Vanguard says LCL shippers need premium service from it, forwarders and liner carriers.
Carrying around 250,000 TEUs annually on a network that encompasses 3,500 port pairs, Vanguard Logistics Services is the largest neutral non-vessel-operating common carrier, and one that continues to expand its global network.
The Long Beach, Calif.-based NVO counts small and midsized freight forwarders, as well as global giants such as FedEx, DHL, Kuehne + Nagel, Expeditors, and DB Schenker, among its long list of customers.
Vanguard’s primary focus is supporting the forwarding industry. As a general rule it does not solicit from or work directly with beneficial cargo owners or retail customers.
Vanguard traces its roots to Direct Container Line, which was started in 1978 by New Zealand businessman Owen Glenn.
Glenn acquired several other large neutral NVOs, including Brennan International and Conterm Consolidation Service. They and other brands such as Ocean World Services, OWS, Ocean Express Global and NACA Logistics were eventually organized under the OTS Logistics Group umbrella.
In 2012 OTS was acquired by Man Capital, a London-based private equity fund and asset management firm which is a part of the family-owned Mansour Group and has its roots in Egypt, but has become a global conglomerate.
Since Man Capital’s acquisition, Vanguard has continued to expand and today has annual sales of about $800 million and 3,400 employees worldwide.
Vanguard continues to increase its global footprint. In January, it acquired its former agent in South Africa, International Liner Agencies, and added offices in Durban, Johannesburg, and Cape Town.
Also in January, Vanguard opened its fourth office in Indonesia at Belawan, near Medan on Sumatra. In 2015 it added offices in Surabaya and Semarang, which are both on Java.
These moves build on Vanguard’s expansion in recent years in Egypt, Turkey, and India.
Charlie Brennan
While Vanguard uses agents in some locations, Charlie Brennan, executive chairman, said the company has sought to differentiate itself from its competitors by handling more of its business through owned offices.
“The whole move forward is that we have an end-to-end strategy,” Brennan said. “We want to control the cargo from origin to destination. It gives us the ability to control the product, the pricing, the compliance, and service levels. This gives us a unique position that sets us apart, in our opinion, from the competition.
“It’s not that we don’t have agents, but they are the minority of our global footprint,” he added.
Graham Cousins
Graham Cousins, chief strategy officer for Vanguard, said it’s important for Vanguard’s offices to have “the same operating environment with the back-office IT that gives control and visibility to our customers and also for compliance.”
Vanguard’s business, like the overall container industry, tends to grow in line with the global economy, Cousins said, generally 2 or 3 percent a year.
In some markets the company is extremely dominant, with a 40 percent share of the NVO business, and in others it only has 4 or 5 percent of the market share.
For example, in Africa, Vanguard has a limited presence and depends heavily on agents. But given its demographics, Cousins said the company would like to see a stronger presence on the continent in the future.
As a neutral, wholesale provider of freight consolidation services, about 30 percent of Vanguard’s business is with large, global forwarders, and the remainder with small and regional companies. No more than 2 percent of its business is with any single forwarder.
It offers both inbound and outbound services to the markets it serves. It calls its service sailings, although as an NVO it does not operate its own ships, depending on container carriers to provide the underlying lift.
Guaranteed Service. “We guarantee our sailing schedule,” Cousins said. “It’s not on an as-needed basis. If we say ‘we’re sailing,’ then we’re sailing, irrespective of whether we have enough cargo or not. That is important to the customers we serve, and a smaller NVO is less able to do so.”
If Vanguard does not have enough cargo to fill a 40- or 45-foot container, it will use a 20-foot box or fill a box partially.
While it tries to offer as many direct services as possible, if volumes are not great enough on a particular route to warrant a direct service, it may consolidate and deconsolidate cargo at a hub port such as Singapore, much the same way airlines use hubs to serve smaller markets.
Brennan said Vanguard is constantly evaluating and adding new routes.
Less-than-containerload services is a highly specialized service, just one step down from air cargo, Brennan said.
He noted that often the reason shippers are moving their goods in LCL lots is because they cannot bide time to assemble enough cargo to fill an entire container and need to move the cargo as quickly as possible.
By handling large volumes of cargo from forwarders and consolidating those shipments into containers, Vanguard is able to offer frequent services at attractive rates.
Most of Vanguard’s services are weekly, though some are less frequent, and where demand is strong, the company offers multiple sailings each week. On the heavily traveled Shanghai-to-Los Angeles route, for example, Vanguard offers sailings six days a week.
Brennan explained there are a number of reasons why a shipper may ask its forwarder to move cargo on one of Vanguard’s services.
“It could be anything from speed of the vessel, to not waiting a long period of time for the next vessel. So we use all the strings,” he said.
Or, another example, a shipper might be entitled to a tax refund from the Chinese government when it exports a product. The shipper then wants a service “that’s going to sail tomorrow rather, than wait a week, to get their export refund,” Brennan said.
Vanguard has stronger relationships with a certain number of strategic carriers, but because of the need to offer multiple sailings and use niche or regional carriers on certain routes, it relies on more than 30 container operators.
When choosing a carrier, Cousins said “there are three factors that are important: transit time, service and price. But in reality, for us, if the transit time is no good, it doesn’t matter how cheap it is, it’s not an attractive product for our customers.
“We guarantee the fastest shipping route to an LCL shipment,” he said.
“We have instances on certain trades where the incumbent carrier will do the route in eight days where we could do it for much lower rates at 14 days, but it becomes uncompetitive as a product for us,” Cousins said.
He also said a high level of service and good relationships with the container carriers is extremely important to Vanguard.
“It’s no good having a low rate if you turn up with the cargo and you are not guaranteed the space or the equipment for the vessel,” he explained.
Vanguard is an attractive customer for carriers. It has a regular flow of business each week.
Cousins said while the NVO has some contracts with liner companies, it tends to buy more of its lift on the spot market.
Consider the needs of a small manufacturer in Kansas City who needs to ship five pallets of equipment to Singapore. It might call a large multi-national forwarder or a small regional outfit to arrange a shipment.
“Most freight forwarders wouldn’t be equipped on a given day of the week to run their own consolidations from the Midwest through to Singapore, so what they would do is look for a consolidator to take it and book that cargo with Vanguard,” explained Brennan, or another neutral NVO such as Vanguard’s competitors ECU Line, Shipco Transport, and CaroTrans.
In these cases, the forwarder would arrange to ship the cargo to one of Vanguard’s consolidation stations, for example in Los Angeles or Chicago, then combine it with cargo from another forwarder.
Vanguard offers similar services to forwarders exporting goods to the United States, say from Quingdao, China, to New York. Brennan said about half the company’s business in the United States is inbound and the remainder is outbound.
“So what we do, we’re able to say, we don’t want to deal with the actual shippers. Some shippers will insist on doing their own transport arrangements just like they do with the ocean carriers, but most shippers will go to the forwarder and ask the forwarder to place it,” Brennan said “That’s how we fill a 40-foot container with a multitude of forwarders.”
The NVO has its own U.S. container freight stations at New York, Chicago, Los Angeles, Atlanta, and Miami, but also uses dozens of others around the country.
The low freight rates being seen in the container-shipping industry make for a challenging environment for a consolidator like Vanguard. Brennan said a shipper may choose to ship its own partially loaded container rather than go to an NVO, believing the differential in cost is insignificant.
But he said there are other costs that the shipper has to consider, as repositioning a container to its own facility for loading, blocking and bracing, and inland transportation. “As ocean rates have dropped, the other rates, such as trucking in the U.S. or in Europe, have not. Those charges, labor costs to load containers and process transactions, all those costs have gone up from, while ocean rates have actually dropped,” Brennan said.
“It’s not just the one item that comes into play. People have this false misconception that simply cheap ocean rates translates to cheap transport for any size cargo, but it’s not necessarily the case,” he said.
Even though freight rates are depressed, “our sense is that the market will continue to demand more for less,” Cousins said. “Our freight forwarding customers have more obligations to their BCO customers in terms of cargo control, tracking and tracing, performance and management. So for us, being able to deliver an integrated network which is seamless from origin to destination for our customers with the IT investment that delivers all those outcomes is key.”
While generally not working directly with shippers, because Vanguard over the years has developed strong skills in compliance and handling of dangerous goods, it handles some LCL shipments for DuPont and other chemical companies.
The company has a centralized desk in Chicago for coordinating movements of dangerous goods and special rooms at its U.S. facilities for storing them.
Brennan said the company’s 400,000-square-foot facility in Antwerp is regularly toured as a model facility for correct handling of dangerous goods.
