Mid-Sized Forwarders Will Do Well Despite Recession

Last month, I was invited by the Chicago Air Freight Forwarders Association to give a talk at its monthly luncheon. The Association asked that I discuss the effect of the current recession on air cargo in general and freight forwarders in particular.

In my talk, I told the audience in no uncertain terms of my conviction that forwarders, and particularly the smaller and mid-sized consolidators, would do well despite our sluggish economy. Middle forwarders are tough, flexible and can turn on a dime; abilities the large, multi-nationals do not share. I believe personal service to customers will be a far more important consideration than ever before despite our world of hi-tech. In an uncertain environment, shippers will require more of the human touch and it is the mid-sized forwarder who can deliver that kind of attention.

I suggested five steps forwarders could take to make them more valuable to current customers, and to generate more business. Improve customer service, strengthen overseas networks, do more traveling to destinations in which you you carry customers’ freight, improve margins per shipment and offer additional services.

I believe international and domestic freight are following different paths. Unfortunately, domestic cargo is little more than a basket case today. Ever increasing fuel charges, the growing penetration by truckers in the domestic market and the soft economy are combining to make mince meat out of domestic freight. I see no growth in domestic cargo for the remainder of 2008 and all of 2009, and perhaps even a decline. International cargo presents a brighter picture although the heady growth of 10 to 15 per cent per annum is perhaps gone forever. I believe international cargo will grow at a more modest pace in the range of 2 to 5 per cent per year, aided by the U.S. increase in exports due to the weakened dollar. Those companies who refused to cripple their domestic manufacturing facilities by offshoring their factories are benefiting from increased overseas demand. The pendulum definitely is swinging back to domestic manufacture.

All is not milk and honey on the international front, however. Too many all-cargo airlines have sprung up, particularly in Asia, to remain viable in a soft global economy. I believe a number of them will have to fold their wings due to a weakening Asian market with a resultant overcapacity in aircraft. Even the strong legacy, combination carriers with major cargo operations, like Korean Air and Lufthansa, will be reducing their all-freighter fleets, particularly the old Boeing 747-200 series and DC-10s, which are such gas guzzlers.

Looming over the U.S. and global economies is the relentless rise in oil prices. With oil hovering near an unprecedented $150 a barrel, I reminded my audience that it is the reckless person, indeed, who would predict that prosperity is just around the corner.

Tags: Economy, Forwarders