Small Exporters Increasingly Turn to Shipping ‘Travel Agents’
Athletes all over the world use bats, gloves, shoes and other sports items made by Mizuno Corp. of Japan. Transporting all of those items from Mizuno’s factories in the Far East could be quite a chore. Gary Susha, director of logistics for Easton Sports, Mizuno’s Burlingame, Calif.-based North American distributor, has found a way to make his job more manageable.
Instead of poring over schedules and rates of different steamship lines, Susha contracts with CF Ocean Service of Carson to move some 200, 25,000-pound containers a year. “It is acting as my traffic department,” Susha said. CF is a freight transportation service concern that is carving out a place for itself in the Pacific trade as well as other international trade routes. A subsidiary of Palo Alto-based Consolidated Freightways Inc., it is part of a growing movement toward the use of middlemen to buy freight transportation.
The use of third parties has jumped 24% since 1982 and is expected to grow another 16% by 1990, according to a survey conducted last year by Inbound Logistics magazine and Reebie Associates, a Greenwich, Conn., transportation management consulting firm. The survey, designed to shed light on the market penetration of third parties, included responses from about 1,500 companies that buy transportation services. The survey results indicated that third parties represented about 19%, or $44 billion, of domestic transportation in 1986.
CF is the type of company known in the transportation industry as a NVOCC (non-vessel operating common carrier), a category that is a relative newcomer in third-party shipping--a, business dominated by freight forwarders, shippers’ agents, brokers and consolidators. The Inbound Logistics survey showed NVOCCs with a 12.3% share of the third party business, compared to 29.6% for freight forwarders, who act as agents for exporters. However, another survey is planned to more clearly distinguish domestic shipments from international shipments, said Richard G. Trenery, a Reebie Associates principal. NVOCCs appear to be more important in international trade, he added.
Consolidate Shipments
NVOCCs could be described as travel agents for freight. They generally provide more comprehensive services through a network of contractual relationships. In addition to buying space on carriers, they offer shippers freight handling and documentation services for exports and imports. Perhaps the most important service offered by NVOCC’s is that they “opened up the export and import industries to small shippers,” said Colin E. Unsworth, president of Unsworth Transport International Inc., an NVOCC based in Linden, N.J.
NVOCCs came into being in part because steamship lines did not like handling small shipments, Unsworth said. The NVOCC’s consolidate small shipments into the large containers that are now the standard for freight carriers. And many of the some 2,000 NVOCCs operating are capable of coordinating shipments from the remotest points by whatever means available. “If we have to, we’ll ship by camel,” Unsworth said.
The move to containerization made NVOCCs possible, but other factors contributing to their growth, according to industry sources, include the deregulation of transportation, which allowed more players in the industry. The growth of NVOCCs hasn’t been without problems, including competitive tangles with freight forwarders and a long-running legal dispute with the International Longshoremen’s Assn. over whether ILA members must stuff containers within 50 miles of ocean ports. The still-unresolved dispute primarily affects the East Coast.
Third parties, such as NVOCCs, are appealing because “most shippers don’t like to deal with a lot of different entities,” Trenery said. But several entities come into play in international trade because of import and export regulations, he said.
“NVOCCs can perform a number of services under a through bill of lading (one contract covering international and domestic transportation), that allows exporters to enter into a market that they haven’t been in before,” said David Westurn, CF’s vice president of marketing and sales.
The company claims to be the most comprehensive U.S. ocean freight transportation service concern, offering door-to-door transportation by land and sea. The company was founded in January, 1987, when Consolidated Freightways merged its three international shipping service companies. They include ContainerFreight Corp., a containerized cargo handling business, Kam Container Lines, an NVOCC, and CF Export-Import, a customhouse broker and NVOCC that concentrates on import cargo from the Far East. The creation of the service was a means for Consolidated Freightways to “expand our product availability in what was becoming a very large world market,” said Westurn.
For Easton Sports, CF Ocean Services provides “both convenience and price,” Susha said. The company arranges all of Easton’s shipments from factories in Taiwan and South Korea and guarantees five departures a week, he said. “We could work with a lot of different steamship lines, but that would be cumbersome,” he added. If the company concentrated on one steamship line it would run the risk that the shipping company’s schedule wouldn’t correspond to the times that factories are ready to ship products, he said. “I could lose a week of transit time.”
Since its creation, CF has demonstrated an ability to handle challenging assignments. In January, the company handled the shipping of an entire soft drink bottling plant, including oversized equipment, from South Sioux City, Neb., to Hong Kong.
Growing Business
Sunshine Technology International of Hong Kong bought the plant, which included an entire beverage manufacturing and production line with all of the necessary mixing, dispensing and bottling machinery, to be reassembled for a bottling plant scheduled to begin operating this summer in the People’s Republic of China. Some of the equipment moved by truck from Nebraska to Oakland and some moved by truck and rail for ocean transit to Hong Kong.
Within the past six weeks, the company’s container freight station at Long Beach has also prepared the shipment of four 1988 Rolls Royces, three 1988 Porsche 924 two-door sedans and a restored, 1956 Ford pickup--all bound for Japan. It has also handled blood separation and analysis equipment and dental equipment bound for the China, herbicides going to Singapore and computer printers destined for Australia.
Westurn said he sees the NVOCC business growing as “we get more into a global economy with different geographical areas opening and more people shipping internationally.”
