Outsourcing - it comes down to what is practical and a lot of that may be dependant on the size of the shipper.

A forwarder will make all the practical arrangements - the bookings, cut the shipping documents, create and submit the customs declarations, etc. even if he doesn't physically handle the freight. For the small shipper, it may be money well spent as he does not have the expertise or resources to handle all this, nor will the carriers want to get involved in direct dialogue with every small shipper. The large shipper on the other hand, while possibly having both the expertise and resource to do these activities, may take the view its not part of his core business and is therefore happy to outsource it. In reality, I suspect for many large shippers its a combination of both.

A shipper can generate his own bookings directly to the carriers and cut his own shipping documents. He can also submit NES declarations himself. So why use a forwarder? Firstly to use the agent's staff to do a lot of the admin serves a purpose, using their resources rather than have the headcount himself. He also gets the benefit of the agent's buying power with the airlines (an important factor that shippers should not overlook). He also needs the agent's IATA accreditation for the billing by the airlines. He is reliant on the billing being done via the agent through the CASS system. Linked to this is the reliance on the forwarder supplying AWB numbers which airlines tend to only issue to accredited agents.

In terms of whether a shipper "pays a hefty commission" for not much in return is down to the shipper's commercial negotiating power and whether he feels he is able to secure a value-for-money deal with his agent.

So, back to your question. I still think its down to what is practical. The airlines may well be ready, or at least be capable of being persuaded, to deal directly with shippers but probably only the large one's. From the airlines' perspective, it would not be practical for them to deal with every small shipper. Equally most small shippers wouldn't have the expertise or resources to be able to handle everything that is required. So we could end up with a situation where the airlines impose a threshold above which they would deal with a shipper and below which they wouldn't. The small shippers would be left to continue to operate via an agent. This could in turn create a 1st and 2nd class service creating a bigger divide between the large and small shipper.

I can only speak from my experiences but I find that there is an inherent imbalance between the interests of a shipper and the interest of a forwarder that require an experienced eye, especially at the shipper, to get over the tensions.

Initially it comes down to resource. Yes, of course a shipper can deal direct with steamship lines and airlines, and some do. Interestingly the shipping and air lines themselves usually erect a barrier in between though, effectively their own forwarding arm. Thus we have to consider three elements: shipper, forwarder and carrier. A shipper will have to devote a lot of resource to dealing with the activities of shipping and forwarding; are those resources and, perhaps more importantly, the expertise available? I would suggest that most shippers do not have the resource, indeed would not consider the business function required to be part of their core business.

And small shippers suffer another way in that the shipping function is typically responsible for typing, ordering stationery, making tea and the like. It's ignored, and they don't have the resource to appoint an expert. SMEs are always going to be a problem if they act alone. Forwarders, good ones, offer the ability to take on that resource issue.

Thus I think we have to accept the need for forwarders in the equation.

The point is noted about the lack of expertise that arises as the function is outsourced. Two responses to that. One, the forwarding community typically ends up becoming the sole repository of expertise in terms of arranging exports, clearing customs, obtaining rates and dealing with the lines. Two, Despite that, as far as compliance goes the shipper always owns the responsibility to comply with customs regulations (and also with Hazardous Goods, Supply Chain Security and the like). Quite clearly taking route one compromises the ability to achieve point 2. Customs are also well aware of the issue and are 'keen' on point 2, to say the least.

I suggest that the inescapable logic is that forwarders are hired to do the work (why after all, does a shipper need all the grief of arranging shipping, doing the customs entries etc.) but that the shipper has to retain in house expertise. This only need be one person, or a few in a large organisation. SMEs need to ensure they have the right forwarder, but more anon.

The reality is that big companies outsource everything, including the expertise, and thus cannot comply when challenged (not that most of them understand their compliance responsibility anyway!). Forwarders hide behind their industry STCs (terms and conditions) (and why shouldn't they?) and the whole lot gets bogged down in arguments over representation. As ever, it only becomes a problem when something goes wrong. Then the tail wags the dog. A shipper has to devote resource and cost to sorting out a mess, recriminations abound and then, once they've fended off (typically) customs, things go back to the way they were done before. Customs, it should be noted, are in control at this stage as well. It's as good a definition of the distinction between reactive and proactive as I can think of. If the shipper were proactive they would have that internal expertise, they would have contracts in place that avoid the STC and representation issue by making that area part of the contract and so on.

Yes, I agree, cheap always wins over good in the long run. That's fine if all we are talking about is huge volumes of shipment - the "trucks and warehouses" supply chain approach. Whenever you involve a regulatory body (typically customs hence their prevalence in the arguments here) then cheapest also tends to equal poor compliance and all those pounds saved on the freight rate get lost in duty & tax issues, compliance issues, event and consequential cost. I know - I've seen it time and again.

So solutions: They're pretty obvious. In terms of resource alone there is a place for a forwarder. And they can (and do) offer cost advantage in that they may have so many shippers that they can broker good deals with the lines that a lone shipper could not. They have day to day expertise in sorting out the myriad problems that arise in simply moving stuff around. The shipper needs to ensure they have either an in house expert (thus larger companies, with the resources to do so) or a robust contract with the forwarder that deals with such issues (thus SMEs). Model contracts would certainly be something that should be investigated. By whom I'm less sure of. Certainly forwarder associations such as BIFA and their like won't be too keen. Perhaps a job for SITPRO?

The shipper is thus responsible for the bits they have the responsibility for: classification of the goods, value of the goods, discharge of obligations under customs regimes they operate. This helps drive out contingent liability and event cost. An SME will be assured that a forwarder does it for them by the contract they have in place. In house expertise also ensures that the right rate is paid for the job. That does not equal cheapest. To use my own company example, cost is 4th in our decision making for forwarders: service level and response is first (again driving out event cost), customs compliance is second (driving out contingent liability, keeping us 'in' with customs and helping us meet obligations); security is third (similar criteria to customs compliance - again driving out risk. Cost is 4th. We are prepared to pay slightly more at 4) to achieve 1) to 3). It's not a usual approach but it does seem to be garnering some interest (not least from agents of course). We also have a vested interest in paying a fair rate for the job to ensure our forwarder is still in business next year, still offering the exemplary service on 1) to 3), otherwise we keep going round the houses, never getting satisfactory service on any of the criteria and still having event cost, contingent liability and customs issues. Yet that seems to be how most global trade works.

SMEs (as ever) have an issue over how do they know what a fair price is? I can only suggest that more transparency is put into the system and that trade bodies perhaps (and not BIFA since they have to represent their members interests first and foremost) advertise 'typical' rate levels without playing favourites. I'm quite happy to play favourites and advertise who we use and why. Shame there isn't a forum to do so. For what it's worth, we will not consider most of the top 10 global forwarders (by volume, worth, market share or turnover); we prefer to use much, much smaller forwarders in the £20-100M per annum turnover sort of area. It works for us, and we feel we get a far better service. Above all, we control what they do on our behalf - we have internal expertise to know that they are - but we let them get on with the day to day stuff. We also have some fairly unique contracts to ensure that we cover all possible gaps.

I am inclined to go fully with Mr Corby's wellanalysed comments.
part from the bsic 3 elements outlined, most important consideaion is that almost all cargo s/mts have become time-sensitive. Today's demands, to keep inventry costs down to the brest minimum, demands delivey compliance.
I am also in greement wih Mr corby that an SME Shipper needs to outsource a SME Forwarder who is fuelled by desire to establish himself in the field.
since 90 per cent plus shipments are through oceanfreight, a Discipline of the forwarders on the lines of the air cargo Agents hs become a virtual necessity. This can ensure accountbiliy, peformance guarantee and minimum expertise and infrastructure; as agaionst today's Brief-case forwarder as we had seen in the (Fly-by-night Operators) in the field of shipping agents.

Outsourcing any function can be dangerous, especially if you choose to throw the baby out with the bathwater. Mark Corby's excellent comments suggest he knows why he outsourced and he manages his forwarder sensibly. I've always taken the view that while I'm happy to treat a service as outsourced, I (or whatever functional manager) should manage the outsourced people pretty much as though they reported to me: use their company's scale, expertise and admin etc but, just like your own staff, they need an opportunity to give their input, clear objectives and the right information to do the job well.