Strength in numbers
Amid uncertainty, shippers' associations provide members value in negotiating service contracts.
By Chris Dupin
As chief executive officer of Worldwide Logistics Associates, a management company that negotiates contracts for three shippers' associations, Dave Akers said some years he's had 'very distinctive feelings as to what I thought the market was going to do, and have been usually fairly accurate in terms of generalities.'
This year is different.
'I was just talking to a good friend on the steamship side, and both of us agreed we had no idea,' he said. 'You are going to get the increase in capacity, and it will just depend on how demand holds up.'
Akers hopes to have a better sense after meeting with carriers in March. Most of the contracts he negotiates renew in May, though some renew in June or later.
Cincinnati-based Worldwide Logistics negotiates the movement of 30,000 to 40,000 40-foot containers annually for the Toy Shippers Association, the International Housewares Shippers Association, and the NCBFAA Shippers Association, which is affiliated with the National Customs Brokers and Forwarders Association of America. The three associations collectively represent more than 200 companies.
| Akers |
Akers formed his first group, the Toy Shippers Association, in 1990. Prior to that he was director of logistics at toymaker Kenner Products, and held a number of logistics posts at General Mills when it acquired a number of toy companies, in addition to Kenner, including Lionel Trains, Parker Brothers, and Craft Master Paint By Numbers, as well as non-food companies selling adult products ' Eddie Bauer, Monet Jewelry and Pennsylvania House of Furniture.
The Toy Shippers Association has grown to 100 members and is affiliated with the Toy Industry Association.
Worldwide Logistics next worked with NCBFAA to form its shippers' association, which has grown to 60 members. And in 2004 it worked with the International Housewares Association to form its shippers' association, which Akers said is approaching 70 members.
Akers acts as either the managing or executive director for each of the shippers' associations.
In addition to negotiating contracts on behalf of its members, 'we've added services over the years' that include customs clearance, inland trucking, warehousing and transloading, as well as trucking and warehousing at the point of origin, he said.
'We look for the best third-party companies out there and try to use them to supply the services,' he said. 'We don't reinvent the wheel.'
The company does not negotiate directly with railroads, but it negotiates 'door' or inland point intermodal rates (IPI) with ocean carriers for members of the associations.
Akers said when negotiating rates for an association, 'there is a lot of input by members in terms of their requirements, and they may talk a lot with their individual representatives' about the special needs of their companies. At the same time his management company speaks to upper-level carrier executives about the total commitment that each association's collective membership is making to each carrier.
He has contracts with about a dozen carriers for the associations. There is some commonality, but there is not a total overlap among the three groups.
While much of the associations' volume is on the transpacific, some of the companies he works with are also negotiating shipments on Asia/Europe and other trades that don't even touch the United States. And NCBFAA members have a need for their non-vessel-operating common carriers to move goods on nearly every trade lane, including the transatlantic, and to and from South America and Africa.
Most members of the associations move less than 1,000 containers and some may just move five to 10 containers annually. When volumes get much greater, shippers begin to negotiate individually with carriers, he said, because while shippers' associations have more buying power, they also have expenses that must be paid.
Akers said that while nearly every shipper had difficulty getting equipment in late 2009 and early 2010, 'carriers did a fairly decent job of getting us equipment and getting us space.' This is another big advantage of shippers' associations, in addition to pooling volumes to negotiate lower prices, he said. When capacity gets tight, the associations can help desperate members find additional capacity with carriers under service contracts.
'I think people who had long-term relationships with carriers had a better time of it, and we have had long-term relationships with most of our carriers,' he said. 'People who went from one carrier to another, just looking for the lowest price in the past, had a few more problems and had to pay a higher rate just to get their product on a ship.'
In negotiating with carriers and writing service contracts this year, 'one thing that we're doing differently is we're trying to get shippers to better forecast what their needs are going to be,' he said. 'By doing that we've been able to get some carriers to get away from saying take your contract volume and divide by 52 and that's what you get per week.
'That's very important especially when you're dealing with a product like toys, which is so seasonal,' he said.
'Where we've made an effort to go out with the carriers and project some volumes ' those carriers have worked with us a little bit better,' he said. 'It's not that we haven't tried to do this in the past, but in the past I don't think it was as much of an issue as it is today.'
Akers said Worldwide Logisticsis not looking to service another association. 'They're not easy things to start.'
He noted that all three of the groups he manages were formed out of pre-existing trade associations, which he believes is natural. In a trade association, you already have companies that, 'even though they are competitors, they are used to working toward a common goal, trying to lower their costs and trying to meet each other in terms of legislative issues.' They also have association members who are willing to serve as unpaid board members, as shippers' associations are non-profit organizations.
Shippers' associations are not more prolific, he said, because it's difficult to get competitors to work together if they are not already members of a trade association with common interests.
Shippers' associations aimed at serving businesses in a particular region are also difficult to make work because only a limited number of carriers may be a good match for that region, and because regional shippers may transport very different products, while most ocean carriers do commodity-based pricing.