Finance for Forwarders?

Finance for Forwarders?

The UK’s export credit agency, UK Export Finance (UKEF) has pledged support to exporters and supply chain SMEs (small and medium sized enterprises) by accessing finance through their banks.

This scheme is set to provide thousands of businesses access to government backed finance. UKEF will provide working capital loans and bonds to SME customers and direct trade finance for suppliers who support exporters.

UKEF are working in partnership with five major high street banks (Barclays HSBC, Lloyds Banking Group, RBS/NatWest and Santander) to give companies access to the finance through their bank.

The Secretary of State for International Trade, Liam Fox commented:

“As an international economic department, this new partnership shows the Department for International Trade’s commitment to help small businesses seize the global demand for British exports. Providing easily accessible finance, backed by UKEF’s guarantee, will lift a common barrier to exporting. Providing finance to suppliers as well as exporters means spreading the benefits of global trade, supporting more jobs and growth for companies large and small.”

A new digital platform is being launched in conjunction with the scheme to ensure the quickest transactions.

The Head of Barclays Corporate Banking, John Mahon added:

“Delegated authority will make accessing UKEF guarantees simpler for many businesses and will help companies we work with grow more quickly. Both exporters and companies involved in international trade through supply chains will benefit, and we look forward to further collaborating with UKEF and our colleagues across the industry to find more new and innovative ways to help UK businesses take full advantage of export opportunities.”

UKEF has recognised the importance of supply chain SMEs and obviously wishes to strengthen its base. This becomes imperative as the UK heads into the political abyss once it leaves the European Union. But simply throwing money around is a cop out.

Indirectly investing through company banks is evidence of tunnel vision. UKEF can’t see the broader threats to industry and how a deregulated system can fail the public. The government must provide support with direct action and take responsibility for the export industry.

Providing support to major UK ports should be on the agenda. Ports are the gateway to the world and act as the foundations of international trade. But British ports are owned and ran by private companies. These companies often suffer from financial constraints meaning investment varies from port to port. Therefore establishing a registered body for ports will allow the government to personally ensure that British exports are handled well. UKEF could also promote new electric automated technology for increased efficiency in ports to benefit and stabilise export growth.

Additionally, the recent Petya cyber-attack highlights that stronger cyber-security is needed to sustain supply chains. Maersk is yet to return to full steam and suffered losses due to the attack. We can see the threat to a merchant fleet has evolved into a cyber-presence. The days of the Royal Navy protecting exports with gunboats are long gone. We must strengthen cyber-security and I would call on the government and UKEF to invest in cyber-defence development, especially with the scheme’s new digital format.

If the government wants stability in the future then it must solve the problems of today. It must guarantee the money invested will strengthen the supply chain for security in a post-Brexit society. The government has to develop a closer relationship with industry and not indirectly invest via banks.

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The Industrial History of Trafford Park

The Industrial History of Trafford Park

During our daily commute, many of us pass the former railway tracks that connected Trafford Park and the old docks of the Manchester Ship Canal. We quickly pass this relic, oblivious to the historic line. Once the centrepiece of Manchester’s industrial history, these tracks carried a total 2.5 million tonnes a year, now it’s an artefact of a past that we can often forget.

This history starts with the construction of the Manchester Ship Canal. Opened in 1894, it connects the Mersey Estuary to the Salford Quays. The Port of Manchester became the third largest port in Britain and this encouraged the development of Trafford Park, the world’s first planned industrial park. This attracted an influx of heavy industry through the 1890s. Large factories like the Trafford Brick Company, the Manchester Patent Fuel Company and W T Glover, a cable manufacturer who supplied all of Trafford Park with electricity, arrived in the early stages of the park’s development.

Through the rest of the 19th Century and into the early 20th century, more companies began to move to Trafford Park including the Ford Motor Company. Ford arrived in 1913 creating components for the Model T and other vehicles. However, they were to relocate to Dagenham, Essex in 1931.

Nevertheless, Ford returned to Trafford Park at the outbreak of World War II, under licence to manufacture Rolls Royce Merlin Engines used in the Spitfire, Hurricane and Lancaster planes. A total 34000 engines were constructed during the war effort and Trafford’s significance in the home front brought the looming threat of the Blitz. Many factories suffering structural damage due to the bombing raids.

Despite such damages, and Ford’s return to Dagenham, heavy industry continued to grow with an estimated 75000 working in Trafford Park once war ceased.

Sadly, this prosperity couldn’t be sustained. Employment in the park began to decline through the 1970s. The canal struggled with the recently launched wider container vessels and the docks closed. Materials for factories simply couldn’t arrive.

Employment fell to 15,000 in 1976. Much to the concern of the Trafford Park Industrial Council (TRAFIC), a group of companies based in Trafford established five years beforehand to combat the park’s decline. TRAFIC’s initiative efforts were futile. The fall of the park was inevitable. By the closing years of the 1980s, heavy industry in the area had vanished.

By 1987, the Trafford Park Development Corporation was established in order to attract private sector business to the park. Over the course of 12 years, a total £1.759 billion was invested generating 28,299 jobs by 1998. That same year saw the cease of operations on the railway between the docks and the park, marking the real end of an era. Heavy industry out, private sector in.

Nowadays a total of about 35,000 people work in Trafford Park. An Amazon distribution centre, logistics companies such as ourselves and the online financial advisors, Think Money reside here. The latter’s ‘Think Park’ is a five-building complex that includes on-site restaurant and gym. Think Money provide their entire operations out of these buildings and the absence of local branches is replaced with the internet. This modern industry is utterly juxtaposing to their neighbours Kellogg’s, whose cereal production is the only echo of Trafford Park’s manufacturing tradition, having been residents since 1938. Now Kellogg’s seem an intruder in Trafford Park, as the majority of business in the park is now office based.

The dramatic development of Trafford Park is remarkable. From the early industries to the efforts on the home front, to later decline and rebirth, all is worth remembering.

And for the future? With Peel Ports’ 2017 announcement of a £138 million regeneration of Salford’s Port, we may see a restoration of the Ship Canal’s former glory.

I doubt we’ll see any new trains on those old tracks anytime soon.

Fun Facts: Shipping Containers

Our creative team have put together a fun facts infographic about the trusty standardized shipping container, that some people might not know.

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Petya: Black Cyber Swans Breaking the Chain

Petya: Black Cyber Swans Breaking the Chain

The industry suffered as Maersk fell victim to the Petya ransomware attack, one of the biggest Black Swan events our industry has seen. The business analysis, Nassim Nicholas Taleb coined his Black Swan theory to describe a high profile unforeseeable event which has great industry-wide consequences.

Typically Black Swan events occur out of sheer chance. Natural disaster, illness, and accident are common contributors.

The Philips Albuquerque semiconductor plant fire in 2000 is a prime example. The factory was the supplier for the Swedish phone company Ericsson and their Finnish competitor Nokia.

During a storm, a small fire broke in a furnace when cooling fans failed after being struck by lightning. Within a matter of minutes, the fire was extinguished. The damage seemed minor and everything was expected to be running as usual in a few days. Ericsson merely waited for production to restart.

But, the fire contaminated the plant to a further extent than originally thought and production halted for months, leaving Ericsson with a parts shortage and desperately trying to rectify their supply chain. But their chain was too lean. They had no plan B and were subsequently unable to launch their new headsets and suffered huge losses.

Compare this to Nokia, who had a wider supply chain and closely observed Philips so they were well accounted for. They implemented their plan B and suffered significantly less than their competition.

Losses after a Black Swan event are common. A Professor of Operations Management at Georgia Institute of Technology, Vinod Singhal, investigated the effects of breakdowns and found within two days after a breakdown shares can drop by an average of 8%.

Historically, unpredictable events can be controlled with close management of supply chains, just as Nokia understood. But Black Swans have evolved into a new form and in the light of Petya, there is cause for concern.

Maersk’s efforts to increase their cyber security were made worthless. They pledged resources and appointed a CISO (Chief Information Security Officer) and it’s frightening that such extensive efforts have proved so ineffective. It’s obvious that basic firewalls and anti-virus software, the extent of many company’s defenses, are simply not enough and cyber-attacks are a looming threat to the industry.

So how do we cope? Black Swans are now cyber, yet the threat the same.

Cross-industry communication is needed. Because this problem threatens all, we must see a co-operative effort to control it and extending MSC’s support to Maersk is a starting point. The two shared “vessel byplans, load lists, and customs information” in the wake of the event in order to control the damages. Now order is restored, sharing resources is important to maintain this order. Strengthening passwords, two step verification and an investigation into the attack is another place to begin. But this still isn’t enough. A complete industry-wide initiative is vital to even begin preventing this modern threat.

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Make Way for the Freight Forwarding Apprenticeship

Make Way for the Freight Forwarding Apprenticeship

Last week the department of education gave the green light to the employer group, known as ‘Trailblazers’, to create the standard for a specific international Freight Forwarding Operative Apprenticeship.

This is something people in the industry have been asking the government for years’ now. There is a shortage of skilled workers in the sector and with increasing pressure on the industry to deliver to tighter timescales, more highly skilled HGV drivers are needed. It is estimated that 35,000 jobs are readily available, but the resources to train and build young people up isn’t there.

 

The Trailblazer group is made up of 38 members, including Neon Freight, DHL and International Forwarding to just name a few. Driving this is the industry giant Kuehne + Nagel, led by Jon Hettrick – the HR director – who has been a dedicated member of the team on this vital industry endeavour.

“The whole sector can benefit from training and development provision that delivers the specialist knowledge and skills we use every day in freight forwarding,” –  Mr Hettrick

The British International Freight Association (BIFA) have always been a huge encouragement to the Trailblazer group. In January, BIFA called upon the wider freight forwarding community to provide support for the initiative. BIFA said it was imperative that the industry has an apprenticeship scheme now more than ever.

 

With full support, the Trailblazer group submitted an expression of interest (EOI) in January, now with the approval confirmed they can start work on the blueprints and standards detailing what the apprenticeship will entail.

The story doesn’t end here though, following this submission, BUILDUK released a document outlining how Trailblazer apprenticeships are coming into all industries. The Minister of state for apprenticeships and skills, Robert Halforn said that:

By putting more control in the hands of employers, we are ensuring apprenticeships are high quality and address skills shortages facing the industry.” 

Offering more opportunities to young people gives them a chance to gain vital skills, and this movement forward is not only a milestone for the freight forward industry but for how education can be accessed and applied to real day-to-day work.

 

Author Info

Rachel Finch

Rachel Finch

Design and Marketing Assistant

Rachel is a relatively new addition to the family, she’s already been making waves on our social media platforms and learning more every day about the complexities of our industry. Yoga obsessed – she should be flexible enough to do the job!

Shipping Line vs Forwarder – Whats the difference?

Shipping Line vs Forwarder – Whats the difference?

The biggest players in the supply chain game are shipping lines or carriers. Considering 90% of global trade moves via containership and some of the largest companies own around 42.8% of this it’s safe to say they’re kind of a big deal.

Freight forwarders (NVOCC’s) emerged mainly to make global shipping as seamless and stress free as possible for the shipper, the very definition of a “middle man”. But in the technologically rich 21st century, some industry experts as well as shipping lines and carriers, have argued there is no longer a place for the traditional freight forwarder in the movement of global freight.

As a first time exporter the choice between a shipping line and a forwarder can be a very difficult decision and the wrong choice can lead to costly slip ups. So we thought we’d take a look at the difference between the two and what may be best for your business.

Let’s lay this out simply

A shipping line is a company or organisation that owns and operates vessels, responsible for the handling and transporting of cargo aboard their ships. They deal with the cargo from point of origin to destination (port to port), transiting regular routes on fixed schedules aboard their own vessels.

A freight forwarder arranges shipments for individuals and companies, they may also be the carrier themselves. They are often the link between shipper and carrier. Forwarders typically assist shippers across the whole journey to ensure no logistical hiccups occur. They can also provide extra services in the form of advising on packing, completing the necessary paperwork (like bills of lading), providing insurance coverage and custom clearing services.

Advantages of booking with shipping line
  • Booking directly with the source of the sea freight offering can sometimes result in more competitive rates.
  • It could mean your cargo is more likely to obtain space on your desired vessel.
  • Shipping lines are accountable for any loss or damages.
  • The owner of the goods can authorise the shipping line to sign on their behalf to expedite any processes along the way, without the need of the owner to physically be there. However, the degree to which this power is given is often listed out in the agreed contract prior to the shipment.
Disadvantages of booking with shipping line
  • You may not always get the best rates as rates are often dependant on volume of bookings.
  • You may have to be tied into fixed term rate contracts that do not take into consideration market fluctuations that can impact rates on a daily basis.
  • A shipping line will carry your cargo at sea but may not provide additional transport services.
  • Using only one carrier means only one set of sailing schedules that may not suit your shipment requirements. Although in recent times this has been counteracted by carrier ‘alliances’ over certain trade lanes.
  • Less likely to have one point of contact for your shipment.
  • They would need a forwarder to organise the movement of more ‘awkward’ / out of gauge cargo
  • Working with a carrier directly means you need to ensure bookings are made on time by your suppliers.
Advantages of using freight forwarders
  • Forwarders are able to negotiate with shipping lines on behalf of shippers to get a competitive deal and discover the most economical route to take.
  • Global forwarders commit big volumes to shipping lines which can make their rates very competitive.
  • Forwarders complete all documentation on your behalf.
  • Import / Export processes are after complex and time consuming. Outsourcing these responsibilities in the supply chain can save untold time and potential headaches.
  • A freight forwarder will often see the cargo through the entire process from door to door, providing multi-modal transportation options and advising customers along the way.
Disadvantages of using freight forwarders
  • As a freight forwarder does not actually move your freight a number of different companies may be looking after your cargo at any one given time.
  • Many shippers cite ‘transparency issues’ for not working with freight forwarders, in regards to sub-contracting third parties to complete the work on their behalf.
  • Some freight forwarders may increase costs along the journey that was not anticipated at the beginning of the shipment.
  • As a freight forwarder does not own the vessels carrying cargo they can often be outranked when it comes to finding space on a vessel.

So what’s best for your business?

The main difference between shipping lines and freight forwarders are the types of services offered. A freight forwarder will provide services which are outside the scope of a shipping line. For example, a freight forwarder will often see the cargo through the entire process from door to door. While a shipping line may only be concerned during the process when the cargo is consolidated to the time when the cargo is deconsolidated. Another key difference is a freight forwarder often provides multi-modal transportation options, while a shipping agent will often specialise in a certain mode of transportation, be it via ship, air or land.

What it all boils down to is the type of service you’re after. Are you wanting to entrust a company completely? Do you believe they have the right experience and expertise to do the job? Or are you happy organising your own documentation and relying on relationships you’ve built to get the best deals and rates for your shipment?

To discover the added value of using a global freight forwarder please contact our team today. You’ll be happy you did.

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Global Container Market: Then and Now

Global Container Market: Then and Now

2016 was a turbulent year for the container shipping industry. Amongst the top ten global carriers there have been countless alliance reshuffles, an inevitable bankruptcy and poignant mergers.

We take a closer look at the evolution of carriers since 2000 and how last year’s events have left the global container market moving into 2017.


 

It’s amazing to consider that in January 2000 the three leading shipping lines Maersk Sealand, Evergreen and P&O Nedlloyd held a combined market share of 23.7%, when compared with today’s figures. According to Alphaliner the three leading carriers Maersk, MSC and CMA CGM now hold a total of 39.9% of global capacity. *This figure only set to increase as Maersk’s acquisition of Hamburg Süd completes at the end of 2017, taking the top three to a dominant 42.8% of global capacity share.

%

Top 3 Combined Market Share Then: January 2000

%

Top 3 Combined Market Share Now: January 2016*

Maersk have prioritised organic growth through acquisitions, confirmed in a 2016 statement and the recent acquisition of Hamburg Süd, the world’s 7th largest container line. Ever since running into difficulties after the purchase of Royal P&O Nedlloyd (that saw their market share shrink by 2%) Maersk have only grown their global fleet.

MSC and CMA CGMs growth over the past 16 years has been impressive for different reasons. The CMA CGM group growing through multiple high profile acquisitions and MSC demonstrating consistent organic growth with only two small takeovers.

 

Merger / acquisitions timeline

1999 Safmarine & Sea-land Service

2002 Torm Liner Service

2005 Royal P&O Nedlloyd

2006 Mercosul Line

2016 Hamburg Süd

2003  WEC services

2006 HMS services

1998 CMA CGM bought the liner division of ANL

2002 MacAndrews services

2005 Delmas and SudCargos

2007 Cheng Lie Navigation, CoMaNav and US Lines

2016 APL / NOL

Where’d all the liners go?

After revisiting Alphaliner’s report the evolution of carrier fleets 1996-2012’ it’s fascinating to see the ghosts of carriers past, blighted by bankruptcy or absorbed by global leaders.

The trend to consolidations and acquisitions has had a significant impact on the number of container lines on the market. For direct shippers and cargo owners, mergers have not been the only concern when looking for fair market rates. Alliances formed by the leading global carriers have only heightened worries over price fixing and concentrated schedules have dramatically reduced consumer choice.

With the top 3 suppliers operating at a 42% market share the container market is now the definition of an oligopoly. According to Drewry, “this trend will continue as the leading five carriers have the largest order books and, as history has shown, the biggest appetite to acquire other carriers.” 

Sources: Alphaliner, Drewry, WSJ 

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