In the olden days a successful manufacturer was measured by the quality control he exercised in his factories which resulted in products if well made gained a ready acceptance into the marketplace. Fisher-Price toys for instance when they were made in America in Fisher-Price owned factories the brand enjoyed a global reputation of excellence. As soon as the company was bought out by that Barbie doll mob and the factories “transferred” to China, Fisher-Price toys became instant junk. When Levi-Straus started closing down American plants one by one, and looked to outsourcing through Chinese suppliers, their market-share declined accordingly. Once the benchmark of quality, the prices of their jeans today reflect the sub-standard product they now sell.

No matter what America manufactured, the world and in particular our own domestic market, held “Made in America” products in the highest of regard. One of the major reasons for this was its educated and diligent workforce was the envy of the world and couple this with invention and innovation; no other country could match us. We just need to look at WW 2 and see how this country mobilized and great corporations like GM and Ford started churning out airplanes and tanks in tens of thousands from their car plants. When I was young, when we described something strong and solid, we would say, “It’s built like a Sherman tank!”

What has changed about American industry is we have allowed academics (who should have stayed teaching the three “r’s” reading, ‘riting and ‘rithmetic to students) to exercise their minds and get involved in making sciences out of science where there was no science in the first instance. Warehousing and transportation is a grand example. It is not about “logistics” and all the modern day nonsense that surrounds the new meaning of that word. The most successful freight forwarder in America, Expeditors International is the only one to claim it is happy just to be called that; yes, a simple freight forwarder. Its growth has been organic and there is no other competitor that has matched its growth and profits for more than twenty years. In fact most its opposition have either disappeared or have been merged/taken over. American industry has to follow what Expeditors have always done and return to its roots, buy the raw materials, decide what to make, make it, store it, sell it and dispatch the finished product themselves and get the hell out of outsourcing.

The grandest example of a company heading into unchartered financial trouble because it has acted upon the most ridiculous of advice within the company and outside of the company is Boeing Co. First of all it embarked upon the acquisition path culminating with the takeover of McDonnell Douglas in 1997. Not long after, the then CEO (who soon after got the flick) for reasons the world would never know or understand decided Chicago was a better place than Seattle for H.Q. That is when its troubles started. A whistleblower got them into serious trouble with the Pentagon, culminating in the loss of an air force tanker order to Airbus and then their civilian aircraft division hit the skids with the delays to the Dreamliner 787 development program. Why has the 787 become such a disaster for Boeing? Simple, components and production that should have been in-house over the years instead has been outsourced to companies, many of which whose skills were wanting and quality control iat best, suspect.

Because of outsourcing (I wonder how many Chinese suppliers are also involved!) what could have been the most successful passenger aircraft since the 737, may never ever be profitable for Boeing. And its all due to delay costs created by outsourcing. However Boeing is starting to realize the error of its ways and recently announced it will be buying out one of its main suppliers, Vought Aircraft Industries, the main culprit that caused the 787 problems. The kicker in all this; who owns Vought, none other than the dirtiest and nastiest Private Equity firm ever created, The Carlyle Group. What do they know about aeronautics? Roughly as much as I know about nuclear fusion! I believe this event is a huge turning point and if American industry is ever going to get back on its feet again, this bricks and mortar approach needs to return. Outsourcing is “out” and in-sourcing is “in”. Let’s hope Boeing’s decision to take back key manufacturing is the tonic it needs to restore its position to number one ahead of Airbus and the harbinger generally of things to come for American industry.

The small mid-sized forwarder is far more resilient than his big brothers. Now is the time to attack the client lists of the multi-nationals, just the same way as Expeditors did in the nineties by selling a buck for ninety cents and telling the airlines if they want to keep their newly won business then they will have to drop the price. Yes, unfortunately it will be a case of survival of the fittest and for those who want to sit and wait for better times it will be their undoing. We are looking at a smaller cake with the result that only the truly hungry will have any chance of a slice.

In the past I had always been a proponent of doing business the old fashioned way; through relationships and loyalty. Wall Street has turned me into an anachronism and if I still believe in those principals then I am truly am a dinosaur. In throwing my ideals to the wind, I have instructed all staff to get the best price from every supplier and if need be, nail them to the wall in our zest to obtain the cheapest deal. Yes, it is the Wal-Mart philosophy. There is no such thing as a prime carrier anymore. I don’t care what airline we chose, so long as it is the cheapest because that is the only way we can keep our customers happy!

Here’s my list of multi-nationals of the eighties:

1. Airborne
2. AEI
3. BAX Global
4. CF Airfreight
5. Circle
6. Danzas
7. Expeditors
8. Fritz
9. Jardines
10. Kuehne and Nagel
11. Lep
12. MSAS
13. Panalpina
14. Pandair
15. Schenker
16. WTC
17. Union Transport

Fast forward to 2008:

1. Agility
2. Ceva
3. DHL
4. Expeditors
5. Kuehne and Nagle
6. Panalpina
7. Schenker
8. Union Transport
9. UPS

My real involvement in global international airfreight started in the eighties. Every country had an indigenous forwarder who enjoyed large local support. Today, that is not the case at all as multinationals extended their tentacles. I drew up a list of the multi-national forwarders of the eighties and did the same for 2008. My buddy is quite right how the industry has undergone huge change, but unlike him, I see the change as the best opportunity for forwarding returning to its true roots of personal service, where small is better, way better.

In less than twenty years the list has halved with DHL alone absorbing Danzas, AEI, Airborne and Excel (MSAS). Many old salts took early retirement because they were forced to and other younger executives simply disappeared with their old companies to that hanger in the sky. Some in order to stay in the business moved over to smaller forwarders and took huge pay cuts just to keep their jobs. A few have set up their own corporations such as Hank Hartong of AEI fame in establishing IJS Logistics.

To me, Hank and his team are on the money. Their goal is to grow internationally as a mid-sized forwarder with revenues of around $500 million. The new big boys are ripe for the plucking. They have used their so-called buying power to send many cargo operations of carriers to the wall and definitely have shrunk all cargo carriers into marginal or loss situations. They have become the enemy of the airlines, not their partners. Customers of large multi-nationals are finding it difficult to maintain close relationships as service levels (principally because of merger/takeover upheavals) over the past few years have been on the decline. Enter the small to mid-sized forwarder armed with all the tools, including good airline relations, to provide great service with the flexibility to match. His future is now assured.

As a wholesaler, I was tickled pink to negotiate a deal with a large multi-national at destination to look after their “expedited” shipments ex the States. The company received head office approval to allow for this change in order to compete in the marketplace. To date the service we have provided has been exemplary compared to the previous in-house situation. When it comes to satisfying the customer, small, not big is beautiful. I believe in order for the large multi-nationals to compete against the rising tide of the small to mid-sized forwarder they will have to break themselves up into smaller units and operate exactly as the small guy does. If the big boys don’t, then their future is at peril.

So to my mate, Pat down under: It is not all gloom and doom. This airfreight industry is still full of exciting opportunities, just as it was in its infancy forty years ago, when you and I were both schoolboys in shorts!