Reduce your parcel shipping expenses through software

Parcel delivery is more than shipping packages on time. There are elements of auditing and contract negotiation that when applied diligently can recover hidden savings.

“Say you ship a package through one of the major carriers using next day air so it arrives at 10 a.m. If it gets there at 10:01 a.m., it’s late, which is not uncommon, and you could be due a refund. However, if no one at the company is auditing shipments, there’s no way to know a refund is due. Companies that make hundreds of thousands of shipments are leaving a lot of unclaimed money out there,” says George W. Reyes, executive vice president at AMWARE Companies.

Companies can also find savings through contract engineering, which is a process of comparing rates to identify discounts that can be applied to pricing agreements.

Fortunately, in both cases, that work can be done through time-saving software. Unfortunately, most companies don’t realize that such software exists.

Smart Business spoke with Reyes about how parcel auditing and contract engineering software can be deployed to save money on shipping.

What challenges come with parcel audits?
Companies often skip parcel audits because the manual process is time-consuming and laborious. Carriers send shipping invoices weekly, each of which can be hundreds of pages.

Most companies don’t have parcel auditing software in house. Instead, someone in the accounting department spends a considerable amount of time thumbing through shipping invoices to find any incorrect charges. And there’s a lot to look at.

Among the issues to review are shipping times, which should be checked against the guaranteed delivery times to see if a refund is due for late delivery. Also, the major carriers assume a package’s weight through its dimensions. There are enough instances of incorrect weight assumptions that companies that don’t catch the error will overpay for a shipment.

Why scrutinize pricing agreements?
Pricing agreements for parcel shipping are designed to be confusing. To untangle the language, companies use contract engineering, which is another method of ensuring parcel shipping costs are kept as low as possible. Many companies are unaware of what can be negotiated in an agreement.

Much like parcel auditing, contract engineering is done through software, instantly comparing levels of service with thousands of other shippers to find appropriate discounts and improve pricing agreements with carriers.

How is parcel auditing and contract engineering software implemented?
Adopting the auditing software is easy. Not much about companies’ shipping processes change — they will still get invoices from their carriers and still pay them directly. Companies just set up an online account and the software automatically does the rest.

Contract engineering is a little more involved. It uses data captured though the auditing software to analyze better pricing agreements. The process typically takes one month, largely because the new agreement needs to be negotiated with and changed by the carrier.

What does the software cost?
Typically there are no costs. Whatever savings are found through an audit  — companies typically save 5 to 6 percent on shipping — is split evenly between the software provider and the company. That means the software doesn’t have to be a budgeted line item because it’s paid for exclusively through found money. That money was already spent on shipping, and now some of it is coming back just by uncovering errors.

It’s the same with contract engineering — it’s paid for entirely through found money. If a discount can be found on shipping, part of that savings comes back to the company, offsetting its shipping costs, while the other part pays for the software.

Don’t be taken advantage of by the only two major parcel carriers in the market. Find a partner that has the technology and software to ease the pain of auditing and negotiating parcel agreements.

Insights Logistics is brought to you by Amware

How to cost-effectively navigate the tightening logistics market

The logistics industry is being affected by two divergent trends: a driver shortage and growth in the U.S. economy. The confluence of factors has greatly reduced capacity, leaving shippers with the uncomfortable choice to either take an expensive option or to have their materials sit.

“Shippers of all types are feeling the effects of these trends in increased freight rates,” says Matthew Fink, vice president of transportation at AMWARE Companies. “However, there are tactics that can save companies from absorbing the additional freight expenses or having to pass them along to their customers.”

Smart Business spoke with Fink about strategies to cost-effectively navigate today’s shipping challenges.

What is a shipper of choice?
Shipper of choice is a term that delineates companies that build quality relationships with their logistics suppliers. It can make a company’s freight more likely to be hauled quicker and at reasonable pricing, something that’s important as logistics capacity tightens.

Most of the components of a good shipper of choice program are fairly inexpensive to implement, and in some cases are free — paying invoices early or consistently on time, treating drivers well. What remains can be difficult, but follow best-in-class sourcing and procurement activities.

For years, trucking has been treated like a commodity, and shippers did not develop durable relationships with their transportation suppliers. Transportation companies have to be treated like any other material supplier. Preferential treatment regarding capacity, commitments and payment terms, however, requires a partnership.

What are dedicated solutions in logistics?
Dedicated solutions can vary in depth, scope and formality. At a basic level, there can be a noncontracted commitment to scheduled movements where a carrier dedicates a specific amount of capacity to a customer.

More formal arrangements can include service-level agreements, performance incentives and the sharing of risk for damaged or late materials.

The misperception is that only big companies can install an effective, dedicated program, or that dedicated programs are inflexible and more expensive than a traditional network design. Rather, when proper care is used in scoping the needs and determining the value of a dedicated program, companies can realize value without having enormous volumes or signing an unfair agreement.

What should companies look for in a request for quotation from logistics companies?
Extreme care should be used when crafting a request for quotation (RFQ). Too many constraints will dissuade carriers from participating, and too loose of a program won’t ensure supplier accountability.

The keys to a great sourcing event are to ensure the data returned is comparable and doesn’t require reassembly to make an apples-to-apples comparison. That could affect the integrity of the data and assumptions can be made that result in future billings not matching expectations.

While consistency is helpful, companies should allow suppliers to present alternative and creative solutions. Ask respondents to adhere to the RFQ template, but give them room to put their expertise on display.

How can companies leverage their logistics provider to drive value in their supply chain?
The right logistics partner will be able to leverage all aspects of its network to optimize and provide efficient and flexible solutions. Ideally, your logistics partner will be able to provide a balanced solution as both an asset-based provider and leveraging a robust 3PL network.

The work companies put into their logistics network can be shared with their customers. That transparency and collaboration from order to cash will enable all stakeholders to reap the benefits of network optimization.

Supply chains are maturing at an incredibly rapid pace. The proper resources and business plans have to be installed to stay in front of the competition. Embrace the value in the supply chain, leverage the expertise of partners and work in a collaborative fashion with customers and suppliers.

Shippers are not at the mercy of the market. There are levers they can pull to optimize and protect their business.

Insights Logistics is brought to you by Amware

How your products are delivered is a reflection upon you

Third-party logistics (3PL) companies have to deliver freight to their customers on time and undamaged. Finding a logistics company that is capable of consistently executing and safely warehousing products requires due diligence.

Warehousing is critical because customers are judging the companies from which they purchase goods based on the condition and timely delivery of those goods. Damages or delays reflect poorly on the manufacturer.

“A product manufacturer’s customers have no idea a third-party is involved with the storage and shipping of their order,” said George W. Reyes, executive vice president of AMWARE Companies.

Smart Business spoke with Reyes about how to find a 3PL that will uphold a company’s reputation for quality and attention to detail.

What troubles do companies tend to have with warehousing and logistics?
Product manufacturers, for example, rely on third-party warehousing and logistics partners to get the right product, the right lot number, and the right quantity — with the right labeling — to their customers on time.

It’s a very fast-paced business that requires a high degree of organization and accuracy to execute correctly and consistently. If the third-party provider makes mistakes, it reflects poorly on the customer because it’s their name on the product being shipped.

When executed correctly, 3PLs add value to the supply chain by labeling and prepping the products to be shipped. Regardless of those extras, it all needs to be done just-in-time and without error.

More and more, companies forego having their own asset-based warehouses because they’d rather invest that money in improved or additional manufacturing space. That’s why it has become increasingly popular to outsource warehousing and logistics to a third party. Outsourcing places the responsibility of product distribution to the third party, saving companies the huge costs associated with running a warehouse.

What should businesses consider as they look for outside warehousing help?
The condition of the warehouse (structure) is often overlooked by companies conducting due diligence to find the best 3PL provider. Businesses seeking to partner with a 3PL should look for a company that has a well-constructed, modern building.

The geographical location of the warehouse is another often overlooked component. Companies looking for a warehouse would be well-served to partner with one in a favorable geography to its client base. Cleveland is a fantastic market because products sent from the city can reach 70 percent of the U.S. population in one day or less.

Technology also plays a significant role in warehousing. For instance, does the warehouse use RF scanners for lot control, accountability and accuracy? There should be a sophisticated inventory management system that can handle the type of inventory needed for the product being warehoused.

Some manufacturers need a logistics provider that can accommodate a first-in-first-out process. That system needs to be fail-safe when it comes to picking the correct lot number and date of manufacturing. Sending the wrong batch can create a host of costly problems the manufacturer will be forced to reconcile.

Two other aspects to consider are quality control and inbound/outbound processes. Ask about inventory accuracy rate — some companies maintain rates as high as 99 percent. Also consider the hours of operation. Some warehouses keep standard business hours while other companies adjust to their customers’ hours of service.

How does price factor into the decision?
Price alone should not drive the decision to work with one logistics provider over another. It’s critical to conduct a background check on the warehouse provider. Companies looking to partner with a 3PL or warehouse should make sure they have quality facilities and experienced and knowledgeable staff capable of handling the distribution of specific products.

It can be surprising to some companies when they compare potential providers against their current provider and find out how little they were getting for what they were paying. Find a good partner that has your and your clients’ needs in mind, because if it’s a one-way street, the relationship is doomed.

Insights Logistics is brought to you by Amware

Low price doesn’t mean greatest savings with LTL shipping

When it comes to less-than-truckload shipping (LTL), companies are looking for the right carrier with the best transit times, rates and services.

“It’s a challenge to find the best carrier because there are so many running the same routes,” says Brad Mullins, COO at AMWARE Companies.

When searching for an LTL shipping provider — of which there are many — companies tend to spend a lot of time online visiting carriers’ websites, typing in the same information over and over to get their rates and transit times.

“Shippers that have 100 orders a day are often getting three to five quotes per shipment. The time it takes to do that becomes a challenge,” he says.

Given the consolidation that’s happened in many companies’ traffic departments, finding a third-party logistics provider (3PL) that can not only find competitive rates, but offer other time-savings services, can bring real bottom-line value.

Smart Business spoke with Mullins about how the right 3PL can make shopping for the best LTL carrier easier.

What challenges do companies typically face when it comes to finding an LTL carrier?
Not every shipment is built the same. There are myriad product types under many National Motor Freight Classification designations, all of which are factors when negotiating shipping costs with carriers. And only when carriers have been contacted and specific rates have been negotiated can rates be compared against all others to find the best price and transit time for a particular shipment.

Because the traffic departments of a lot of companies have been consolidated, there’s no longer multiple personnel available to deal individually with all the aspects of the department — loading trucks, finding and comparing shipping rates, scheduling production, etc. It’s often the case that one person is loading trucks and negotiating rates with carriers. This is why 3PLs have become such a key partner in recent years.

How can 3PL companies help with LTL shipping?
Having a shipping partner that has the experience needed to compare shipping costs among LTL carriers is important, and it’s a service that can be found in some 3PL companies. These companies can gather the information and find the best quotes for each LTL shipment, eliminating the time burden while quickly finding the best prices. They’re a partner and a consultant that has the technology combined with an understanding of shipping characteristics to narrow down the choice of carriers.

Some 3PL companies have a full team of dispatchers who can help move freight. They will find the best LTL carrier for the job, schedule the pickup and complete all of the paperwork that goes along with the delivery and deal with any discrepancies to ensure the price quoted is the price charged. They’ll even handle the billing.

Not all 3PLs have a team. Some just have software tied to their websites that traffic department personnel can use to manually search rates.

Companies can also find 3PLs that are able to integrate their shipping software with a company’s existing Enterprise Resource Planning systems. That enables the provider to populate shipping characteristics the moment an order is received, and begins the routing process.

What benefits can companies realize by partnering with a 3PL to handle their LTL shipping?
Partnering with a full-service 3PL company offers relief to a company’s traffic manager, enabling them to get back the time needed to make sure the right product gets on the right trucks rather than managing carriers. There’s also a bottom-line benefit to working with a 3PL.

For instance, some traffic managers can spend three hours every day trying to find the right carrier for every shipment. By working with a 3PL, those three hours can be deployed elsewhere. It means consistently getting the best shipping prices while lowering the time spent finding them, which brings down overhead costs.

Not every 3PL is the same. Full-service 3PLs offer deeper services to manage all of a company’s LTL shipping. Find a company that can be partner and consultant. Working off of price alone will not help companies achieve the savings they’re looking for.

Insights Logistics is brought to you by Amware

How your products are delivered is a reflection upon you

Third-party logistics (3PL) companies have to deliver freight to their customers on time and undamaged. Finding a logistics company that is capable of consistently executing and safely warehousing products requires due diligence.

Warehousing is critical because customers are judging the companies from which they purchase goods based on the condition and timely delivery of those goods. Damages or delays reflect poorly on the manufacturer.

“A product manufacturer’s customers have no idea a third-party is involved with the storage and shipping of their order,” said George W. Reyes, executive vice president of AMWARE Companies.

Smart Business spoke with Reyes about how to find a 3PL that will uphold a company’s reputation for quality and attention to detail.

What troubles do companies tend to have with warehousing and logistics?
Product manufacturers, for example, rely on third-party warehousing and logistics partners to get the right product, the right lot number, and the right quantity — with the right labeling — to their customers on time.

It’s a very fast-paced business that requires a high degree of organization and accuracy to execute correctly and consistently. If the third-party provider makes mistakes, it reflects poorly on the customer because it’s their name on the product being shipped.

When executed correctly, 3PLs add value to the supply chain by labeling and prepping the products to be shipped. Regardless of those extras, it all needs to be done just-in-time and without error.

More and more, companies forego having their own asset-based warehouses because they’d rather invest that money in improved or additional manufacturing space. That’s why it has become increasingly popular to outsource warehousing and logistics to a third party. Outsourcing places the responsibility of product distribution to the third party, saving companies the huge costs associated with running a warehouse.

What should businesses consider as they look for outside warehousing help?
The condition of the warehouse (structure) is often overlooked by companies conducting due diligence to find the best 3PL provider. Businesses seeking to partner with a 3PL should look for a company that has a well-constructed, modern building.

The geographical location of the warehouse is another often overlooked component. Companies looking for a warehouse would be well-served to partner with one in a favorable geography to its client base. Cleveland is a fantastic market because products sent from the city can reach 70 percent of the U.S. population in one day or less.

Technology also plays a significant role in warehousing. For instance, does the warehouse use RF scanners for lot control, accountability and accuracy? There should be a sophisticated inventory management system that can handle the type of inventory needed for the product being warehoused.

Some manufacturers need a logistics provider that can accommodate a first-in-first-out process. That system needs to be fail-safe when it comes to picking the correct lot number and date of manufacturing. Sending the wrong batch can create a host of costly problems the manufacturer will be forced to reconcile.

Two other aspects to consider are quality control and inbound/outbound processes. Ask about inventory accuracy rate — some companies maintain rates as high as 99 percent. Also consider the hours of operation. Some warehouses keep standard business hours while other companies adjust to their customers’ hours of service.

How does price factor into the decision?
Price alone should not drive the decision to work with one logistics provider over another. It’s critical to conduct a background check on the warehouse provider.

Companies looking to partner with a 3PL or warehouse should make sure they have quality facilities and experienced and knowledgeable staff capable of handling the distribution of specific products.

It can be surprising to some companies when they compare potential providers against their current provider and find out how little they were getting for what they were paying. Find a good partner that has your and your clients’ needs in mind, because if it’s a one-way street, the relationship is doomed.

Insights Logistics is brought to you by Amware

Ready or not, here it comes

The global logistics industry has had a full year to adjust to industry-changing Importer Security Filing (ISF, or 10+2) regulations before they become fully enforced by U.S. Customs and Border Protection (CBP) on Jan. 26, 2010.

Aimed at preventing acts of terrorism, the 10+2 ruling requires ocean cargo information to be transmitted to Customs at least 24 hours before being loaded onto a vessel in the foreign port.

“Because noncompliance in the form of data errors and late transmissions can result in severe financial penalties between $5,000 and $10,000 per shipment, timely receipt of information and documentation from overseas suppliers, shippers and cargo agents has never been more critical for the global supply chain community,” says Paul Codere, corporate Customs brokerage manager for AIT Worldwide Logistics, Inc.

Smart Business spoke with Codere about how the industry has adjusted to the ISF phase-in period and his advice for Customs brokers and importers once CBP begins full enforcement of the ruling.

Why did Customs give the industry a trial period with the ISF regulations?

Customs afforded the entire industry a yearlong delayed compliance period to acclimate to the new mandates. The intent behind this initiative was for the international trade community to take the full 12 months to work together in educating themselves on complying and cooperating with 10+2. Importers have been warned of infractions rather than being fined so that, ultimately, it will only mean business as usual when full enforcement begins.

First, importers had to decide whether or not they were going to complete their ISF compliance individually or with the security filing assistance of agents like Customs brokers, who have the internal processes, resources and capabilities necessary to file the sensitive data requirements.

Working together to streamline their security filing procedures, brokers, agents and importers have been held responsible for organizing data, implementing a software solution to facilitate the process, and transmitting timely and accurate 10+2 filings to U.S. Customs.

Collectively, the implementation of 10+2 has been quite a challenge for the industry. Customs has advised mitigating factors for when they begin enforcing bond guidelines and deadlines, and I am quite confident that the steep financial penalties will absolutely drive 10+2 compliance.

Customs has stated that without fines, the industry might not take ISF seriously.

Supply chain responsibility

By its very definition, a supply chain is a system of organizations, people, technology, activities, information and resources involved in the flow of global shipments from supplier to customer.

In many aspects, the supply chain is the engine that drives our economy — it is a vital service, fundamental to nearly every sector of the marketplace.

Therefore, it isn’t difficult to comprehend why many corporations within the supply chain community have a growing interest in developing a social obligation to the local and national communities they serve.

“Logistics activities that demonstrate a deep-rooted commitment to the community are highly effective corporate initiatives that enhance relationships among employees, customers, vendors, partners and carriers,” says Vaughn Moore, vice president of sales and marketing for AIT Worldwide Logistics, Inc. “The practice of corporate philanthropy has become an important factor in sustaining a successful and responsible logistics business.”

Smart Business spoke with Moore about how the logistics industry has become guided by a collective social conscience.

How has community involvement been embraced by the supply chain community in recent years?

The logical and most obvious form for logistics providers to give back has involved providing the resources, warehouses, transportation solutions and other assets necessary to implement disaster relief operations that, at their core, are all about supply chains. The industry has been a leader at the forefront of using what it has and does every day in order to distribute goods and materials where they are needed most.

Two events in recent years have served as a wakeup call for the industry — Hurricane Katrina and 9/11. In the wake of those dire circumstances and horrific tragedies, transportation providers were called on to coordinate relief operations to civil society.

In addition to providing aid, they were also challenged to move beyond the tangible business aspect of transporting goods. As you might imagine, these two historical events prompted the industry to rally together, recognize the power of humanity and embrace the altruistic side of the supply chain.

Logistics businesses were inspired to find additional ways to connect with local and global communities in order to contribute to the greater good.

Chill out

One day it might be coordinating the delivery of food products to trade shows at convention centers around the world. The next day it could be making sure a single truffle arrives looking perfect for an early morning TV show in New York, while a Fortune 50 customer rolls out a new product line at supermarkets across the country. No matter the size of the shipment or the distance it travels, when it comes to moving perishable commodities, timing is everything.

“The cold chain needs to be precisely timed and maintained from the point of pickup to the point of delivery, as any slight deviation in the process could cause serious losses in product, business and customer satisfaction,” says Steve Taylor, perishable station manager for AIT Worldwide Logistics, Inc.

Smart Business spoke with Taylor about how the regulatory demands of temperature-controlled product distribution have evolved in recent years.

What are some key trends within current industry practices?

The demand for expediting perishable shipments has declined in the past several years as shippers and food manufacturers have trended toward moving their goods using slower modes of transport and deferred delivery services.

Less than truckload (LTL) schedules can pose serious problems in terms of meeting stringent delivery deadlines. To serve and adapt to these evolving customer demands, logistics providers have developed business models that allow perishables to be shipped over longer periods without compromising product integrity.

Customers are also becoming more proactive in taking measures to monitor the condition of their cargo as it is being transported. For example, the use of temperature recording devices has become more prevalent. These monitors are activated, placed into one of the cases and reviewed upon delivery to see if the product experienced any temperature variances while in transit.

What risks are involved with perishables not transported properly, and what can be done to mitigate them?

The first and most obvious risk is product spoilage. The losses result not only in adverse financial impacts, they can also contribute to waste, contamination and illness.

Temperature abuse can also drastically diminish a product’s shelf life, quality and value. Logistics providers should possess extensive knowledge on the type and amount of refrigerant and packaging material required to safely transport each temperature-controlled product, as they degrade at different rates.

For example, ice cream should be continuously maintained at a temperature of minus 20 degrees Fahrenheit. Similarly, food that is labeled as frozen must be maintained at a product temperature of minus 10 degrees Fahrenheit.

The final mile

In 2008, an estimated 192 million U.S. Internet users visited an average of 11.3 retail sites per month to make their online purchases. As online retail revenue continues to increase, its impact on the ways in which individuals shop has undoubtedly transformed many of the ways in which logistics providers distribute their goods and services.

“Business-to-consumer needs have become a growth engine for the transportation and logistics industry in recent years,” says Ray Fennelly, director of business development for AIT Worldwide Logistics. “This shift in buying patterns and business activities has presented tremendous opportunities for logistics providers, who have been challenged to develop a more robust and highly sophisticated B2C residential delivery service for their customers.”

Smart Business sat down with Fennelly to discuss how logistics providers have adapted to the in-home delivery expectations of convenience, speed and choice among their customers.

Explain how and why logistics providers have been trending toward developing in-home delivery services for their customers.

The proliferation of online technology to facilitate e-commerce, online shopping and the B2C sector has put the spotlight on in-home delivery services for logistics providers, who are trusted by retailers, vendors and consumers to coordinate and handle the ‘final mile’ of purchases from brand owners to consumers.

With the continuing need to drive down costs and deliver directly and efficiently to the consumer’s residence, the logistics market has been increasingly shifting away from B2B business models and moving toward B2C. Today, online distributors and Main Street retailers share the same concern in finding the most prompt, reliable way to market and deliver goods such as TVs, fitness equipment and furniture direct to the consumer’s door.

Consumers’ spending behaviors and buying patterns have drastically changed as a result of their growing confidence in the Internet. Before the dot-com boom approximately 10 years ago, moving large consolidated shipments from manufacturer to distributor to retailer was the industry norm. Now, logistics providers are commonly delivering merchandise directly to consumers in the comfort and privacy of their own homes.

What are the risks or challenges presented with in-home delivery services?

Several indirect and direct complexities are involved with a home-delivery service solution. For starters, technology’s role in streamlining delivery details and enhancing every aspect of communication is crucial — today’s Web-savvy customers expect to schedule online delivery appointments and receive automated e-mail responses and real-time status updates.

Delivering to private individuals instead of companies requires tremendous flexibility on the part of logistics providers. Getting access to delivery at a time that’s convenient for the homeowner often means you must be available to both coordinate and conduct their deliveries during weekday evenings or on weekends. It also means that you must be proactive in rescheduling appointments in the event that no one is home to accept the delivery or correcting a data entry error that has led you to the wrong address.

Regardless of consumers’ various service specifications, protecting both the home and the goods you are delivering is critical to ensuring customer satisfaction. Damage to walls, paint and carpeting are equally as detrimental as any potential damages done to the customer’s LCD television or treadmill while in transit. You also have to be mindful of regulatory concerns. For instance, individuals under the age of 18 cannot sign for the goods.

Essentially, the real challenge lies in ensuring that you provide the consumer a professional and quality experience from point of purchase to final delivery.

Describe specific service demands of in-home delivery customers.

The logistical requirements of supply chains extending to each customer’s address tend to be highly detailed and involved, as they include features and value-added benefits such as ‘white glove’ services, room-specific deliveries, professional installation, packing and unpacking, and debris removal.

While those services begin for logistics providers at the point of dispatch, the customer’s main concern is rarely about the lifecycle of his or her shipment. Instead, customers need to know whether or not you can be held accountable for meeting the delivery promise you’ve made to them. Empathize with the fact that their time is valuable — they have likely rearranged their schedules in order to be home when their goods are scheduled to arrive.

Similarly, ensure that your work force is courteous, respectful, knowledgeable and polite upon entering each customer’s private home, and represents your company in a professional manner upon delivery. Remember that, in order to successfully develop a comprehensive expedited in-home delivery product, you must first acknowledge the fact that customer satisfaction goes far beyond the actual service and delivery requirements.

RAY FENNELLY is the director of corporate development for AIT Worldwide Logistics, Inc., headquartered in Itasca, Ill. Spanning numerous nationwide locations and an ever-increasing network of international partnerships, the global transportation and logistics provider delivers tailored solutions for a wide variety of vertical markets and industries. Reach him at [email protected] or (800) 669-4AIT.

Going global

As international trade continues to surge and transcend national boundaries, it’s become nearly impossible to manufacture, sell or consume a product that hasn’t resulted from a global logistics solution at some point in its creation.

Because globalization has given way to diverse customer demands, countless overseas opportunities and fierce global competition, today’s logistics companies can no longer specialize in just a few select areas within the international marketplace.

“Ten and 15 years ago, logistics suppliers could quite comfortably become niche players, with a focus on either importing or exporting,” says Franco Lasagni, managing director of international at AIT Worldwide Logistics. “Globalization has pioneered many breakthroughs in the ways in which logistics providers conduct their commerce activities with networks of suppliers, manufacturers, distribution centers, customers and partners across the global supply chain.”

Smart Business spoke with Lasagni about how globalization has transformed the roles, supply chain relationships and business models of today’s logistics providers.

What are the risks and challenges involved in doing business on a global scale?

There are several key economical concerns involved. Longer response times, cultural barriers, foreign documentation, different time zones and lack of critical infrastructures necessary for data exchange are critical factors that can impede on expanding your reach into the global logistics marketplace.

However, geopolitical barriers are the biggest challenge of all. With the exception of Europe, the rest of the world is still affected by a much higher level of bureaucracy. Protectionism, which can take the form of tariffs, subsidies, import and export regulations, and anti-dumping legislation, has the potential to restrain trade and is without a doubt the largest detriment to foreign trade practices.

These challenges can best be overcome by selecting solvent overseas agents who reflect your business ethics and core competencies while acting as an extension of your company in establishing a local presence. Together, these partnerships work to innovate, integrate and sell not just a service to customers, but a transportation solution.

How has the role of a global logistics provider changed in recent years?

Only a few years ago, steamship lines and air carriers were the high-end service providers of supply chain solutions, whereas logistics providers facilitated shipping transactions as brokers. Compared to today’s environment, the role of freight forwarders was relatively simple and straightforward.

Freight forwarders began evolving into more diverse and sophisticated roles when transportation deregulation hit the marketplace. Deregulation first affected air carriers, then steamship lines, which found the emergence of new companies and service options unfavorable.

To respond to the overwhelming new competition, many had to take drastic steps in tailoring their existing business plans. Airlines began cutting costs and services as they struggled to remain profitable. A similar scenario applied to most steamship lines. Thus, interactions with the entire supply chain community and its customers were transformed.

As the industry scrambled to fit the market and serve its new needs, logistics providers recognized, redefined and embraced their new roles in the global marketplace as consultants to customers. Because of the increasingly collaborative and consultative nature of our business, the trend ever since has been one of improved efficiency in which goods are manufactured and services are rendered, requiring more of a customer-driven marketing model on the part of global logistics service providers.

What other globalization trends have placed increasing importance on logistics providers?

Several developments have contributed to the exponential increase in world commerce that the industry has experienced. First and foremost, the concept of global logistics wouldn’t be a remote possibility without the affordable and user-friendly IT solutions that make integrated tracking and tracing systems and real-time global connectivity part of the valuable services provided to customers by logistics leaders.

The realities and effects of a post-Sept.11 world also placed a permanent emphasis on the industry’s role within the international arena. Enhanced security measures and compliance requirements exacerbated the costs and processes of doing business globally and created red tape across the world’s transportation systems, triggering an immediate need for services.

Logistics leaders stepped in to educate, inform and assist customers on complicated customs clearance documentation, duties, taxes and various other issues that once had very little to do with transportation but have since become imperative aspects in building a secure and cost-effective supply chain.

The growth in logistics has also been based on the proliferation of trade lanes and investments in key markets, such as Europe, the Pacific Rim and South America, and in emerging regions, such as the Middle East.

Additionally, the marketplace has trended toward an increasing presence of third-party providers, who integrate warehousing and inventory management activities to store and ship their customers’ goods.