Raising the standards of documentation and invoices
Thursday, 5 June 2008
10+2 = Big Problems: a shipper's response to the latest US security proposals
Tuesday, 8 April 2008
What are forwarders for?
Wednesday, 26 March 2008
Thursday, 5 June 2008
Documentary errors cause delays, cost time and money to resolve. Some shippers and even shipping lines suggest that as many as 50 percent of all documents require amending to get them right. This is an extraordinary state of affairs: no wonder shippers in particular have been complaining.
So what can be done about it? The European Shippers' Council believes it has the basis for a solution. In conjunction with representatives of the liner shipping industry (ELAA) and European freight forwarders (CLECAT), a framework has been developed which identifies key performance indicators and best practices that, if implemented and followed, would go a long way to removing the causes of inaccurate transport documentation and invoices.
All that is required is for people to work out how to implement it.
You would think that, given the scale of the problem (find me a shipper who does not think this issue represents a considerable strain on their time and resources) and the costs of continually dealing with re-drafting documents, challenging incorrect invoices and trying to get a speedy resolution, that people would be snapping up the 'guide to best practices and KPIs'. Seemingly, however, since the release of the work on the 28th March this year for wider consultation within the freight industry, there has been very little in the way of media interest and barely a trickle of people picking up the documents and commenting on them.
One carrier has suggested that establishing an industry-wide standard approach to the issue, in itself might represent a restriction of competition.
Freight Forward International (the organisation that represents some of the larger third party logistics companies, formerly known as Freight Forward Europe) somewhat disappointingly declined to take part in the project, suggesting a lack of interest.
In my view, these people are wrong. This is a significant issue. If you cannot get the paperwork right what hope is there for getting the service right?
Things that create the errors include wrong use of terminology used in the process from quotation through to invoicing: it is often inconsistent, confusing and sometimes incorrectly used. Some may refer, for example, to a bill of lading when in fact they mean a sea waybill or vice versa. Customs officials don't help matters much either: they often require different procedures, documents, information because of a local interpretation of the rules; in some places they accept electronic documents, in others they don't. Banks often require information included on letters of credit, for example, that may seem completely irrelevant to the carrier and either overlooked or not entered in the manner or detail required.
The appropriate or inappropriate use of standard shipping terms and INCOTERMS in the production of transport documents is another area which causes confusion and misunderstandings; and it remains a hot debate as to who should be billed for different charges and surcharges, depending on the terms of sale agreed between the buyer and seller of the goods being shipped.
Personnel can be to blame: it has to be recognised that it is sometimes the inexperience of staff employed by shippers and carriers that cause problems: customer service should not be left to new employees or those assigned to this role without the necessary training and supervision, but that is what does happen in many cases. Shippers must have the requisite knowledge to know the shipping business, and customs requirements in order to know what information is required. Seemingly innocuous inaccuracies in the data or information provided at the early stages of the information process chain can create big problems later on; failing to review or update information in good time likewise causes major issues and errors in documents. Sailing schedules and itineraries are often out of date: a shipper quoted in the Shippers' Voice Digest (Spring 2008, see www.shippersvoice.com for details) said, "We have become very reliant on the lines NOT sticking to their schedules! They aren't worth the paper they are printed on… Vessels are switched around at short notice which gives us great problems with documentation that requires the vessel details." Another shipper quoted, simply said, "We look at the schedules, but we never trust them."
Everyone agrees that the more one can migrate the process to a fully electronic process the better. This would remove errors caused by re-keying data; it would provide greater scope for automating the responses and error reporting (on an exception basis), speeding up the whole process. But not everyone operates the same systems or 'open standards'. Shippers systems may be incompatible with that of carriers or even the portals that offer services in this area. Carriers may be reluctant to alter their systems and shippers unwilling to pay the costs: as one shipper I spoke to on this subject put it, "this would be like paying for the privilege to be told your freight is delayed."
The KPIs and best practices are available to download from The Shippers’ Voice website at http://www.shippersvoice.com/index2-11.html?id=130 or else from ESC’s website at http://www.europeanshippers.com/docs/press/080328pr.jsp.
Clear, accurate, timely and consistent information will reduce the errors. Monitor and act on findings and the errors, the causes of errors and the time and money wasted on errors could be a thing of the past!
To me, the key to the success of this initiative is to accept that everyone has a responsibility to work together and play their part. As one shipper involved in the project put it "Any obligation on a carrier to deliver must be counterbalanced by a commitment from the shipper to supply the necessary information, accurately and in good time in order for the service to be given."
What has been provided is a framework to help. It may not yet be perfect, but it is a start.
So what can be done about it? The European Shippers' Council believes it has the basis for a solution. In conjunction with representatives of the liner shipping industry (ELAA) and European freight forwarders (CLECAT), a framework has been developed which identifies key performance indicators and best practices that, if implemented and followed, would go a long way to removing the causes of inaccurate transport documentation and invoices.
All that is required is for people to work out how to implement it.
You would think that, given the scale of the problem (find me a shipper who does not think this issue represents a considerable strain on their time and resources) and the costs of continually dealing with re-drafting documents, challenging incorrect invoices and trying to get a speedy resolution, that people would be snapping up the 'guide to best practices and KPIs'. Seemingly, however, since the release of the work on the 28th March this year for wider consultation within the freight industry, there has been very little in the way of media interest and barely a trickle of people picking up the documents and commenting on them.
One carrier has suggested that establishing an industry-wide standard approach to the issue, in itself might represent a restriction of competition.
Freight Forward International (the organisation that represents some of the larger third party logistics companies, formerly known as Freight Forward Europe) somewhat disappointingly declined to take part in the project, suggesting a lack of interest.
In my view, these people are wrong. This is a significant issue. If you cannot get the paperwork right what hope is there for getting the service right?
Things that create the errors include wrong use of terminology used in the process from quotation through to invoicing: it is often inconsistent, confusing and sometimes incorrectly used. Some may refer, for example, to a bill of lading when in fact they mean a sea waybill or vice versa. Customs officials don't help matters much either: they often require different procedures, documents, information because of a local interpretation of the rules; in some places they accept electronic documents, in others they don't. Banks often require information included on letters of credit, for example, that may seem completely irrelevant to the carrier and either overlooked or not entered in the manner or detail required.
The appropriate or inappropriate use of standard shipping terms and INCOTERMS in the production of transport documents is another area which causes confusion and misunderstandings; and it remains a hot debate as to who should be billed for different charges and surcharges, depending on the terms of sale agreed between the buyer and seller of the goods being shipped.
Personnel can be to blame: it has to be recognised that it is sometimes the inexperience of staff employed by shippers and carriers that cause problems: customer service should not be left to new employees or those assigned to this role without the necessary training and supervision, but that is what does happen in many cases. Shippers must have the requisite knowledge to know the shipping business, and customs requirements in order to know what information is required. Seemingly innocuous inaccuracies in the data or information provided at the early stages of the information process chain can create big problems later on; failing to review or update information in good time likewise causes major issues and errors in documents. Sailing schedules and itineraries are often out of date: a shipper quoted in the Shippers' Voice Digest (Spring 2008, see www.shippersvoice.com for details) said, "We have become very reliant on the lines NOT sticking to their schedules! They aren't worth the paper they are printed on… Vessels are switched around at short notice which gives us great problems with documentation that requires the vessel details." Another shipper quoted, simply said, "We look at the schedules, but we never trust them."
Everyone agrees that the more one can migrate the process to a fully electronic process the better. This would remove errors caused by re-keying data; it would provide greater scope for automating the responses and error reporting (on an exception basis), speeding up the whole process. But not everyone operates the same systems or 'open standards'. Shippers systems may be incompatible with that of carriers or even the portals that offer services in this area. Carriers may be reluctant to alter their systems and shippers unwilling to pay the costs: as one shipper I spoke to on this subject put it, "this would be like paying for the privilege to be told your freight is delayed."
The KPIs and best practices are available to download from The Shippers’ Voice website at http://www.shippersvoice.com/index2-11.html?id=130 or else from ESC’s website at http://www.europeanshippers.com/docs/press/080328pr.jsp.
Clear, accurate, timely and consistent information will reduce the errors. Monitor and act on findings and the errors, the causes of errors and the time and money wasted on errors could be a thing of the past!
To me, the key to the success of this initiative is to accept that everyone has a responsibility to work together and play their part. As one shipper involved in the project put it "Any obligation on a carrier to deliver must be counterbalanced by a commitment from the shipper to supply the necessary information, accurately and in good time in order for the service to be given."
What has been provided is a framework to help. It may not yet be perfect, but it is a start.
Labels: customer service, documentation, KPIs, liner shipping, sea freight, shippers
10+2 = Big Problems: a shipper's response to the latest US security proposals
Tuesday, 8 April 2008
The following is a list of concerns over the US '10+2' Proposal for Advance Trade Data Elements.
1. Giving a reduced data set as an AEO, for example, is of very limited appeal when we have to give the same data, or worse subtly different data sets, several times.
We would much prefer to give a single common set of data, to the US, the EU or anywhere else but just once. This could be achieved by using a web portal or similar. Is there any possibility that such a system could be made worldwide? Would the various trading blocs - especially the EU - be able to buy into this idea politically or are we going to see the usual ‘lines in the sand’ drawn by the respective trading blocs?
The whole basis of trade is set up to deal with a single data set moving, with the goods, from country to country. This seems to have escaped the notice of the authorities.
Since all signatories to WCO SAFE should be using a common data set the apparent disagreements are baffling. It’s not that we don’t want to give the data...just make it easy for us.
2. Who has the data? As usual, everything appears tuned to the freight forwarding community but shippers are better positioned to kick off the data collection activity. Key issues here are:
2.1. A single identifier to 'tag' a shipment so that the respective parties can add in data. The Global UCR has been bandied about for some years. Why do we need yet another unique reference number? Ordinary commercial practise already offers a unique ID (a de facto UCR?) in the form of the MAWB/HAWB or MBL/HBL combinations. Accepting that some work would be needed, why are we continually re-inventing the wheel?
2.2. Some shippers will be unable to provide the necessary data for a variety of reasons; inexperience and lack of resource being two of them. They will have to rely on the offices of their forwarder. This is fine but the option needs to be available for those shippers able to perform the activity to do so.
2.3. This is my best fit for the 12 US data elements and how the respective parties could furnish data. This pre-supposes an experienced shipper and is based on UK practises.
o Manufacturer name & address
o Seller name & address
o Buyer name & address
o Ship to name & address
o Country of origin for the goods
o Commodity HS number (6 digit level)
All these are readily available to the exporter prior to export, or should be. They are best provided by them or via an intermediary such as an agent.
o Importer of record number
o Consignee number
These may be available to the exporter, certainly to the agent in the transaction. Either party could provide the data, the agent is probably best. The contract between exporter and consignee/importer can cover the need for this information. It could be a requirement to be shown on export paperwork, for example.
o Container stuffing location
o Consolidator name & address
These are more readily available to the agent. They are best provided by them. Exporters who fully understand and control their agents activities should be able to verify this data if needed. Indeed, to have proper safe and secure control of their supply chain, exporters must know who consolidates their goods and where. Again a contract between the parties could require this information to be made available.
o Vessel stow plan
o Container status messages
These are realistically only available to the agent and/or vessel operator. They are best provided by them.
3. Also at this stage, ownership of the compliance responsibility needs to be rammed home.
In the UK at least, an importer or exporter of record may outsource all their logistical activities to agent. They may not outsource their compliance obligation however. This is poorly understood by business in general, outside the immediate area anyway. The implications of having an agent perform all activity, well or otherwise, without ultimate responsibility are also not always understood.
4. I have already alluded to the importance of forwarders in this data collection. Whilst there are many good forwarders there are as many poor ones, and the ability of good ones suffers when up against time constraints. This is, of course, the norm in the industry.
We also have to consider what data they get from consignors who really do not understand or appreciate the data requirement (i.e. many of them). How can a forwarder cover that gap?
Data is always prone to adaptation to what is available at the time, especially on airfreight. Do we honestly expect an agent to either delay a flight or risk losing a major customer because, for whatever reason, one of these data elements is unavailable? Experience shows that an agent will, often in good faith, make their best guess as to such data. This may be wholly accurate or wholly inaccurate.
5. Suppliers who do not have English as first language exacerbate these issues and may cause problems.
6. With the best will in the world an importer will sometimes use a different classification from the exporter. How is that discrepancy to be dealt with? What are the implications for security of such a 'misclassification'?
Highly technical products especially give rise to problems in this area.
How far back down the supply chain do CBP require manufacturer data? CBP appear to have stepped back by requiring just the name and address of the entity that last manufactures, assembles, produces or grows the imported commodity. However, without definitive confirmation of the requirement it remains a concern. CBP may still want to know the ultimate manufacturer of every component of every product imported into the US. This will present huge problems and difficulties for importers and exporters to acquire.
7. Finally there is the issue of delays arising from providing data, or whilst obtaining data, or even whilst CBP work out what the data is telling them.
The manufacturer, the exporter, the importer has most to lose. They are the ones whose goods are examined, refused, unloaded of just plain delayed. The commercial impact of 10+2 is great if it is unfocused in application. Costs, of overhead, inventory buffer stock, premium freight lanes, will all increase. Competitiveness, especially against in-country competitors, will be damaged. Credibility with customers and with the authorities may suffer. The list could go on but the thrust of the argument is clear.
Above all market forces will determine whether the costs and inconvenience of dealing with US companies is worthwhile. In general, the answer would still be yes but it impacts on the cost of doing business with the US and other markets may prove easier to deal with. The US will be extremely sensitive to this aspect of the impact of their controls. Whether they choose to do anything about it is another matter.
This post was produced by Mark Corby, Customs & Trade Compliance Manager for a leading multinational company, based in the United Kingdom.
1. Giving a reduced data set as an AEO, for example, is of very limited appeal when we have to give the same data, or worse subtly different data sets, several times.
We would much prefer to give a single common set of data, to the US, the EU or anywhere else but just once. This could be achieved by using a web portal or similar. Is there any possibility that such a system could be made worldwide? Would the various trading blocs - especially the EU - be able to buy into this idea politically or are we going to see the usual ‘lines in the sand’ drawn by the respective trading blocs?
The whole basis of trade is set up to deal with a single data set moving, with the goods, from country to country. This seems to have escaped the notice of the authorities.
Since all signatories to WCO SAFE should be using a common data set the apparent disagreements are baffling. It’s not that we don’t want to give the data...just make it easy for us.
2. Who has the data? As usual, everything appears tuned to the freight forwarding community but shippers are better positioned to kick off the data collection activity. Key issues here are:
2.1. A single identifier to 'tag' a shipment so that the respective parties can add in data. The Global UCR has been bandied about for some years. Why do we need yet another unique reference number? Ordinary commercial practise already offers a unique ID (a de facto UCR?) in the form of the MAWB/HAWB or MBL/HBL combinations. Accepting that some work would be needed, why are we continually re-inventing the wheel?
2.2. Some shippers will be unable to provide the necessary data for a variety of reasons; inexperience and lack of resource being two of them. They will have to rely on the offices of their forwarder. This is fine but the option needs to be available for those shippers able to perform the activity to do so.
2.3. This is my best fit for the 12 US data elements and how the respective parties could furnish data. This pre-supposes an experienced shipper and is based on UK practises.
o Manufacturer name & address
o Seller name & address
o Buyer name & address
o Ship to name & address
o Country of origin for the goods
o Commodity HS number (6 digit level)
All these are readily available to the exporter prior to export, or should be. They are best provided by them or via an intermediary such as an agent.
o Importer of record number
o Consignee number
These may be available to the exporter, certainly to the agent in the transaction. Either party could provide the data, the agent is probably best. The contract between exporter and consignee/importer can cover the need for this information. It could be a requirement to be shown on export paperwork, for example.
o Container stuffing location
o Consolidator name & address
These are more readily available to the agent. They are best provided by them. Exporters who fully understand and control their agents activities should be able to verify this data if needed. Indeed, to have proper safe and secure control of their supply chain, exporters must know who consolidates their goods and where. Again a contract between the parties could require this information to be made available.
o Vessel stow plan
o Container status messages
These are realistically only available to the agent and/or vessel operator. They are best provided by them.
3. Also at this stage, ownership of the compliance responsibility needs to be rammed home.
In the UK at least, an importer or exporter of record may outsource all their logistical activities to agent. They may not outsource their compliance obligation however. This is poorly understood by business in general, outside the immediate area anyway. The implications of having an agent perform all activity, well or otherwise, without ultimate responsibility are also not always understood.
4. I have already alluded to the importance of forwarders in this data collection. Whilst there are many good forwarders there are as many poor ones, and the ability of good ones suffers when up against time constraints. This is, of course, the norm in the industry.
We also have to consider what data they get from consignors who really do not understand or appreciate the data requirement (i.e. many of them). How can a forwarder cover that gap?
Data is always prone to adaptation to what is available at the time, especially on airfreight. Do we honestly expect an agent to either delay a flight or risk losing a major customer because, for whatever reason, one of these data elements is unavailable? Experience shows that an agent will, often in good faith, make their best guess as to such data. This may be wholly accurate or wholly inaccurate.
5. Suppliers who do not have English as first language exacerbate these issues and may cause problems.
6. With the best will in the world an importer will sometimes use a different classification from the exporter. How is that discrepancy to be dealt with? What are the implications for security of such a 'misclassification'?
Highly technical products especially give rise to problems in this area.
How far back down the supply chain do CBP require manufacturer data? CBP appear to have stepped back by requiring just the name and address of the entity that last manufactures, assembles, produces or grows the imported commodity. However, without definitive confirmation of the requirement it remains a concern. CBP may still want to know the ultimate manufacturer of every component of every product imported into the US. This will present huge problems and difficulties for importers and exporters to acquire.
7. Finally there is the issue of delays arising from providing data, or whilst obtaining data, or even whilst CBP work out what the data is telling them.
The manufacturer, the exporter, the importer has most to lose. They are the ones whose goods are examined, refused, unloaded of just plain delayed. The commercial impact of 10+2 is great if it is unfocused in application. Costs, of overhead, inventory buffer stock, premium freight lanes, will all increase. Competitiveness, especially against in-country competitors, will be damaged. Credibility with customers and with the authorities may suffer. The list could go on but the thrust of the argument is clear.
Above all market forces will determine whether the costs and inconvenience of dealing with US companies is worthwhile. In general, the answer would still be yes but it impacts on the cost of doing business with the US and other markets may prove easier to deal with. The US will be extremely sensitive to this aspect of the impact of their controls. Whether they choose to do anything about it is another matter.
This post was produced by Mark Corby, Customs & Trade Compliance Manager for a leading multinational company, based in the United Kingdom.
Labels: freight forwarders, outsourcing, security, shippers
What are forwarders for?
Wednesday, 26 March 2008
Outsourcing can be dangerous. As shippers, if we leave all matters related to the movement of freight to third parties, we end up with no in-house expertise. So we find it harder and harder to figure out who is offering us the best deal, and can all too easily just select the cheapest one. And we all know that can be fatal! Surely we can talk to the airlines and shipping lines as easily as the forwarders can? We are the people who know our own business best. And what do the forwarders add, except a hefty commission? And a lot of excuses when things go wrong? What are forwarders for?
Labels: air freight, customer service, freight forwarders, outsourcing, sea freight, shippers
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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.
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.
#
posted by 
: 26 March 2008 11:13
: 26 March 2008 11:13
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.
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.
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posted by : 26 March 2008 12:35
: 26 March 2008 12:35
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.
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.
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posted by : 14 April 2008 14:48
: 14 April 2008 14:48 Post your comment
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