so sub-contract the business. “We can persuade customers that they can cut

out the multinational middle man and come straight to us to get it done at half the price.”

Overall the multinational companies remain weak in Africa and local expertise is king. However, the

independent sector has to engage now and heed the warnings of African agents if they are to take advantage of the continent’s rapid rise in logistics demand.

Infrastructure opportunities beckonContinued from front page

Dan McKorley, Chief Executive Officer, McDan Shipping Company

Mustafa Issa, Executive Chairman, MIM Logistix

How SMEs can gain from corporate governance help

A number of forward-thinking logistics companies are using well thought out programmes to not only help strategically plan their business, but also help accelerate growth

A PROGRAMME of corporate governance training is something that would send most hard­pressed owners/chief executives of SME freight forwarders running for the door. However, a number of forward­thinking logistics companies are using well thought out programmes to not only help strategically plan their business, but also help accelerate growth.

Triple Crown Shipping & Logistics, based in Dubai, has engaged in a new government­led programme called Dubai SME that has a corporate governance initiative designed to inform and educate SMEs of the need for robust businesses and financial processes that will aid future expansion.

Ishwar Jodha, Managing Director of Triple Crown, explains how the programme has aided his company from start­up. “Right from when we established the company corporate governance for us simply meant controls, process implementations and owners’ needs being met. However, since being involved with the Dubai SME100 team and attending the various sessions we have a deeper understanding. We can follow a more structured path with effective management practices that can lead a small company like ours towards growth, improved performance and also an important aspect of exit strategy.”

Having come from the background of running a multinational corporation as a managing director, Jodha appreciated and understood the advantages of best practices and processes. “As an entrepreneur starting up, there was definitely a need to be cautious

and ensure all the checks and balances that could be put in place were present.

“Interestingly, I did not face many challenges because I was clear in my mind that these best practices are important enough to ensure the company moves forward in the manner I envisaged. Every new employee was told about the importance of the idea, although the difficulty was to ensure we did not lose focus overly on that and lose sight of the day­to­day sales and commercial activities.”

So what practical measures have been taken that will benefit his business? “We have

set up an advisory board as recommended by the Dubai SME’s Code of Corporate Governance, and I am already seeing the benefits. I am an entrepreneur and every so often one needs to bounce ideas off someone who is objective and often has a

different view. Also in critical issues I have approached them and the feedback has helped me gain a different perspective on matters.”

“After attending a focus group on financing for growth, I was also convinced for the need to bring in a CFO. It was a long hard search but all should be in place soon and we will be ready to go all guns blazing to achieve all out targets, to put every single code of conduct in place and reap the benefits of growth and opportunity.”

Jodha admits that for a small company adopting these measures is a financial strain to start with, but he is certain that getting the foundations right and having the right team at the helm is an essential building block to build and sustain growth in the rapidly changing global economy.

“We can follow a more structured

path with effective management

practices”

VOICE OF THE INDEPENDENT, NOVEMBER 2012 3

Editor’sOverview

IT was interesting to hear the head of an-other major multinational forwarder not only calling for, but predicting major consolidation within the freight forwarding sector over the remainder of this decade (see page 8).

When the financial crisis first stuck in 2008, the multinationals said that indepen-dent forwarders lacked the global network to react to rapidly changing market conditions and relied on just a couple of tradelanes. In addition, they claimed they lacked the ability to meet the increasing demands from ship-pers to help control their supply chain in the most efficient manner. In fact, the market share has remained amazingly static in this period.

The rise of global freight forwarding net-works, combined with the entrepreneurial and customer-focused approach of SME for-warders, not only proved their thesis wrong, but also has provided many new opportuni-ties for agents to increase their market share.

The new challenge for forwarders is now to prove they can match or better the multina-tionals in global reach and price, while also upgrading to introduce the latest technolo-gies that will become increasingly important to both customers and regulators.

This, combined with the independents’ far superior customer service will ensure that the sector not only survives but remains buoyant and full of opportunities.

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THE annual Sino Freight Forwarders Conference has been hailed as a key platform in the promotion of global trade by the Chinese government and logistics executives from over 100 countries.

As the largest logistics business meeting in China, the 9th Sino Conference attracted over 1,000 independent freight forwarders from around the world to Xiamen from 16-19 September for three days of intensive business meetings.

The conference, co-hosted by the Chinese International Freight Forwarders Association (CIFA) and WCA Family of Logistic Networks, saw over 30,000 individual business meetings held using the unique One-on-One business scheduler.

Many hundreds of new business partnerships were cemented during the conference that also included numerous social networking events, designed to maximise the opportunities for linking forwarders throughout the world.

In addition, the plenary session provided delegates with vital information on a number of important issues ranging from the steps the Chinese government is taking to promote trade and develop logistics, through new technology offerings for independent forwarders and the importance and procedures for ensuring every agent has the right insurance.

Among the key Chinese government officials in attendance was Lv Jijian, Deputy Director of China’s Ministry of Commerce, who told delegates that independent freight forwarders were the bridge that allowed the flow goods around the world and that they played a vital role in promoting and facilitating foreign trade. He added that the Ministry of Commerce was present at the

conference to actively formulate plans to develop international freight forwarding and help coordinate partnerships abroad. “Only if we closely cooperate can we develop more quickly and inject even more momentum into worldwide freight forwarding services. The economic slowdown has had a big impact, but this conference provides a great opportunity to work with the Ministry of Commerce to help formulate new plans to develop international freight forwarding.”

President of co-organiser, CIFA, Mr Zhao Huxiang, told delegates that the Sino Conference had become one of the world’s most important platforms for global trade, offering abundant market opportunities and reliable partners for all attendees. He added that CIFA was working hard on a number of important goals, including paperless reform of Chinese customs.

WCA Family President David Yokeum said that the Sino Conference has matured and developed into the premier logistics networking event in China. “Every year I see delegates benefit from even greater success and opportunities at the event. Participants are now much smarter about doing their homework before the meeting and have learned how to maximize the potential for generating new partnerships.

“The combination of WCA Family, with over 4,500 freight forwarder offices in 188 countries, working alongside CIFA – the largest domestic freight forwarding association, provides a powerful platform that is unmatched anywhere else.

“WCA Family and CIFA have a very special, wonderful relationship and each year we will continue to look for opportunities to add even more value for independent freight forwarders.”

THE recent announcement that Maersk Line has stopped calling at Iranian ports as a result of the lack of clarity over the legalities of sanctions imposed by various governments and institutions, including the US government, combined with the increasing level of sanctions, should be seen as the starkest warning yet to freight forwarders and shippers that are importing goods into the country.

Maersk said that it was not prepared to risk the reputational damage associated with dealing with Iran and had ceased operations “for the foreseeable future”.

Iran relies on container and bulk shipments of food and consumer goods, which are still legal under European and US sanctions.

However, the complexity of the legislation and the fear of transporting what on the surface may appear to be legal goods, only to find the shipment falls foul of the increasingly stringent measures is forcing many companies to reconsider the risks.

The USA has the most comprehensive sanctions and companies found, even innocently, transporting US made goods to the country could suffer severe financial penalties.

Forwarders may find that goods inbound to Iran by air or ocean are seized at any time, leaving the agent exposed to unrecoverable charges. In addition, companies with US offices are particularly at risk as although they may be legally exporting into Iran from a

different office in a different country, US legislation means they could still be placed on the US Commerce Department’s ‘export denial orders’ list.

Forwarders warned over Iran trade

Sino Conference success is vital for global trade

Maersk is not prepared to deal with the reputation risk associated in dealing with Iran, and has ceased operations to the country

Mr Zhao Huxiang, President of CIFA

Delegates network at the Sino Conference which has become one of the world’s most important global trade platforms

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ONE large manufacturer, which spends about US$450 million on air freight each year out of a total transport budget of some $2.8 billion, said: “We have never had an airline knock on our door. All they do is complain. We would like to deal with them directly, and I simply don’t understand why we can’t.”

Speaking under anonymity for internal company policy reasons, the director of global transport continued: “In a company as big as ours we have large and guaranteed volumes. We scratch our heads as to why the airlines

are so reluctant to deal with us.

“Our company offers a guarantee to our customers that they can have spare parts within 48 hours, anywhere in the world, often in remote regions. To do that we need a rock solid distribution system. We want the same predictability as the cold chain pharmaceutical shippers, a next­day air service. We are a good, steady customer, we do a lot of block space agreements – but we want some transparency and simplicity from the airlines in rate structures. And we will pay a premium for

predictability.”Speaking on the fringes of

the Council of Supply Chain Management Professionals’ annual conference in Atlanta, the shipper noted that he found passenger carriers to be far more reliable than the integrators. “We’ve no problem with all­cargo carriers, but we shy away from small parcel flyers – they will bump you. The integrators – and we have tried all of them – sometimes leave our parts behind. We find that passenger carriers have very good reliability – and we don’t see that at times from the integrators.”

As air freight has found its market share increasingly eroded by shipping lines, the director noted that the lines were simply better at forming relationships. “The ocean carriers gives us direct access,” he said. “They work directly with us to help provide door­to­door solutions, and they are aggressive in forming relationships with us.”

The shipper said he had no interest in cutting out forwarders, and that he maintains strong ties with a handful of companies. ”We don’t want to displace the forwarders. We need them. But now we are asking forwarders to inform us about which air carriers they use, and we want a say in that.”

He said that multinationals sometimes don’t have the time or resources to keep him informed about the airlines. “They are trying to manage their BSAs [Block Space Agreements], but sometimes I don’t think they look aggressively enough at the low cost options available. I’d like them to treat my money as if it were their own business.”

Complexities in managing diverse fuel surcharges, which airlines all deal with differently, is one of the biggest headaches for shippers, he said. “It is difficult to manage a tonne of different surcharges. And we discovered that some 7% of our bills had errors in them. In the corporate

world, no one wants to hear that fuel surcharges, which account for 20% of our transport costs, are volatilities that you can’t control. It turns transport into a commodity service. If the fuel bill goes up, then for us, just getting the goods from A to B is not really enough. We want to see more from that.”

Speaking at the TIACA Air Cargo Forum, Delta CEO Richard Anderson had explained his company’s

decision to buy an oil refinery was to give the airline more control over its fuel costs. “Oil is 40% of our cost structure,” he said. “We can’t tell ourselves that we can’t control that. We treat 100% of our costs as controllable.”

But is any element of that control passed on to the customer?

The shipper responds: “He is going to control his costs, he’s got to make a profit from a more efficient environment. Good for him. We want the airlines to be healthy. We want market­based rates. But we don’t want to see airlines making

money out of our fuel costs – that should come from the freight rate. We want to get bad behaviour out of the marketplace. We are just trying to get some simplicity into the process.

He added: “For us the rate is secondary to service – clearly, they have to be competitive, but we don’t necessarily want the lowest cost provider. We are willing to pay a 5% to 10% premium.”

Another major shipper, attending the TIACA event,

said that he had come to see if he could forge better relations with the airlines. “We don’t seem to have enough dealings with them, and I want to know them better.”

The director of transport summed up his message to the airlines:

“Come and see us. You are not aggressive enough. Get off your arses and come and talk to us.”

He added: “I am not down on the airlines – I don’t know why they don’t come, perhaps there is something I don’t understand about their business. So we need some transparency, so we can understand each other’s businesses.”

The airlines’ reluctance to talk to their customers may stem in part from the disastrous 1990s affair of a European carrier that wanted to engage with shippers directly.

“We scratch our heads as to why the airlines

are so reluctant to deal with us”

Shippers lambast airlines for lack of engagement

Complexities in managing diverse fuel surcharges, which airlines all deal with differently, is one of the

biggest headaches for shippers

A number of major shippers have lambasted the air freight industry for failing to engage with their ultimate customers

Richard Anderson, CEO of Delta explained his company’s decision to buy an oil refinery was to give the airline more control over its costs, but is any control passed onto the customer?

VOICE OF THE INDEPENDENT, NOVEMBER 2012 5

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CRYING babies, chatty strangers or perspiring passengers with an aversion to soap, might seem like some of the worst people you can sit next to on a long-haul flight. But none of these are as scary as InHouse Crown’s latest passengers.

On behalf of the 2Oceans Aquarium, four juvenile sand tiger ragged-tooth sharks were transported to Istanbul’s aquarium. The entire operation was planned in less than two weeks and involved 20 people including aquarium and freight staff.

Four tanks were specially-built according to guidelines by the International Airport Transport Association (IATA) to house the sharks.

Under careful supervision by aquarium personnel, the unusual passengers were prepared for the journey two weeks prior and then flown direct via Turkish Airlines. The sensitive nature of the cargo called for the closest monitoring of the water conditions and health of the sharks throughout the journey. The two male and two female sharks have now successfully set up home at Istanbul Aquarium.

Sharp-toothed shipping success

THE Air Cargo Forum, organised by TIACA and held in Atlanta from 2­4 October, saw the great and the good of the air cargo industry gather to discuss the state of the industry.

In good times, with relatively few freight forwarders in attendance, the event is less about business and more a nice opportunity for the airlines, GSAs and airports to slap each other on the back and congratulate themselves on doing a good job. However, 2012 has been hugely disappointing in terms of volumes, with the expected recovery failing to materialise. The event had a more serious tone than usual and there was certainly more momentum behind taking measures to drive more costs from the industry.

Des Vertannes, head of IATA, re­iterated that he thought it not only desirable, but inevitable, that e­freight will be made compulsory. In a panel discussion it was denied that the costs of implementing e­freight would be pushed onto the forwarder. Mitch Nicols, president of UPS Airlines said that as a company UPS “went from a paper­intensive to data­driven system because that’s what we needed to do to become more efficient. If I can absorb that cost by becoming more efficient, the forwarder will be able to see that opportunity as well.”

GACAG also produced a new position

paper at the event aimed at the World Customs Organisation (WCO). The paper urges members of the WCO to embrace the principles of the revised Kyoto Convention and shift its dependency on paper documents to a full e­Customs environment. It states that harmonisation of Customs procedures will play a pivotal role in establishing e­Customs platforms and the entire air cargo industry has pledged its support in this effort.

Many airlines also spoke out about the new European Emissions Trading Scheme, urging more collaboration in removing regulation and costs from international trade rather than adding more barriers.

As more airlines withdraw freighter capacity, the sector is certainly showing the stresses and strains of lower than predicted demand. Earlier this year IATA predicted a 0.3 per cent year­on­year rise in air cargo volumes and flat yields for 2012. They are now predicting that the market will have contracted by 0.4 per cent over 2011 levels and yields would be a painful 2 per cent below the previous year.

Overcapacity, especially in bellyhold, plus continued weak demand is likely to keep rates lower for forwarders in 2013 as IATA predicts airline cargo yields will continue to fall by another 1.5 per cent, despite the continued removal of freighter capacity and a predicted recovery in world trade. For

forwarders this is a double­edged sword. Rates are unlikely to rise and certainly they will have a strong negotiating position with airlines desperate to fill their bellies. However, airlines are now very serious about implementing measures such as e­freight, and if the independent sector does not get on board, could find themselves losing out to larger logistics companies that are already implementing paperless freight.

Airfreight suffering as volumes continue to fall2012 has been hugely disappointing with the expected recovery failing to materialise

It is inevitable that e-freight will be made compulsory

VOICE OF THE INDEPENDENT, NOVEMBER 20126

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MAERSK has made further capacity cuts in its Asia-Europe services as demand continues to fail to meet expectations. The latest cuts bring the

total capacity removed on the tradelane in 2012 to 21 per cent.In a statement the company said that in view of declining demand

on the Asia-Europe trade, it was further reducing capacity by removing the AE5 service permanently and suspending the AE9 service until early December 2012.

“We do not expect volume growth on the Asia-Europe trades this year so there is currently no need for the number of ships

sailing”, said Vincent Clerc, Chief Trade & Marketing Officer for Maersk Line.

“We expect a 3% slump on the Asia-Europe container trades for 2012 and are taking steps to adjust to this without reducing our market position”.

The Maersk Line AE5 service, which currently operates 8 vessels of 6500 TEU nominal capacity, will be closed with the last sailing departing Tanjung Pelepas on 8 November 2012.

CHINA’S exports grew more than estimated in September, signaling that the world’s second­biggest economy may be stabilising after a slowdown that began in the first quarter of 2011.

Customs data issued in early October showed that exports grew 9.9% year­on­year, a big jump on the 2.7% growth recorded in August.

However, despite the encouraging figures, overall business sentiment remains very cautious and indicators show a continued pessimism on export growth for the next two quarters.

An HSBC survey of purchasing managers that correlated data from 430 Chinese companies has concluded that Chinese export orders fell at their sharpest rate for three and a half years in September.

It was the 11th straight month in which

the index was less than 50 – the cut off point between manufacturing expansion and contraction.

“Manufacturing activities remain lacklustre thanks to weak new business flows and a longer­than­expected destocking process,” said Qu Hongbin, HSBC’s chief economist for Greater China.

The report says that manufacturing growth is currently bottoming out, however it is hoped that the governments recent efforts to boost the economy should begin to take hold in Q4 2012.

The Financial Times reported that Shannon O’Callaghan, an analyst at Nomura, said: “At the start of the year most US companies were saying they thought China would get better in the second half. But by the summer, it was clear it was not getting better. If anything, it’s getting worse.”

CMA CGM has launched a new seasonal service from Turkey and Egypt to Russia called the Citrus Express.

Dedicated to meet the needs of citrus fruit exporters, the fixed-day weekly service links Mersin, Turkey and Damietta, Egypt to Novorossiysk, Russia with journey times of five and

seven days, respectively.On 2 November CMA CGM will also

deploy three vessels connecting all three counties on a loop beginning and ending at

Port Said, Egypt.

New seasonal fruit lane to Russia

Chinese exports remain under pressureDespite encouraging figures overall business remains cautious

Maersk makes further major cutbacks in Asia-Europe services

US ports are expected to handle 1.45 million 20­foot Equivalent Units (TEU) in October, up 9.9 percent from the year­earlier period, according to the monthly Global Port Tracker report by the National Retail Federation and Hackett Associates. The expected rise follows the postponement of planned strikes, with talks now set to continue through to 31 December.

The more positive figures follow a year-on­year rise in containerised imports at Los Angeles of 3.38 per cent in September –

equating to the highest monthly volume of 2012 so far. “Increased imports show that retailers have gauged the market and expect increased sales,” said Jonathan Gold, Vice­President for supply chain and customs policy at the National Retail Federation.

US ports handled 1.42 million TEU in August. That was 6.7 per cent higher than July and 3.3 per cent higher than August 2011. Ports are expected to handle 1.49 million TEU in September, up 8 per cent from last year.

US Ports expect a healthy Q4 riseExpected rise follows postponement of planned strikes

Vincent Clerc, Chief Trade & Marketing Officer, Maersk Line

VOICE OF THE INDEPENDENT, NOVEMBER 2012 7

Spotlight ON tEdward Zarach

PresidentEdward J Zarach & Associates, Inc

Trust is key to leverage our collective strength

HOWEVER, he feels that now is the time to step up another gear and really utilise the advantages inde pe­n dents have by adopting innovative new strategies and practices.

Like many entrepreneurs in the log istics industry, Zarach struck out on his own after spending several years and learning how the business worked as an employee of a large freight forwarding company. Having eyed an opportunity in the Midwest of the USA, Zarach launched Edward J. Zarach and Associates with the aim of providing customs brokerage and freight forwarding services to a number of select clients in the local area. By working 14­hour days and convincing customers of his vision, the company soon gathered momentum.

However, after three years Zarach was seeking a new approach that would help him compete with the multinationals that were becoming increasingly aggressive in the market. “Our competition was the likes of Kuehne and Nagel, Schenker and Panalpina. Their worldwide network and global products were winning clients over

and the independents had difficulty overcoming that competition”.

Zarach was searching for a way to provide clients with the global reach they wanted when a representative from the nascent network United Shipping walked into his office. “I quickly realised what United were trying to do and what it could do for the indepen dent forwarder. I was the first to give the company a cheque and trust in their vision. I guess you could say I was at the van guard of the freight forwarding network community that we have today.”

“In the early days of the network, I would travel the world and talk to customers and partner freight for­ward ers and could now sell as a global company. This was a revel­ation as now, for the first time, we could begin to match the reach of the multinationals, yet still offer the superior customer service that is the hallmark of the indepen dent.”

Since those early days Zarach has carefully selected the networks he belongs to and is currently a member of WCA Family and Global Oceanfreight and Airfreight Logistics (GOAL). “We feel we

have chosen the best networks to fit our business. Choosing the right network is absolutely essential as there are now hundreds of new networks out there many of which make great boasts but have no substance. I am contacted every week by a new network and subjected to nefarious and dubious sales techniques. To join a network we feel it must have been built with integrity and be backed up with proper finances, insurance and proven benefits.

Zarach has leveraged the strength of the networks he belongs to to grow his business, find new customers and attract clients from the multinationals. “Thanks to our unique benefits and superior service we have cut into the markets of the bigger players. Here in the Midwest people like to support local companies and if we can offer a global service it makes us a very attractive proposition.”

By concentrating on providing a premier service for the Midwest region, offering international freight forwarding and customs brokerage, Zarach has not only weathered the global financial crisis, but also prospered. “Being in the Midwest provides us with a tremendous opportunity. Chicago is the hub for the Midwest and is fed by 11 surrounding states. Business has been very good for us through these difficult times and we have taken the opportunity to expand through two acquisitions combined with organic growth. Our customer base has expanded noticeably through a combination of aggressive sales and referrals, but also our existing customers are expanding and giving us more business. We have now opened a second office in Minneapolis and plan to open up other locations in the Midwest such as Cleveland, Kansas City and Milwaukee.

A range of surprising new markets are helping boost the volumes at this time and Zarach says that the

nimble and reactive nature of the independents allows them to outmanoeuvre the multinationals. “For example there is substantial growth in organic food products to China from the Midwest, a market that was little known or anticipated a few years ago. There is also a growth in imports of organic foods to the region as the financial conditions mean people are cooking more at home and looking for high quality produce.

“Project work is another niche area in which we have seen useful growth over the years. By specialising pri­marily in military aviation project moves we have built a reputation with our clients that has engend­ered a great deal of loyalty.”

Zarach says that manu fac­turing jobs are returning to the Midwest and after a period of belt­tightening companies are re­tooling. “Things are happening. People in the Midwest like a local flavour and local representation and we are gearing ourselves to offer a competitive service across the region.”

With freight forwarder networks playing a crucial role in the success of his company, Zarach says the time is now right to more effectively leverage the strength the networks have for the benefit of all members.

“The next stage of development of the major and credible networks is to use our combined might in new directions. For example, we have been pushing for members to come together and build LCL consolidations, providing massive time and cost savings. Here in the Midwest we see massive benefits in WCA Family members say putting together consolidations from China, markedly improving all our margins.”

Is this possible given that all forwarders are basically after the same piece of pie? Zarach believes it is and says that on a smaller scale it is already working. GOAL is a much smaller network, but our 125 members globally have been successful in co­ordinating LCL freight from every major point in China. It has taken a great leap of trust, but since we all committed to this we have seen massive cost savings in terminal charges, breakdown charges, trucking expenses from the west coast ports and numerous other aspects. Our

overall costs have been reduced by some US$25 per cu m. In addition, we have reduced transit times regularly by 10 days – a massive boost for our customers. We

can now go out and really compete with the big boys by not only beating them on rates but also on transit times.”

Zarach says however, the driver in making the scheme work is trust. “It took one person within GOAL to say ‘look if we trust each other we will all benefit’. We acquir ed a neutral warehouse in Chicago and it works. We are now looking to do the same in Cleveland and the West Coast.”

Zarach believes that the potential for members setting up consolidation programmes in the larger quality networks is immense. “Consolidation could become the biggest benefit of network mem ber ship, but only if the network can direct it for the benefit of members and they can learn to trust it and believe it is truly neutral. We have proven the concept works within GOAL, the challenge now is to transfer this to larger networks and begin to all reap the very real benefits.”

It is not an exaggeration to call Ed Zarach a veteran of the industry. After establishing his own freight forwarding company in 1981, he has seen the independent sector develop and mature into a force to be reckoned with...

“Choosing the right network is absolutely

essential”

Major and credible networks need to use combined might in new directions and LCL

consolidation could provide massive time and cost savings

VOICE OF THE INDEPENDENT, NOVEMBER 20128

Editor Dan March dmarch@worldlogisticsmedia.com

Advertising Mandy Warren mwarren@worldlogisticsmedia.com

Editorial Contact

Dan March ­ Phone: +44 7921 038568

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Contacts

FOUR years after the then head of DHL Global Forwarding, Hermann Ude, predicted that many small freight forwarders would “just disappear” in a wave of consolidation as the global downturn intensified, it appears that the opposite is true and that there are now more registered freight forwarders globally than ever before.

John Pattullo the outgoing CEO of CEVA Logistics has been reported to have

stated at the Council of Supply Chain Management Professionals annual conference in Atlanta, that: “In the global logistics industry, the top 10 players have less than 30% of the market share.” This figure shows a stagnation of the multinational forwarders market share, rather than a relentless rise as predicted by Ude.

Again the multinational freight forwarders seem confused as to why the

market is not responding in the way they expect. The independent sector has weathered the global financial crisis better than they or any analyst predicted. However, the sector must continue to move forward with integration of

new technologies and working together to create seamless global networks if

it is to continue to prosper.

Pattullo, almost echoing Ude’s words of four years ago, added

that he believed the current market fragmentation was

“not sustainable, so there will be some meaningful consolidation in the coming years. Over the next ten I’d expect to see significant consolidation.”

The threat to the erosion of the independents market share is real, but in emerging economies such

as in Africa and Latin America, independents with significant local market knowledge and expertise are in prime position to take advantage of growth.

Multinationals admit industry consolidation hasn’t yet happenedThe independent sector has weathered the global financial crisis better than any analyst has predicted

John Pattullo, former CEO, CEVA Logistics

“The top 10 players have less than 30% of the market share” Industry players are

backing WIN platformWORLDWIDE Information Network (WIN), a revolutionary new electronic communications and data transfer platform, has been backed by significant industry players such as IATA as an ideal solution for the freight forwarding community.

An agreement to incorporate INTTRA, the world’s largest, multi-carrier network for the ocean shipping industry has already been signed. The INTTRA system enables customers to efficiently and easily plan, book, manage, settle and analyse ocean freight shipments with the 40 leading carriers and NVOCCs.

In addition, WIN announced at the FIATA World Congress that an increasing number of major software providers and vendors are fully committed to integrating WIN with their own systems.

WIN will also be announcing shortly an MoU with a company that provides the most comprehensive range of integrated IT solutions and distribution services within the air cargo transport chain. WIN itself has been developed as a cloud platform, allowing all users full access to its capabilities without having to change their own in-house system.

John DeBenedette, Managing Director of WIN said that a number of important milestones in the development had been achieved in the last two months and that WIN version 2.1 will be launched early in 2013 incorporating many new advanced features. He added that there was huge momentum behind the project as “support from across the industry has been immense”.

WIN version 2.1 will be launched in early 2013 incorporating many new features