June 2009 Newsletter
How Valuable Is The Forwarder In Today’s Tough Times?
With transport expenses under a microscope in every
traffic manager’s office and at every company CFO, the
question of a forwarder’s value naturally arises. “Is he
worth the money?” is on the lips of every shipper.
My answer: In these tough economic times, a forwarder is
more valuable than ever before. Moving cargo on time, in
good condition and hassle-free, never has been more
vital to help shippers achieve their production,
distribution and ultimately, sales goals. Equally
important, the forwarder’s negotiating skills greatly
strengthens the shipper’s bottom line by obtaining rates
that were considered unthinkable just a few years ago.
"The day of spot rates is
here.The forwarder who can
obtain the lowest rate for his
customer while providing the
highest quality service is the
answer to a traffic manager’s
often impossible dream."
There are forwarders, and forwarders, however. Most
forwarders claim to be all things to every shipper. That
claim is unrealistic. The days of long term contract
rates is over. The day of spot rates is here. The
forwarder who can obtain the lowest rate for his
customer while providing the highest quality service is
the answer to a traffic manager ’s often impossible
dream. Close behind in negotiation skills is the ability
of the forwarder to know his territory—whether it be the
next city or the next continent. A consolidator serving
the South Pacific like CII must have at our fingertips
all kinds of information and knowledge affecting a
shipment including the most dependable airlines flying
that route, what are the region’s customs rules and
regulations, amount of space for goods in transit and
quality and availability of local trucking to final
destination. These are questions which only a forwarder
with years of experience can answer accurately and
precisely. There are 10,000 forwarders operating in the
U.S. Choosing the right one among all these
consolidators has never been more critical. Choose him
wisely.
Back to Top
| |
Cutback In Jumbo 380 Orders Inevitable In Today’s Economy
The announcement last month by Airbus that it was cutting
production of its jumbo 380 aircraft to 14 from 18 this year was
a bow to the inevitable. While the huge aircraft is performing
satisfactorily for the few airlines that have ordered it
(although Qantas did have some early teething problems), it
remains debatable if the airplane ever can be a money maker.
Interestingly, very little has been said on the 380’s load
factors on their long haul routes. Most analysts now believe
Airbus must sell at least 150 of the huge aircraft to make a
profit. That target now seems unattainable. Airbus must be
satisfied with the “honor” of building the largest civilian
transport to date.
"Most analysts now believe
Airbus must sell at least 150
of the huge aircraft to make
a profit. That target now
seems unattainable."
With a record 2,200 airplanes sitting in various
deserts, it is surprising that Boeing and Airbus are
receiving any new orders. Until both passenger and
freight volume revives, the production lines in Seattle
and Toulouse will be operating at a snail’s pace.
Back to Top
|
A Close-Up View Of China Shows Dramatic Drop-Off In Trade
I have long advocated not putting all one’s eggs in the China basket. But even I did not realize the recent huge drop in trading volume between that nation and the rest of the world. Eye witnesses paint a frightening picture of the drop-off in economic activity both along the normally bustling China coast and inland.
"At
ports like Shanghai, a
new Great Wall has been
erected, not one built by the
great emperors of the past,
but a wall of 100,000 empty
containers, neatly stacked
and waiting for cargo to be
loaded—cargo that may
never come."
It is one thing to read dry statistical reports. It is another
matter to actually see the devastation in China trade. Travelers
report a downturn never seen since that nation transformed
itself from a rural economy to an industrial powerhouse. Empty,
shuttered buildings now line the avenues leading up the great
ports of the nation. Not only is car traffic light, but trucks
hauling containers are few and far between. At ports like
Shanghai, a new Great Wall has been erected, not one built by
the great emperors of the past, but a wall of 100,000 empty
containers, neatly stacked and waiting for cargo to be
loaded—cargo that may never come. There are seventy gantry
cranes in Shanghai harbor. Few were working, and only on three
ships. Normally, all of the cranes are busily loading and
unloading ships at every berth. Export warehouses, normally full
of noise and hustle and bustle with fork lift trucks buzzing
about, were eerily silent. The warehouses were quiet as the Ming
Dynasty’s tombs.
Is China about to return to its
rural roots?
Hardly. The nation has come too far in its industrial
transformation. China has become a world economic and political
power. Perhaps it will rise once again to its heady growth
rates. To its credit, the Chinese government is not hiding its
head in the sands. Half a trillion dollars will be spent on the
nation’s infrastructure during the next few years. Chinese
citizens, just like their counterparts in the west, are being
urged by the government to spend. I expect China to rise from
its economic torpor in tandem with the West, but I do not
believe that nation ever again to demonstrate the same economic
growth it has enjoyed in the past.
Back to Top
| |
Obama Facing His Greatest Challenge In Taxing Overseas Profits
If President Obama thinks he is having trouble with his
present proposals before Congress, wait until he sends
up to the House & Senate a bill to end the deferral of
taxes on overseas profits by U.S. corporations. When the
President announced his plan last month, a roar came up
from K Street, the infamous home of the American
lobbying industry, that could be heard from East to West
Coasts. If anything unites the business community, it is
fear and loathing of any new corporate taxes. A united
business community is perhaps the most powerful force
affecting legislation. Aided in the anti-tax fight are
the Wall Street analysts who are fearful company
earnings will drop by many cents per share if the tax
bill becomes law. President Obama will have a battle on
his hands which will make the proposed health insurance
reform bills look like a genteel tea party.
If the proposed tax bill passes, and it’s an enormous
“if,” what are the consequences for American
corporations with existing or planned operations
overseas? No one really knows. But there are plenty of
educated guesses. My own theory is that planned
factories, particularly in nations quite distant from
the U.S., never will be built. Costs in China, the
largest recipient of overseas expansion by U.S.
companies, are rising steadily. Combined with a 10,000
mile supply chain that is increasingly fragile, it seems
highly unlikely that any new, major outsourcing will
occur there. Ditto for other Asian nations like
Malaysia, Thailand, Korea, Viet Nam and Singapore.
What about America’s huge, existing operations overseas?
How will they be affected? Will they continue to operate
as if a new tax did not exist, or will there be a
massive reshuffling of assets back to the U.S.? Already,
there is talk about “bringing industry home” but that is
simply premature. American CFOs, particularly in large
corporations, are highly sophisticated. They are well
aware that taxes are a relatively small item on their
P&L statements. Higher taxes alone will not bring
manufacturing facilities back to our shores. The nascent
boom in re-manufacturing within the continental United
States will be helped only to a minor extent by any new
taxes on overseas profits.
If enacted, will the new tax proposals impact our
industry—air freight? Not to any great extent. Air
freight has plenty of other problems, to worry about any
future legislation. Convincing shippers that moving
their products by air is a viable option despite a heavy
economic climate, remains our most serious problem. Some
business commentators are calling air cargo a
“vanishing” industry. We still have a powerful message
to convey, however, in our speed and ability to move
merchandise accurately over vast distances. Other modes
of transport simply cannot match it.
"American CFOs, particularly
in large corporations, ... are
well aware that taxes are a
relatively small item on their
P&L statements. Higher
taxes alone will not bring
manufacturing facilities back
to our shores."
Back to Top
|
Recession Spurs Second Look At Cargo Conferences
While I have spoken at a number of air cargo conferences
in the past, I have not shied away from criticizing them
on a number of issues. These include too lengthy
scheduling, having too many speakers discussing similar
themes and too often using the forums as platforms for
extolling their own companies’ capabilities rather than
addressing the issues at hand.
For many years, I was a voice in the wilderness. Now
that a recession hangs heavy over our industry, however,
sponsors of these conferences finally are considering
seriously basic changes for a once sacrosanct segment of
our industry.
Why should cargo conferences last for two or even three
days? How much new thinking will be aired during all
those hours by droning speakers? Why should attendees
pay hundreds and even thousands of dollars in attendance
fees, hotel, food and sundry costs? Also, in these tough
economic times, why should attendees spend almost a week
in both attending a conference and air travel time when
they are most needed at home?
I believe whatever needs to be said can be discussed in
one day. Already, some organizations are beginning to
believe small is beautiful. The Los Angeles Chamber of
Commerce recently held a half day, breakfast conference
on world trade at a modest cost of $65 per attendee
which was well attended. Attendees felt they received
all the information and predictions they could absorb in
just one morning. If cargo organizations insist on two
or three day conferences, why not offer attendees a
choice of which day they want to attend and pay for just
those sessions. If they wish to attend the entire
conference, fine. Realistically, however, I believe most
cargo professionals will want to attend those events
which only have a particular relevance to their
companies’ operations. They will save money, time and
with no need to listen to topics of little interest to
them. For air cargo conferences to survive in these dire
economic straits, changes will have to be made.
Back to Top
| |
CII To Obtain NVO-Ocean Freight Forwarding License
Primarily because of our
growing tuna business into the Western Pacific, CII has
decided to obtain a NVO-Ocean Freight Forwarding
License. Most of our shipments supplying the tuna fleet
and canneries are via ocean. We believe a license will
aid CII in its business and help our customers as well.
We also have on file with the U.S. Maritime Commission a
request for a NVO-Common Carrier License.
The tuna business has been one of CII’s most successful
entries into so-called niche markets. The business seems
to be recession-proof as America’s taste for tuna
continues to grow at about a 4 per cent annual rate.
That rate is quite high for a basic foodstuff.
Back to Top
|
Vision, Vision, Vision—Who’s Got The Vision?
Perhaps the most overused expression heard at cargo
conferences is the word, “vision.” Speaker after speaker
exhorts their audience to have an air freight “vision”
which will guide them to future success.
I believe whatever needs to be said can be discussed in
one day. Already, some Unfortunately, while it is easy
to talk vision, it is very difficult to fulfill it. We
have been talking vision for the past fifty years with
little success. Air freight, even before the current
recession, captured at best 4 per cent of the
international market and 2 per cent of domestic
business. In today’s economic climate, our share is
probably less. I suggest we ban the word “vision” from
our vocabulary at least until the world digs out of a
very serious recession. What our industry needs is less
vision and more of a hard core, basic determination to
generate new business.
Back to Top
Julian
Keeling
|
|
