Freight Forwarders: The lifeline of logistics industry
Freight forwarders are an integral part of logistics sector transporting huge chunks of cargo. CARGOTALK speaks to experts to know the global practices that freight forwarders need to adopt to move cargo proficiently and the issues forwarders are facing a
Hemant Bhatia President, The Air Cargo Agents Association of India
The two important issues–‘ease of doing business’ and ‘transaction cost’ have to be efficiently and effectively implemented to provide a level playing field to the Indian freight forwarding and logistics industries in tune with global standards. The incumbent Union Government has been implementing many measures to facilitate trade and industry in the conduct of their business. Currently the express cargo industry (courier business) has been provided various facilities, whereby their goods can be cleared in a matter of a few hours, whereas the freight forwarding industry has to follow cumbersome procedures and submit various documentation, thus taking them much longer for clearance of goods. A level playing field should be provided to all segments of goods which are transported by air (air freight, courier, air cargo charters). With regard to taxation issues, the freight forwarding and logistics industries are currently grappling with numerous demands from the service tax authorities all over India for payment of service tax for various types of transactions. Such demands are not in tune with the applicable regulations in developed economies such as UK, Australia, Singapore where similar transactions are exempted from service tax.
Bharat Thakkar Past President and Permanent Member - Board of Adviser ACAAI and Joint Managing Director, Zeus Air Services
Freight forwarders are ‘unsung heroes’ - the back bone of economic strength of our nation and are responsible to help exim maintain their target, without complaining in spite of no industry status in the changing times. There is variation of roles between a travel and a cargo agent. A passenger can buy a ticket online, walk through the terminal/regulatory, checks-in and that is it. But a cargo agent arranges customs entry applied for gsp/certificate of origin, pick up goods, weigh, mark, affix airline awb/handling labels and several other things. Efficiency in getting freight off an aircraft is ludicrous. If passenger can get bags off an aircraft in an hour then why can’t we handle air cargo with some of the same efficiencies? Every stakeholder needs to deal with this crisis, as business Is down due to global slowdown. The moot question remains, ‘Why are we not able to reach the levels of air cargo uplift that other countries have?’ We need to set a milestone that we can achieve in 2016 and at least we can look back in 2017. Airports have got to lead this change here and not always look to reduce free period without accountabiliy.
Cyrus Katgara Partner, Jeena & Co
Forwarding business is ever evolving. Conventionally the value addition of the forwarders was to make the cargo ready for carriage. That required both ensuring its airworthiness or seaworthiness as well as accurate documentation for compliance with transportation as well as customs compliances. Forwarders also are expected to optimise the costing by appropriate consolidation route planning and choice of carriers. Globally, in addition to these functions forwarders now need to become active part of an integrated end to end supply chain with demands on value added functions of IT integration with customers and other stakeholders as well as aligning physical handling and processing of cargo with the last mile distribution requirements at destination. In India we need to develop such capability with the homegrown companies too. Corporate social responsibility and risk management are the emerging concerns globally and we need to build capacities to address such concerns of global buyers.
We are in a peculiar business of trading a highly perishable commodity that is air/sea freight. Such transaction entails high volume with high financial, compliance and security risks while the stiff competition keeps pulling down the margins to its lowest levels. In order to survive such a tough business environment high degree of competence is required from the staff and the processes and compliance checks have to be calibrated and fine tuned to the minutest levels to avert any potential risks. In India the additional challenge is thrown by the slow judicial process that increases the financial risks.
Arnaud Cauchy MD, GEFCO India
On the global front, freight forwarders need to have a strong international network so as to support the customers and the regions that they operate in. It is very crucial in our industry to provide door to door service in the most efficient and timely manner across all regions of operations for all the global customers; it is only through this that freight forwarders would be able to bring value to the customers’ supply chains while enabling them to achieve greater growth and competitiveness.
Primarily there are two main issues forwarders are facing across the globe. The first one is the process of free circulation of goods. Freight Forwarding Companies will need to have an Authorised Economic Operator (AEO) license that allows the entire process to be certified. This has been put in place in the markets like the US but it is still not in practice in other regions. Acquisition of this license will ensure the safe and secured services in the transportation of goods. It will help in assuring customers about the safety and security of their goods; additionally also aid in streamlining the custom clearance processes and making them transparent and user friendly. The second issue that is broadly faced by the freight forwarders is the custom clearance processes. Customs processes at present, are very heavy and tedious and thus, there is a need to simplify the processes across globe. There has to be a necessary measure to expedite and simplify the process which will help in reducing transaction costs for trade.
R Jayakumar Chairman, Jayem Logistics
Let’s talk about some insight on forwarding industry. Worldwide the situation of freight forwarding industry is grim and there are no signs of recovery at all, not at least till 2017. Freight prices have dropped significantly in the history of ocean cargo.
Globally all forwarding companies are going through tough times; capacity is huge and demand is pretty low. Cut throat competition has made this industry suffer a lot, all trade lanes Europe, US, China, India, Singapore are bleeding. All forwarders, MNCs or Indian companies are incurring heavy losses due to rate cut steep drop in freight rates.
Couple of decades ago India was an emerging market for most of the MNCs in order to support their global customers. Multinational forwarding companies brought their technology and best practices to India and processes became easy to adapt and advanced technologies brought efficiencies in the work culture, visibility and tracking.
Modern material handling tools has increased workers productivity and minimised the damages, and high-tech surveillance brought down the pilferages. Government of India has taken all necessary steps to modernise the trade policies and infrastructure for better handling, efficiencies, and economy.
Huned Gandhi Managing Director, India Air & Sea Logistics DACHSER India
Freight forwarders are indeed a very integral part of the supply chain and the industry has been working relentlessly to provide high quality logistics solutions to customers.
Standard global practices are very important as our customers are going global and they expect the same services in Europe, Americas, Asia and other distant markets. It is also important that freight forwarders align themselves with global best practices like GDP, AEO to ensure that the shipments are handled smoothly and security is not compromised within the transportation chain. The need for a very high degree of specialisation and certifications based on global practices is the future.
Vineet Chadha Managing Director Combined Logistics
The freight forwarder doesn’t actually move the freight itself, it acts as an intermediary between the client and various transportation services. Sending products from one international destination to another involves a multitude of carriers, requirements and legalities; and to handles the considerable logistics of this task for the client is a freight forwarder’s task.
Freight forwarders has to deal with numerous issues to play in tune with the global standards. Freight forwarding services negotiate the best possible price to move the product along the most economical route by working out various bids and choosing the one that best balances speed, cost and reliability.