The Stories Customers Tell Us About Their Freight Forwarding Business

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We are forced to run lean

We are forced to run lean

The rumours had spread fast. Steve, the CEO, had been given the hard word. Now it was his turn to brief the collected management team.

“Morning team” Steve, the CEO, started. “As you know we have been under pressure for some time to improve our overall performance. This industry has become increasingly competitive and, in some cases, so competitive that companies with cash are choosing to buy smaller firms just to get access to their volumes.”

“The board does not want to follow that route. Instead, they want us to grow our performance with an excellent team that outperforms the competition. That means we must be the best we can.”

“With the direction the forwarding industry is heading, we will need a breakthrough in productivity otherwise we will become trapped in a race to the bottom. The question is from where will we get this breakthrough.”

“Jeff (Sales Manager), you’ve focused on premium services, and you are being competitive on rates to win the volumes and offering all-in rates. The market seems to be responding to your offers but our core margins are not rising as a result. We need to be even more competitive.”

“Carol (Operations Manager), you’ve been freeing up capacity across your teams, whilst handling rising volumes without additional resources. You’ve brought in temps to handle the surging, training operators to specialise and be more efficient. You’ve managed to keep up with sales, which is great, but under all that pressure the incidence of missed cut-offs is too high and it’s costing us in terms of penalties, late charges, and billing delays. We need to tighten up the performance and be more efficient. We cannot afford to drop the ball.”

“What the board is seeing is that, even with all our effort, the overall performance is not improving. Don’t misunderstand me here. Our efficiencies are up and comparatively we are doing well compared to many of our competitors. But it is just not enough. We need a breakthrough.

“Whilst our cash flow remains tight, we must continue being careful to only make investments that have an immediate and lasting payback. We have to find ways to be even more efficient with the people we have but we must also enhance our competitive edge and grow sales. If we can do this then we will prosper.”

“It’s tight guys, but we can win this one. I need ideas, solutions and breakthroughs otherwise we will just be forced to run even leaner and hope a disaster doesn’t happen.”

“I want this business to be a growing profitable business. I want us to enjoy coming to work again.”

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The forwarder's dilemma

Analysis of the Run leaner issue

Steve has been backed into an unpleasant corner by a Board level demand to improve performance. Such a demand he would normally deal with by increasing the pressure on his team and forcing Carol to run a tighter leaner operation plus reorienting the sales team to focus on high margin sales. Steve team is expecting that directive.

Most businesses faced with this pressure would look to cut staffing costs as the easiest option ‘trim some fat’. However, getting rid of people in forwarding generally results in an increase in late clearances or rushed customs entries. Surges are common and not having staffing for the peak is dangerous.

The competitive nature of forwarding is brutal when a firm fails to handle surges. For Steve the issue is compounded by his people having already ‘leaned’ the business as much as they consider safe. Yet Steve knows he is pushing them to lean even further and he knows this approach is unlikely to work. Hence Steve feels backed into corner.

The challenge for Carol is to find a new way, a breakthrough in productivity, and frankly none of the managers believe that is possible. They would have heard of it if it existed.

The challenge for Jeff is to find a way to sell higher margins without increasing the load on operations and given how competitive forwarding is this doesn’t seem possible either.

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