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BIFA vIEW / NEWS

ISSUE 1 2010

If you can keep your head while all about you are losing theirs ... you’re probably a freight forwarder

The freight industry thought it had enough on its plate...and then European airspace was shut down. But the turmoil of the past few days has given the industry a chance to demonstrate its most important quality – resilience.

Managing the unpredictable is key to meeting freight industry challenges, says BIFA director general, Peter Quantril.

The unprecedented closure of European airspace clearly shows that managing the unpredictable is important for any company involved in international supply chains. As I write this column, airspace in Scotland, Northern Ireland and Northern England was due to reopen, but with

flight restrictions remaining for most of the rest of the UK. By the time you read this, the situation may have improved, although the airfreight backlog will probably take many days, to clear. The disruption has caused real problems for those trading perishable goods,

including food and flowers, vital pharmaceuticals, important medicines, electronic components and essential spare parts which depend on airfreight. As ever, BIFA members have used their imagination to devise alternative services to try to keep freight moving, including shipping by surface modes. This has been a perfect

example of a dynamic and constantly changing situation confronting an international freight industry that has passed through a ‘trial by fire’ over the last 12 to 18 months. A couple of months ago, eagerly-awaited

demand,

particularly for exports from Asia ran headlong into capacity constraints driven by the significant space reduction of the last year. Peak season was ever thus, but the economic environment

exacerbated

the mismatch of demand and capacity. Such events ask the question:

What will the airfreight forwarding industry look like going forward? Will carriers become reluctant or unable to finance additional capacity or seek to outsource that capacity

entirely? Consolidation in the airline industry is likely to continue, despite the difficulties of integration, in the belief that scale will address the problem. Whatever the shape of the sector, the forwarder’s skill become even more critical in meeting customers’ needs in a market where reliable forecasting is increasingly difficult (even without acts of God), the market more volatile and the need for professional and creative solutions even more fundamental. In seafreight, carriers

slashed capacity in 2009, and dramatically services.

restructured Idle containership

capacity fell to about 1 million teu or 7.5% of the world fleet in 2010, its lowest since February 2009; there will be fewer than 20 idle ships of over 5,000teu by June as demand rises with the introduction of new line-haul services for the peak season. Over the last few months, our

members have seen containers rolled over and embargoes placed on bookings. For sure, global supply chains need viable air and ocean carriers, but as the ‘glue’ in those supply

chains, freight forwarders need measured restructuring, not knee-jerk reactions, which are not constructive and just lead to frustrations for forwarders and our shipper clients alike. This was a brutal way of

solving a problem. Forwarders’ clients build shipping line schedules into their supply chain planning. Rollovers and booking embargoes wreck it. Supply-demand dynamics can

be pretty tangled in the freight transport business, and not just during a global economic downturn. With acts of God thrown into the mix, such as the Eyjafjallajokull volcano, that’s unlikely to change with a return to economic growth. For sure, the transition from recession to recovery will have its ups and downs. The effect of the downturn

on the freight transport and logistics sector has also been mixed. Some businesses have actually grown, others have barely survived and many have been damaged. What is certain is that business confidence has been badly hit and will take time to recover. Most commentators agree that recovery will be a long

haul and it is probably a good idea to plan for that. Part of that planning will be the need to find a new generation of leaders for the industry and to help them develop their skills. The creative thinking demonstrated by our members’ staff at all levels clearly demonstrates that there are plenty of talented individuals ready to respond with effective solutions. Clearly there are freight industry leaders in waiting. The environmental, security

and cost challenges faced by everyone in supply chain management are not likely to go away in 2010. Furthermore, BIFA members must contend with trade facilitation, compliance and supply chain security issues daily. Is the freight industry really

on the road to recovery? Who knows? But one thing is sure: the challenges faced by BIFA members, service providers and the wider trading community will increase as the country emerges from recession. Strong and visionary leadership will be key to meeting those challenges, as well as the ability to manage the unpredictable.

Global crisis set to reshuffle the trading pack for Britain, say govt experts

The Government is exorting British businesses to ‘take it to the world’ and start exporting – but have we been looking in the right places to do business? The global financial crisis could completely reshuffle the league-table

of countries that the UK does business with, say the authors of a new report commissioned by promotion body, UK Trade International. For many years, the country’s top trading partners have included the US, Germany, France, China and Japan; by 2014, the study predicts that the top ten would be, in order, China, US, India, Libya, Ukraine, Russia, Romania, Korea, Mexico and Singapore. Lead author, Professor Peter Buckley of Leeds University’s Centre for International Business, predicts that the big industrial economies will be too burdened by debt and unemployment to make a rapid recovery from the banking crisis, leaving the way clear for other countries to overtake them. In general, Eastern Europe and Asian countries will increasingly replace Western Europe nations as the most promising markets for UK companies. Outside the top ten, Egypt and Pakistan might become a bigger market for UK firms than Canada or Saudi Arabia, he points out. This is not the first study of international trade prospects, but it is the first to concentrate on the UK’s international trading partners. Professor Buckley adds that other studies have also tended to concentrate on the so-called ‘BRIC’ nations - Brazil, Russia, India, and China – while ignoring other up-and-coming places to do business. “There are a lot of surprises – for example Libya, Ukraine , Mexico and Argentina.” Interestingly, Argentina was once among the world top ten economies – but that was in 1911. Professor Buckley acknowledges that studies of this type are predictions and

that they do have their limitations. They can’t really take into account wars and insurrections – which clearly will reduce a country’s international trade – because it is hard to put such risks into numbers. It’s possible that internal unrest might increase in, say, China to the extent that it affects the country’s ability to do business, but no one can really quantify that. “However, we really would like to update this report – it depends on funding

– and if we could, we might make it more sophisticated and take some of these factors into account,” he said. That said, trade and business is surprisingly resilient, adds UKTI’s international

trade director, Mark Robson. Places like Israel or Northern Ireland continue to function economically, despite the troubles that frequently hit the headlines. Similarly, the study does not take into account countries signing free trade agreements, or factors like EU membership, even though these clearly boost trade levels. The on-off saga of Turkey’s EU membership looks set to run for a while yet, though no one can predict when it will end or what the outcome will be. It can be difficult to predict exactly when a free trade deal will actually take effect – even the one that the EU recently signed with South Korea has actually not come into force yet and no one can say for certain when it will. Sometimes, adds Mark Robson, the world of diplomacy takes unexpected turns. “For instance, the EU trade commissioner visited Vietnam recently and, completely out of the blue, the Vietnamese said they wanted to have a trade agreement.” The EU delegation had to move very quickly to prepare a document in a matter

of hours. (For more information see: www.uktradeinvest.gov.uk)

Happy times here again?

World trade could rebound in 2010, reversing much of the record decline in 2008, said the head of the World Trade Organisation, Pascal Lamy. In its latest economic analysis

published in late March, the WTO said that developed world exports are expected to increase by 7.5% in volume in 2010 and those from the rest of the world by around 11%. This would go a long way to reversing the 12.2% drop in global trade in 2009 and, if it continued, would take global trade past its 2008 peak in a further year’s time. Pascal Lamy said that the renaissance

could be derailed if world governments resorted to protectionism in a bid to cut dole queues at home. However, all the evidence so far suggested that they were not in fact doing so. Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36