LTD Management
Logistics & Supply Chain Management Consulting Global Solutions That Work

Working through Import/Export Associations Could Lower Your Shipping Rates

FEBRUARY, 2000 Modern Woodworking
By Brooke Baldwin

With a strong U.S. economy and today's global access, more and more woodworking industry manufacturers are finding themselves importing products and components and then in turn selling into the export market. "Rates are high for imports whether they come out of Brazil, Asia or anywhere," says Tom Craig, general manager for LTD Shippers Association.

"On the other hand, if you want to export from the U.S., rates are low. We are consuming more than we are exporting in this country. Because of this trade imbalance, there is a discrepancy where imports are subsidizing exports. The value-add is on the imports because that is where the demand is."

Large volume overseas shippers are in a very nice position to take advantage of all this activity and make some very nice deals, according to Craig. "But what about the small to medium sized business guy without the leverage of large volume shipments?" he asks. "That's where a lot of change will shake down over time."

"The Ocean Shipping Reform Act allows contracts with steamship lines to be confidential now," says Craig. "This was not always the case. Although the company name might not have been on the contracts, there were enough details based on the destinations or the origins to figure out how much the contract was for and for whom. With those contracts being public, in a sense, someone could say 'I want that same price.'"

Since those guidelines do not exist anymore, creativity in constructing individual steamship line contracts is the result of this new confidentiality, and that necessitates manufacturers to be savvy in the ways of import/export strategies, he explains. Whether it is about rates, service or contingencies, manufacturers, who often may be in the dark as to what the going rates and services are, must structure their own deal. Couple that with current increases in container rates, and the plight of the small to medium sized company becomes even more difficult.

"That's where someone like us, a shipper's association focusing on smaller companies, comes into play," says Craig. "How do carriers get their business now? They go after the large guy and cut their prices and their margins to get that piece of business; but smaller companies have no leverage. Shipping associations can level the playing field for small businesses and make them more competitive. And this leveraging of the purchasing power of its members provides lower freight costs and improved service for them."

Dave Kimmel, of K's Merchandising, Decatur, Illinois, likes the idea of shipping associations, "It's a weapon smaller importers can use. We can band together, go to the shipping lines and offer greater volumes. We collectively get better rates."

In large volume businesses, Craig explains, there is an in-house transportation and logistics person to handle overseas shipping contracts. "The small to medium sized business owner doesn't have this advantage and that creates another dichotomy between the really large importer/exporter and the small to medium guy. He doesn't want to have to deal with a lot of details and questions, he just wants to import the components he needs, or export his own product.

"As carriers continue to cut back on their sales reps, it is going to become more and more difficult for a manufacturer to keep up with what's going on as far as freight prices, service and contingencies such as hiring helicopters for example. He's going to have to have people look out for him because he will be getting less and less attention from carriers' sales reps. They are going to be looking at how much potential business each manufacturing company represents and if it doesn't make their threshold cut off, it will fall off their attention span."

Craig believes small businesses are the backbone of the American economy today, and that shipping associations are their solution to meeting the challenges of negotiating with major steamship lines.

"We are looking a lot at how we are positioning ourselves to take advantage of what we see as the real growth of this country. A small to medium guy doesn't have time to read professional transportation logistics periodicals like the big guys have people to do. He stays within his industry because that is his focus. The Internet is where we see an opportunity to get the word out to the small to medium sized manufacturing company about shipping associations. We want it to be easy for him to find us, and we want it to be easy for him to deal with us.

"Basically we are saying the small to medium guy is going to have to look at alternative ways of doing business. The old way is not the way to grow."

For more information, contact Tom Craig, LTD Shippers Association, 1230 Pottstown Pike, Suite 6, Glenmoore, PA 19343, (610 458-3636) or log on at www.ltdmgmt.com.