Especially in the freight forwarding business, the bigger a customer you are the better a freight forwarder will like you. I do realize this is true for most any business. Big is always better… or is it?
Freight forwarders are intermediaries. They act on their customers behalf to purchase and aggregate multiple services. There are several ways freight forwarders make money. A few examples:
• Simple markup on services due to the value of expertise or removing complexity
• Providing services on top of transportation. Examples of this are doing documentation, providing support for trade compliance, or facilitating financial transactions such as letter of credit processing
• Aggregating volumes from multiple customers to procure at a lower price services such as transportation
The first two of these really can be done by almost any freight forwarder that can put together a network, hire, and retain quality people who know international trade and transportation. The third bullet is when “Bigger is Better” comes in. “Bigger is Better” also has impact in other areas.
Procurement of Transportation Services:
Freight forwarders want to purchase based on volume. Doing this helps create price value that they can pass on to you as their customer and keep a portion of the lower pricing they achieve to create profits for themselves. Businesses are there to make profits so none of us should be offended by the fact that freight forwarders are there to make a profit.
We also want our sales people to get as much business as possible. Same is true for Freight Forwarders. To leverage volume the freight forwarder also wants to grow business within defined trade lanes. A trade lane example would be from China to the US. This means they have high volume in a concentrated market that can command price concessions from ocean carriers, airlines, truckers, and warehouses.
This is good for all businesses, it lowers price. If you are a small to medium sized business you do get advantage of this.
Other factors where small to medium sized businesses are underserved by Freight Forwarders:
When is the last time you saw a sales person from your freight forwarder? Cost of sales is high. Sales people command large salaries. Especially good sales people! That means the value the sales person creates is how much revenue they generate. If you ship 20 containers a year on a lane you likely have not seen a sales person past a qualifying discussion. Am I right?
Have you had an ocean container stuck? It didn’t get on the ship? You couldn’t get it trucked out of the port? Worst case, did it fall off the boat?
Cost of service is high. If you are applying resources to solve a problem for a customer and the service resource is valuable where would you apply them if the following happened?
You and another customer need a quote. You ship 20 containers a year from China to the US and the other customer ships 20 containers per day from China to the US. Given my experience I would tell my customer service team to work on the 20 container quote, good business right? What would you do with your customers?
Another example would be if the same customer had a container that needed priority loading. Your business is important, what if you needed priority loading?
The implication of this is direct, because of being a small to mid-sized business you suffer less service priority than those who are larger. From a business standpoint this makes sense.
From a customer standpoint, we are thinking like you are.
It sucks and we want to make this better for you at FLEET.
Ron Berger - COO at Fleet