Shippers turn to forwarders for downturn ‘re-tuning’
Drewry Supply Chain Advisors Report identifies best practices, cost and contractual issues for shippers willing to outsource to international freight forwarders.
London, UK, 1st March, 2010 – Businesses facing the global trade downturn and market volatility are using international freight forwarders to reduce fixed costs, secure a wider carrier base and shift business risk, according to a new research report by Drewry Supply Chain Advisors.
Many larger shippers are turning to their freight forwarders to find smarter ways of handling and moving products more cost-effectively. Fixed-capacity logistics assets can turn into a strategic disadvantage in an economic downturn. So let a freight forwarder or third-party logistics provider (3PL) assume the risk of over-capacity. Furthermore, a common method of reducing head office costs for shippers is to outsource shipping administration and support activities to a freight forwarder.
“Generally, the outsourcing decision is driven by a comparison of internal and external costs as well as assessing the benefit of turning fixed costs into variable costs,” said Philip Damas, director of Drewry Supply Chain Advisors. “However, there are different levels of outsourcing, each of which represents different possible steps towards integration with a forwarder and dependence on a forwarder,” he added.
Drewry’s research Report identifies best practices in selecting and negotiating with freight forwarders and focuses on cost and contractual issues, including bankruptcy risks faced by shippers when using direct carriers or forwarders,
KPIs for shippers
As intermediaries or ‘managers’ of other vendors, freight forwarders are in an ideal position to monitor the performance of carriers and other sub-contractors using Key Performance Indicators (KPIs). Drewry provides a list of common KPIs in international transport to help shippers monitor their logistics performance.
The Report stresses that shippers should define whether transport is a cost or a service that can add value and if it will be advantageous to outsource some or all transport activities to a forwarder. If the use of forwarders is seen as beneficial, then a robust tender and selection process is essential to get the best value out of freight forwarders.
Researched with the assistance of shippers and former shipping and forwarding executives, the report includes analyses and advice on:
The forwarding market structure, market sizes and segments
The value of forwarders to shippers, costs and best practices
The freight forwarder’s business model
Profiles of 19 major international forwarders
Market metrics
Having quantified the ocean freight forwarding and air freight forwarding markets in volume and in revenue terms, Drewry Supply Chain Advisors estimated that these two global markets represented about US$260 billion of business in 2008 and US$190 billion in 2009 and that forwarders are gaining market share at the expense of ocean carriers and airlines.
The Report, the first of its kind on contracts, best practices and related issues in freight forwarding, is designed as a reference guide for current and potential users of freight forwarders, including both freight buyers and senior executives in charge of procurement strategy.
Although the report focuses mainly on international forwarding, it also explains the increasingly blurred division and the links between forwarding services and contract logistics services among major forwarding and logistics groups.
London, UK, 1st March, 2010 – Businesses facing the global trade downturn and market volatility are using international freight forwarders to reduce fixed costs, secure a wider carrier base and shift business risk, according to a new research report by Drewry Supply Chain Advisors.
Many larger shippers are turning to their freight forwarders to find smarter ways of handling and moving products more cost-effectively. Fixed-capacity logistics assets can turn into a strategic disadvantage in an economic downturn. So let a freight forwarder or third-party logistics provider (3PL) assume the risk of over-capacity. Furthermore, a common method of reducing head office costs for shippers is to outsource shipping administration and support activities to a freight forwarder.
“Generally, the outsourcing decision is driven by a comparison of internal and external costs as well as assessing the benefit of turning fixed costs into variable costs,” said Philip Damas, director of Drewry Supply Chain Advisors. “However, there are different levels of outsourcing, each of which represents different possible steps towards integration with a forwarder and dependence on a forwarder,” he added.
Drewry’s research Report identifies best practices in selecting and negotiating with freight forwarders and focuses on cost and contractual issues, including bankruptcy risks faced by shippers when using direct carriers or forwarders,
KPIs for shippers
As intermediaries or ‘managers’ of other vendors, freight forwarders are in an ideal position to monitor the performance of carriers and other sub-contractors using Key Performance Indicators (KPIs). Drewry provides a list of common KPIs in international transport to help shippers monitor their logistics performance.
The Report stresses that shippers should define whether transport is a cost or a service that can add value and if it will be advantageous to outsource some or all transport activities to a forwarder. If the use of forwarders is seen as beneficial, then a robust tender and selection process is essential to get the best value out of freight forwarders.
Researched with the assistance of shippers and former shipping and forwarding executives, the report includes analyses and advice on:
The forwarding market structure, market sizes and segments
The value of forwarders to shippers, costs and best practices
The freight forwarder’s business model
Profiles of 19 major international forwarders
Market metrics
Having quantified the ocean freight forwarding and air freight forwarding markets in volume and in revenue terms, Drewry Supply Chain Advisors estimated that these two global markets represented about US$260 billion of business in 2008 and US$190 billion in 2009 and that forwarders are gaining market share at the expense of ocean carriers and airlines.
The Report, the first of its kind on contracts, best practices and related issues in freight forwarding, is designed as a reference guide for current and potential users of freight forwarders, including both freight buyers and senior executives in charge of procurement strategy.
Although the report focuses mainly on international forwarding, it also explains the increasingly blurred division and the links between forwarding services and contract logistics services among major forwarding and logistics groups.