The supply chain is now a demand chain

The judges of this year's IFW Awards were unequivocal in their praise of the winner of the Freight Forwarder of the Year category, Uniserve. They said the company had "demonstrated marketleading strategies to attract new customers, win tenders and retain business from some the most demanding blue-chip shippers in the world".

The UK-based freight forwarder, which also scooped both Sea and Air Freight Forwarder of the Year gongs at the BIFA Awards at the beginning of the year (the first time in the 20-year history of the BIFA Awards that one company has won both), put forward an entry based on its contract win of the logistics of a major UK-headquartered retailer, which has a global supply chain feeding its international network.

Grant Liddell, Uniserve's key account director, explains: "We won the contract after explaining and demonstrating the value-add that we could bring and deliver quickly, as well as the cost savings and streamlined 'no risk' implementation of the project, ensuring immediate benefits were seen."

He says the migration of the business was done well ahead of schedule, which was mainly down to getting the IT systems to talk to each other. The flip-over itself only took a week or so.

"Our approach was to go in there and totally 'smother' the contract with experienced people, and provide real value-add and commercial advantage in an incredibly competitive retail sector where differentiation generally brings success."

However, "value-add" is a term that can mean many different things, as Liddell acknowledges: "It's different for different contracts and services, but here it was about attending to the client's needs, now and where they want to be in the future, with innovation and best practice initiatives.

"This was led by a contract director - in this case, myself - and involved understanding fully the client's desires and expectations, supply chain modelling and a lot of focus in setting the service level agreements (SLAs) and key performance indicators (KPIs) based around these criteria, so that our performance is constantly measurable.

Speed of decision

"There is a pretty intensive management of the account, and being that hands-on gives the client real speed of decisionmaking and market advantages."

On a daily basis, there are a lot of people behind the account, including an operations manager, contract manager and contract director, and it also involves putting Uniserve staff into the customer's facilities, as well as vice versa - to the extent that it is providing the shipper with the latest market intelligence so it can position itself at the forefront of its market.

"We're involved in the coaching of their staff in logistics operations, as well as conducting regular familiarisation visits to all parts of the supply chain globally, in conjunction with our global overseas operations and partner carriers.

"For example, we generally use Stansted Airport for our air imports, where we have an airside facility, and we organise site visits there, demonstrating the benefits with aircraft-to-warehouse transfer. We also extend similar tours of our ocean freight operations and ports."

This approach reflects the way that the supply chain is changing, particularly since recession began to bite and shippers naturally looked at logistics as an area to reduce costs.

"The supply chain is definitely becoming a higher profile aspect of any global business operation, " Liddell agrees. "The number of customers taking a greater interest in it has increased significantly since recession set in and is seen as a target area to strip out cost, both directly through freight pricing and efficiency from business overheads.

"People are getting smarter about what they want from their supply chain. That's led to a lot of interest, and there have been more opportunities this year than during the last 10 years: if you have a real proposition and can deliver change, then you will be listened to very carefully by the people that make the decisions."

Challenge into opportunity

It's a classic case of turning a challenge into an opportunity, and Liddell says Uniserve takes an aggressive approach during tougher times. Hard work now pays dividends in the future.

"We have traditionally been a business that grows during recessions. We then develop those contracts and see organic growth during the good times. That's happened again this time: clients that aren't ours will entertain seeing us now, whereas for the last three to five years, you simply couldn't see people - they weren't interested; there was no pressure to save costs and a mediocre service with little contribution to success was just accepted.

"Now the focus is all on the supply chain as the number one area where a shipper/ importer can save costs - no one made money from their supply chains, after all, but everyone can save money with an improved platform."

The other area where shippers have sought cost-savings is inventory, and this year's peak season has demonstrated exactly what happens when shippers suddenly need to restock at a time when carriers of all modes have cut capacity.

"On the Asia-Europe routes, trade is 20% down year-on-year, although in October it was down less than this, " Liddell says.

"However, according to my figures, sea freight capacity to the UK is half of what it was, and some of the Chinese ports are still looking congested.

"There are containers on the docks because they've been rolled from one vessel to the next, but when there is up to a 50% shortfall in the supply-demand model, that is only to be expected.

"The air freight market is more congested - capacity cuts have really taken their toll and freight rates have gone to the highest level I think they've ever been."

The uncertainty of shippers in predicting volumes for this year's peak compounded the situation, particularly in the air freight sector, and left many forwarders struggling to find capacity when it suddenly became urgently required, as Liddell illustrates.

"We would normally do three months of aircraft charters in the peak season to complement our scheduled carrier departures, and we would normally sign charters contracts in April and May and get a good deal. But we weren't able to do that this year, because a lot of the retailers were unable to forecast peak season demand, or simply didn't expect there to be any.

"Even the transpacific unexpectedly picked up, and that has a serious effect on us. The US market has a 20% premium on Europe, in terms of rates, and so all the charter operators were all over the US market early on in the spike, even though there was really strong demand into Europe.

"Charter rates went sky-high and, because there were so few charters, freight began to pile up in a queuing system experienced by all freight providers.

"Really, it was a very similar model experienced in surface freight earlier in the year, and followed the same trend."

The air freight backlog out of Asia was put under further pressure by the cargo rollovers in the sea freight sector.