Small freight forwarders will just disappear

INDEPENDENT freight forwarders have expressed their outrage to Air Cargo News at comments made by DHL Global Forwarding chief executive officer, Hermann Ude (right), in a recent interview in the Financial Times.

In the interview Ude sets out his reasons why he feels that many small freight forwarders are doomed, and that only the multinationals have the power to survive and prosper in the current financial crisis.

Ude believes that there will be significant consolidation in the freight forwarding sector as smaller companies collapse due to clients delaying payments or changing routes. “Many of these companies will just disappear,” said Ude, “I now see a big attempt by many companies to prolong their pay terms. For us, if a customer does go bust and we still have to pay the carrier, we would survive. But a smaller company would not.”

Pouring more oil on the fire, Ude added that smaller freight forwarders in Asia did not have a sufficient network to divert their goods shipments to the Middle East and other healthier markets and away from the depressed markets in Europe and North America. “Many [smaller companies] rely on one or two trade lanes. If the strategies of their customers change very quickly, as they are now, they cannot adapt,” said Ude.

Ude believes the collapse of small companies will allow DHL Global Forwarding to gain market share  and “at least hold our profitability next year”.

Ude added that the industry was particularly fragmented in Asia and these forwarders face the biggest challenge.

So far, one of the strongest responses has come from Julian Keeling, chief executive officer of Consolidators International. He accused Ude of being “full of his own self importance to the point of arrogance in many of his statements”.

Keeling added that he felt the oddest part of the “diatribe” was Ude’s claims that smaller forwarders cannot adapt to changes in trade lanes. “One of the greatest tools in the small forwarders’ arsenal is the ability to quickly respond to changes and tailor their business to meet the customers’ new requirements. It is the large forwarder that is saddled with internal rules and regulations that causes great consternation for the customer when that large forwarder cannot move quickly enough to adapt to the new environment.”

Keeling also dismisses Ude’s claim that DHL will squeeze out the smaller forwarder accelerating their demise. “I believe that there will be one or two huge failures in the large multinational ranks and furthermore I think that DHL could well be one of them. The owners have already taken a bath to the tune of US$ billions in the States [DHL Express].” Keeling also alleges that “DHL forwarding is suffering from major moral problems” and added that he believes many of Ude’s senior colleagues will leave to work for or own small forwarding companies. “I have great respect for my fellow small forwarder customers and my experience is overall they are far better managed than the vast majority of their larger competitors.”

Keeling provides no evidence of ‘poor morale’ at DHL, however, the company must find a replacement for DPWN chief financial officer, John Allen who will leave in June.

The views of Paul Evans, managing director of the independent freight forwarder EMS Cargo, were typical of the response Air Cargo News has received from independent freight forwarders. “I would like to thank Hermann Ude for his comments regarding small freight forwarders facing failure. His forecast on gaining ‘marketshare’ (not people, friends, customers, partnerships) will help smaller forwarders a great deal. It appears that his strategy is to go after cash strapped customers who are struggling to pay on schedule. Please Mr Ude, find them and take them as apparently DHL are able to take the losses when they go bust.”

Evans added that “should any commercial exporting or importing company read this, and you cannot pay your bills, please do not leave your debts with a small forwarder. Mr Ude needs you to increase his ‘market share’”.

In response to the criticism DHL Global Forwarding stated: “Of course Hermann Ude in no way intended to appear arrogant, or wanted to offend any competitor. Rather to the contrary he expressed his concerns about the rise of smaller and/or single tradelane-focused forwarding companies leaving the market in times of increasing pressure.

“However, as you can easily reconcile from IATA statistics, he only stated the obvious. In the airfreight market the top forwarding companies (DHL Global Forwarding, DB Schenker, Panalpina and Kühne + Nagel) increased their market share from 23.6 per cent (2006) to 26.5 per cent (2007). While 2008 IATA statistics are not available yet we expect this trend to have continued.”