Airfreight Forwarding: Small Companies Get on Board
For some small companies, airfreight forwarders play a large part in the flight path to global success. Lacking the resources of larger players, small companies look to air forwarders to cut costs, improve service, provide know-how, and deliver global capability.
Small companies increasingly leverage the knowledge, networks, and technology of air forwarders to boost international business and improve competitiveness. Companies essentially use air forwarders as "in-house experts," says Michelle Halkerston, president, Hassett Air Express, Elmhurst, Ill.
Working with an air forwarder helps a small firm "open up its marketing and distribution operations to a more global perspective," says Randy Sinker, vice president of international operations, Seko Worldwide, an air forwarder headquartered in Chicago.
Air forwarders traditionally have played a well-defined role in international trade. "Years ago, forwarding involved moving products from Point A to Point B," Sinker says. "Today, air forwarders are involved in transporting goods from one end of the supply chain to the other."
The air forwarder's expanded role is a result of the changes underway in the forwarding industry, says Brandon Fried, formerly chief operating officer of forwarder Adcom Worldwide and past president of the Airforwarders Association. Now an air cargo consultant, Fried is based in Chevy Chase, Md.
"The large forwarders, such as UPS and FedEx, have dominated the just-in-time aspect of the industry," Fried says.
With their global networks and sophisticated technology, large air forwarders have created a very efficient next-day system. Non-asset-based air forwarders have responded by carving out specialized niches and offering a broad range of services that blur the lines between freight forwarders and third-party logistics providers.
Forwarders "have ventured into providing a full menu of transportation services that can be designed specifically to meet shipper requirements," notes Gregory J. Ricca, director of trans-Pacific sales for Kuehne + Nagel, a logistics service provider and air/ocean forwarder. "These services can be custom designed at both origin and destination."
Kuehne + Nagel, for example, handles both imports—largely from Asia and Europe—and exports, primarily to South America and the Caribbean, for Unlimited Parts and Supplies, a New York City-based sewing machine parts wholesaler.
Unlimited looks to Kuehne + Nagel to manage the process "from the time my vendors call to say they have a shipment available," reports Jean Squire-Smith, the wholesaler's traffic manager.
Kuehne + Nagel arranges to have product picked up at the vendor's facility, handles customs clearance, and arranges for delivery from the airport directly to Unlimited.
Triad Sales International also expects its air forwarder to handle the complete process, says Rick Fiorey, traffic manager for the company. Triad, based in Mt. Arlington, N.J., exports and imports products purchased for retail customers including bookstores in the United States as well as overseas.
Triad's import division buys products such as sketchbooks and small leather goods in the Far East and India, and distributes them to U.S. customers that include the college bookstore market. Triad also buys office supplies, stationery, and books domestically, and sells them to international retailers, such as the 16-location Jarir Bookstore, headquartered in Riyadh, Saudi Arabia.
Rather than handle customs clearance, transportation, and warehousing in-house, Triad partnered with GeoLogistics Corporation, a non-asset-based international freight management/logistics company. GeoLogistics consolidates both air and ocean shipments in the United States to be delivered overseas, and consolidates orders in Hong Kong that then move as one shipment to the United States, enabling Triad to cut transportation costs.
In addition, "GeoLogistics handles our documentation," Fiorey says, including getting shipping documents legalized by the appropriate consulates. This saves time by facilitating customs clearance overseas.
Triad benefits from GeoLogistics' international network, knowledge of trade regulations, and specialized expertise.
"They have to be our eyes and ears," Fiorey says. In addition to preventing potential problems with Customs and other regulatory bodies both in the United States and abroad, "GeoLogistics makes us look good to our customers," he says.
A Basketful of Benefits
Freight forwarders can level the playing field and help small companies overcome the size and scale advantage large companies enjoy. Small companies in particular look to air forwarders to enhance their business in a variety of ways, including:
One call does it all. The ability to work with one or a handful of providers is an appealing solution for smaller companies that often lack extensive transportation and logistics resources. "A small company generally looks for one-stop shopping," says Kuehne + Nagel's Ricca.
Knowing their shipments are in good hands is particularly important to small companies. From dock to delivery, "shippers know they can turn over their shipment, problem, or concern to a forwarder to solve," Halkerston says.
Just ask American Precision Electronics, a contract electronics manufacturer based in Carol Stream, Ill. About two years ago, when American Precision started importing electronic components direct from manufacturers in the Far East, the company began working with Hassett Air Express.
The ability to take care of all details related to a shipment with one phone call was the main reason American Precision chose to work with a third party, says James Kopp, corporate vice president.
"A forwarder takes care of everything," Kopp explains. "Hassett works with our vendor to arrange shipments via air or vessel, works with Customs to get the shipment cleared, and arranges for shipment to our final destination." Where the company previously had to deal with five or six service providers, it now deals only with one.
International business knowledge. Small companies look to air forwarders for a staff of international trade specialists that can tackle issues such as documentation, taxes, and duties; which airline to call; packaging; or what kind of skids to use.
Shippers "can draw on this knowledge, which can cut costs and prevent delay," Halkerston says.
Forwarders' international experience can also help on the sales front because understanding a shipment's final landed cost enables shippers to plan and negotiate more effectively. Kuehne + Nagel, for example, works to help shippers understand their duty rates.
"We have a staff dedicated to helping customers understand international shipments' total cost components," Ricca says.
Keeping up with changes in complex international trade regulations is another challenge for small companies. "Changes take place daily," says David Wirsing, executive director of the Airforwarders Association (AfA), Alexandria, Va.
"Companies have to be careful when exporting to Brazil, for example," says Fried. "If they don't have an importer of record in Brazil, the government can confiscate their shipment. Just because they receive a shipment doesn't mean they have the ability to move goods through customs in Brazil."
Correcting the recipient on a bill of lading is "not only expensive—it may be prohibited by the Brazilian government," Fried warns. Shipments might be delayed, incur storage charges, or even have to be taken out of Brazil and re-exported.
Today's air forwarders may have their own staff of regulatory subject matter experts. Kuehne + Nagel, for example, has a staff of compliance experts charged with staying abreast of regulatory changes. The company sends electronic updates and advisories to shippers on topics such as what types of wood can no longer be used for pallets.
Other forwarders may work with a third-party compliance expert. Forwarders who are AfA members, for example, can subscribe to a compliance program that enables them to provide clients with a web-based trade automation and export compliance portal from OCR Services Inc., Rockville, Md.
An existing network. Because small companies in particular need to stretch their resources, the ability to leverage a forwarder's existing infrastructure can be very attractive.
A company that wants to begin distributing product in Shanghai, for example, can avoid having to invest in assets by working with a forwarder that has warehousing capabilities and information technology in place.
"A small company can go to a forwarder and quickly gain a presence internationally," Wirsing says. Whether the forwarder has its own global network or works through franchises or agencies, it's important to have a good agent that has established arrangements with suppliers and transportation providers in any city where you do business.
While some large forwarders have extensive international networks, other companies offer global reach through memberships in a consortia of forwarders, such as the World Cargo Alliance or the International Freight Logistics Network.
Evaluate potential forwarders' networks carefully, Fried advises.
"You want a forwarder that has been certified by the International Air Transport Association, one that can do air shipping as well as surface, and has an NVOCC certificate," he says. Make sure the forwarder's counterparts overseas have the same qualifications.
Established relationships with regulators. Small and medium-sized shippers can leverage forwarders' existing relationships with the regulatory community. Forwarders have both an established network of communication with U.S. Customs and relationships with regulators.
"Relationship are very important today in dealing with security rules and regulations," Ricca says. "Customs is extremely strict, and will likely flag shipments of first-time exporters or importers. Air forwarders offer established relationships with regulators, which can be an advantage."
Special services. Forwarders may also offer a range of specialized services. "Packing, crating, and warehousing are crucial," Fried says.
A shipper, for example, may look to forwarders to unpack shipments and deliver them to end customers overseas, to crate a hazardous shipment on its way to the United States, or to consolidate small shipments for import to the United States.
A small manufacturer may ask its forwarder to merge components of a product in transit, notes Seko's Sinker. A computer manufacturer, for example, may produce a keyboard in one location, the computer in another location, and the software in a third location, then ask the forwarder to bring the components together and ship them to the final customer.
Some forwarders also offer kitting and light assembly services, and can play a valuable role in reverse logistics.
In addition, "forwarders increasingly provide financial services, including letters of credit and payments on behalf of customers," says AfA's Wirsing.
If financial services are important to you, "make sure you use a forwarder with banking experience," Fried says. This includes experience working with letters of credit and understanding terms and conditions regarding a transaction's financial aspects.
Staff extension. Forwarders offer a staff of trade, transportation, and technology professionals that small companies can use as a resource.
Red Hawk Inc., a value-added fiber optics manufacturer based in Milpitas, Calif., for example, relies on freight forwarder Air 7 Seas Transport Logistics, San Jose, Calif., to handle shipments of products manufactured offshore, primarily in China and India.
For international shipments, Air 7 Seas "makes the arrangements, and follows shipments from pickup to delivery," says Ray Valadez, purchasing manager for Red Hawk. The forwarder acts almost as a staff extension, handling all transaction details for Red Hawk.
If a certified check is required, for example, Air 7 Seas makes sure the check is delivered where it's needed—which could even mean running it to San Francisco. "We're too small to do that ourselves," Valadez says.
Information technology. "In the old days, technology was very expensive," Fried recalls. Small and medium-sized forwarders, in particular, couldn't afford track-and-trace software. Today, however, "all small and medium-sized forwarders have some type of comprehensive system that's updated continuously," Fried says.
"This is a 24/7 world. Global shippers and consignees need to know where their cargo is at all times," he adds. Be sure to look for an air forwarder that offers 24/7 track-and-trace capability through the web.
The human touch. Technology is important, but small companies in particular also value the personal touch. Although Kuehne + Nagel, for example, offers a web-based visibility solution, customer Jean Squires-Smith prefers a phone call to the forwarder to ask where her shipment is.
Companies that want a high-tech/high-touch provider should look for forwarders that couple their technology solutions with live customer service associates available around the clock.
Economies of scale. While large, integrated air carriers may extend cost savings to large shippers, they may not offer such savings to smaller companies, Fried says.
Air forwarders, particularly small to medium-sized ones, "want regularity, to build up consolidated shipments," he explains. "If a small retailer has traffic coming in every week from Shanghai, even if it's only a few hundred kilos, the agent overseas can use that traffic as a bargaining chip to secure space on a regular basis and perhaps reduce rates."
In addition, forwarders' assets—such as warehousing facilities on-site at airports—can help reduce a shipper's costs in the long run. The ability to use forwarders' facilities enables shippers to avoid sinking capital into assets, and to procure services as a variable cost.
As important as these benefits are, perhaps the top advantage of working with air forwarders today is that they have become what Sinker calls "solution providers, acting as extensions of a company's supply chain."
Here's an example of how it works for one company.
An Umbrella is an Umbrella
Windbrella, a Boynton Beach, Fla.-based customized umbrella manufacturer, sells to golf and pro shops, retail stores, and direct marketers. The umbrellas are popular specialty advertising products that can be silk-screened with company logos for promotional use.
Glenn Kupferman, president and CEO of the company, has been in the importing business since 1978. When Kupferman started the operation in his garage in 1996, he was already familiar with the benefits of working with a third party to handle international shipments. He immediately began working with a forwarder to handle inbound shipments of Windbrella's products, which are manufactured in China.
The plant in China delivered product to a freight forwarder in Hong Kong, which handled customs clearance and arranged transportation for both air and ocean shipments from Hong Kong to Windbrella's offices.
As Windbrella grew, the company moved operations from New York to Florida. Kupferman continued to work with the forwarder and began a relationship with a public warehouse, which stored the goods and shipped product to customers. Special orders were received in Florida, then repackaged and re-sent to the customer, often requiring shipping umbrellas across the country and back again.
Service is crucial to a small company such as Windbrella. Despite the company's patented 'double canopy vented mesh system' and 'pinchless runner,' ultimately, "an umbrella is an umbrella," Kupferman says.
Windbrella's ability to produce high-quality customization and deliver it on time and at a reasonable cost is what helps the company keep customers coming back for more.
To streamline service, Kupferman began using UPS Supply Chain Solutions to handle its air and ocean freight. To locate a shipment, Kupferman and his staff log onto the web.
"I don't have to call the broker to find out where my shipment is. The information is right in front of me—I can get it in minutes," he says. "Before, it would take a day or so to get the same information."
In addition, Windbrella uses UPS' Trade Direct service, which combines package delivery with order fulfillment and customs clearance. Today, individual orders are labeled for final destination before leaving the manufacturer in China.
These individual orders are consolidated into a single shipment for transportation from Hong Kong, clearing customs as one shipment. When shipments arrive at the UPS SCS hub in California, they are deconsolidated and put into the UPS package delivery network for final delivery to customers.
This approach enables Windbrella to cut customs clearance time as well as warehousing costs. And, when shipments go to California rather than through Florida for redistribution, shipment time is cut in half or better, saving nearly two weeks in transit time.
Trade, transportation, technology, and time. That's the name of the game for today's air forwarders, and the small companies that use them.