Surviving the ‘perfect storm’ Independents shine as light appears at the end of the tunnel WE are going through one of the most testing periods in the history of post-war logistics. Not even the fuel crisis of the 1970s, the recession of the early 1980s, the first Gulf war, SARS or 9/11 has matched the intensity and dramatic decline in volumes of world trade, be it air, ocean or surface. For sure, many companies within the supply chain are struggling – airlines, shipping lines, sales agents, handlers, truckers – have all had to rapidly re-examine their business plans and, in many cases fight for survival. The multinational logistic companies too have had to take tremendous hits and have been busy desperately reducing costs through manpower cuts, changes in strategy and cutthroat pricing. Deutsche Post DHL recently announced a 94 per cent drop in profits, UPS announced a big drop in logistics earnings and the other large forwarders such as Panalpina, Schenker and K+N have found profits plummeting and shareholders wailing in agony. But what about the smaller independent forwarders? Have they, like DHL’s Hermann Ude suggested, suffered even greater woes, relying on single or limited markets? Or have the close personal service and niche specialisations helped independents to ride the worst of the storm? Although the summer period is likely to provide the most difficult trading conditions ever experienced by the industry, early indications are that small and medium forwarders are likely to endure the downturn better than the less agile and adaptable multinationals. Many have even benefited thanks to close personal relationships with customers. The widespread predictions that hundreds of smaller agents would be forced out of the market are yet to materialise and the scale of bankruptcies falls below all analyst predictions. In total a collated appraisal from forwarders associations in three continents, puts bankruptcy rates for independent forwarders for the previous 12 months at around 0.8 per cent. Indeed many small forwarders have taken the opportunity to re-examine their business plans and strategies and focus on delivering quality service. There is growing evidence that the summer period will see the end of the worst of the downturn and that the autumn ‘peak season’ may be better than originally feared. Airfreight is generally accepted to be ‘first into recession and first out’. Heads of cargo of a number of key airlines are predicting that the downwards year-on-year trends of recent months will level out and even show small signs of growth by the end of the fourth quarter. “Inventories are reaching critical levels” said Carsten Spohr, chief executive officer of Lufthansa Cargo “companies will be forced to restock.” Inventory levels are a key indicator of the prospects for logistics and airfreight in particular. Monica Tappi,Vice President of the WCA Family of Logistic Networks said “Our members are reporting small but encouraging indications from their customers, the shippers and consignees. As the record half of 2009 begins we may see the supply chain reconnecting and manufacturers, distributors, suppliers and buyers looking to replenish inventory”. More promising news has come from the International Chamber of Commerce, that stated in May that the world economic climate index rose in the second quarter of the year for the first time since 2007 as a result of more favourable expectations for the coming six months. ICC Secretary General Guy Sebban said that the report gave him reason for cautious optimism. “After four months of very depressing news we are finally seeing some signs of hope,” he said. “The outlook for the next six months is positive for most areas of the world, including the United States and Europe.” Monica Tappi,Vice President, WCA Family of Logistic Networks Small but encouraging indications In addition share prices have been rising in key markets showing a return of confidence and the oil price has also risen as speculators gamble on an increase in demand later this year, as manufacturing begins to recover. With airfreight likely to show the first signs of recovery, ocean freight volumes are predicted to begin a gradual recovery from the first quarter of 2010. When the recovery begins, it is the independent agents that have the agility to move quickly and gain the first advantage. The key is to plan in advance and have your strategy in place to take full advantage, while the multinationals are distracted by ongoing measures to reduce headcount and exposure to shareholders wrath. Airfreight is predicted to recover ahead of ocean freight