There’s a big profit lure for freight forwarders to want to manage project shipments, but a general lack of internal expertise — and patience — keeps many of these firms sidelined from the business.
Project shipments in no way, shape or form fit the mold of what most air and ocean forwarders are used to handling, which are discrete cargoes able to be loaded on pallets and into standardized containers. Instead they are often super-sized pieces that require highly specialized logistics skills and transportation equipment to move them.
These shipments are also extremely time-consuming, and that’s if you’re lucky enough to win the industrial shipper’s business from the competition. “We’re bidding on projects right now that will be realized two to three years from now,” said Heino R. Winkler, president of Global Projects Services (GPS), which advises many small and mid-sized forwarders on securing and handling project cargoes.
Winkler started Marietta, Ga.-based GPS in 2003 after working many years in the forwarding business. He witnessed first-hand the trepidation and knowledge gap among both his fellow forwarders and shippers when taking on these unusual cargoes.
“The margin for error with these shipments is undeniably small,” Winkler said. “If you mess up a container shipment, it may cost you several thousands of dollars in mitigated damages, whereas with project cargoes the penalties could reach well into the tens if not hundreds of thousands.”
Not to mention dealing with irate customers, if a shipment is mishandled. Large projects, such as equipment for power plants and factories, require timed deliveries. If one piece is late or damaged, it could throw off the entire construction schedule, Winkler explained.
Many large forwarders host project cargo divisions, often catering to the heavy machinery, oil and gas and now renewable energy sectors. These divisions are either grown organically or through acquisitions of specialty firms.
For example, C.H. Robinson Worldwide in 2008 acquired project cargo forwarder Transera International Holdings Ltd., based in Calgary, Canada. Earlier this year, Panalpina integrated its partner Apollo in Perth, Australia, to expand its focus on the oil and gas business to that market.
Yet there’s a predominance of small firms that specialize in project cargo logistics. GPS will work with these forwarders to attain logistics contracts from industrial shippers. “We’ll even sit in on meetings as either a representative of the forwarder or shipper, depending on the circumstance, to ensure the right things get done,” Winkler said.
One of the toughest parts for small project forwarders is developing strong and trusted relationships with counterparts overseas. During the past decade, many of these firms have joined networks, giving them the ability to more easily offer shippers global service while retaining their individual identities. There are a handful of forwarder networks specializing in project cargoes, including the Project Professionals Group, World Cargo Alliance Project Network, Freight Network Group, The Heavy Lift Group, and Worldwide Project Consortium.
Kevin Stephens, a 40-plus-year industry veteran and general manager of Brisbane, Australia-based Project Professionals Group (PPG), came up with the idea for his network about 15 years ago. Starting with 16 members, the group has evolved to 145 members in 100 countries. “Members enjoy country exclusivity with the exception of a few of the larger countries, which are culturally diverse and regionally remote,” he said.
Each PPG member is assessed an annual fee of 3,000 euros (about $4,270). The network also arranges annual conferences, exhibition attendances, and advertising and marketing on behalf of its members. It held its most recent conference in Rio de Janeiro, Brazil on June 15-17.
The network is highly visible at other industry events where project cargo opportunities are available, such as the American Wind Energy Association’s widely attended annual conference. At this year’s AWEA Windpower 2011 Exhibition in Anaheim, Calif., PPG, together with TransProject USA, operated a booth that was visited by numerous renewable energy companies. “All PPG participants gained invaluable contacts, leads and many genuine business opportunities,” Stephens said.
While many forwarders of general cargo suffered anemic freight volumes during the global economic crisis of late 2008 and 2009, project cargo generally remained robust as multiyear contracts were still being met by shippers throughout the recession. The business remains healthy today.
The biggest risk to project forwarders’ future is a looming shortage of skilled personnel. Winkler, who works with the WCA Project Network, was taken aback recently when he met with some Chinese forwarders, who wanted to enter the project cargo business with the hope of making big money. “We showed them pictures of multi-axle trailers and other equipment used in the U.S. that they’ve never seen before,” he said.
Stephens highlighted the problem of “an aging workforce and not enough qualified people to step in and learn their jobs. Although the inability to hire and retain skilled and educated employees afflicts other industries as well, the problem is particularly acute in the shipping industry.
“The problem is so pervasive that many companies are luring qualified professionals out of retirement as contract employees or part-time help in order to meet business demands. Pirating personnel from other companies is also a major concern,” he said.
Stephens said the situation is further exacerbated by the lack of students to pull from. “As a consequence of this dearth of qualified professionals, the shipping industry is in danger of being left critically short of skilled workers,” he added. “After years of steadily eliminating jobs, the industry may not have the manpower and brainpower to keep up with the world’s growing demand for project professionals.”
He noted PPG’s International Project Forwarding Education Program is tailored to the heavy-lift, project cargo industry and aims to add value through training that otherwise would take years to attain.
GPS has started offering one-day project forwarding seminars in China that coincide with WCA’s annual conference, which will be held in Shanghai on Sept. 26-29.
“It is project forwarding 101,” Winkler said. “We basically outline what you have to watch out for when entering the project cargo market.” — Chris Gillis