Your assembly line is fine-tuned and orders are pouring in from across the country, including some remote areas of Alaska you never even heard of. Based on this positive scenario, you are now planning to expand your product distribution to Latin America and Asia, but want to avoid the shipping snafus your competitor struggled with last year.
The U.S. Department of Commerce reported that American businesses transported at least $1.7 trillion in equipment, $874 billion in food products and $574 billion in consumer goods in 1993. Where do these businesses find fast, consistent transportation for their products? There are a variety of options, and the question really becomes a matter of finding the right one.
Choosing among the array of shipping companies these days is like picking a line at the supermarket—without taking a moment to observe each checker at work, what appears to be the shortest, most efficient line could turn into a frustrating eternity of "price checks," misplaced groceries and endless delays. The good news is that technology and competition are motivating shippers to offer better results and more attentive service during every phase of transit and delivery.
So how do you choose a shipping service that meets the needs of your company? Most small businesses consider only cost and transit time. While these factors are critical, they should not be the sole determinants for making shipping decisions, says Greg Berk of United Parcel Service (UPS), Pacific Region. He recommends these guidelines in selecting a transportation carrier:
Reliability—From your personal experience or that of trusted colleagues, what is the carrier’s track record? How would you rate their on-time performance for deliveries?
Range of Services—Do you need an array of air, ground and international options or a company that specializes in one transportation niche? Do you need a selection of time-of-transit options?
Capacity Management—Does the carrier have the means to increase staffing and vehicles during peak hours and seasons?
Tracking—When you need to find out where your package is, how quickly can it be located? Does the shipper have the technology to locate shipments in transit? Can you find out who signed for your package? How about a copy of the consignee’s signature?
Guarantee—Does the carrier stand behind its service? Does it guarantee its time-in-transit?
Customs Clearance—What does the carrier do to expedite customs clearance? For example, UPS key—enters and transmits critical information about your shipment to the overseas brokerage operation, which usually allows for clearance before the plane lands.
International Documents—Does the shipper provide you with the international forms needed for customs clearance?
Shipping Automation System—Will the carrier provide you with hardware or software to simplify shipment processing and manifesting?
Penetration—Does the shipper deliver door-to-door to all zip codes or does it hand off some packages to an agent?
"Can Do" Attitude—How does the carrier solve problems? Are the problems resolved quickly? Is the shipper easy to work with?
Corporate Image—Does the carrier maintain a dress code for its delivery personnel? A delivery person’s manner and visual appearance—even the condition of the vehicle—will reflect on your operation.
Going Global
Thinking about taking your company global? International shipping, either importing or exporting, adds a few complications such as packaging, labeling, customs and documentation requirements, but can be well worth the added work.
Importing goods for use in businesses or manufacturing raises issues ranging from proper labeling of the country of origin to accurately classifying imported goods. To minimize problems, Mike Lubinski, an international attorney, advises getting an advance ruling on the classification of your import through your closest customs office.
Entirely different rules and regulations apply for exporting goods. The Department of State and Department of Defense regulate shipments of strategically controlled goods and forbid any shipments to politically sensitive destinations.
Strategically controlled goods include armaments such as guns, gunpowder, military vehicles and nuclear technology. Strategically controlled locations include the People’s Republic of China, North Korea, Cuba and Iraq. Licensing requirements for these categories are mandatory and failure to obtain them could lead to investigations and perhaps even civil or criminal penalties.
So how can small business owners maneuver successfully through the rules and regulations of international shipping and transportation? "There is no reason new importers cannot rely on the information made readily available by the U.S. Customs Services, both in hard copy and online," emphasizes Lubinski. "The information is out there; it is just a question of networking and finding the right data for your specific situation."
The Export Hotline
Another resource is the Export Hotline® and TradeBank™, joint ventures of the U.S. Department of Commerce and UPS. The Hotline provides market data on 80 countries and 50 industries; the TradeBank provides contact information for finding new trading partners, including 15,000 companies and leads from embassies and consulates worldwide. To register, call (800) 720-XPORT or visit www.exporthotline.com. In addition, try the U.S. Department of Commerce International Trade Office at (800) USA-TRAD or www.ita.doc.gov.
For Speed: Use an Air Carrier
When speed is the chief concern, air carriers can work well for small companies. "In my business, three hours can make a huge difference to my customers," says Jim Huang of Japan Video Games, a San Gabriel, California-based distributor/manufacturer that flies 90 percent of its 13,000 products annually. Huang airships products for speed and efficiency and chose UPS for its reliability and high level of customer support. "Everyone wants the newest games as soon as they’re available. No one wants to wait."
Technological advances have also helped air carriers streamline and improve efficiency. The Internet has improved tracking and delivery, lowering the costs of data transmission by directing long-distance phone calls and faxes through the Internet. In addition, carriers are shifting from paper waybills to electronic information records, similar to those now offered to airplane passengers, thereby cutting costs by reducing the amount of paperwork needed for each shipment.
Trucking: The Middle Road
Trucks carry almost 30 percent of all domestic freight. American businesses and households spend more on shipping by truck than on any other means of cargo or freight transportation. Trucking companies generally fall between rail and air freight companies in terms of speed of delivery and price.
Entrepreneurs should consider several factors before choosing a trucking company. Depending on the destination of a shipment, businesses can select a company that offers local, regional or cross-country service. Alternatively, a carrier with specialized equipment for bulldozers, cranes and other oversized loads may be required. In other situations, a general freight hauler is sufficient.
Beware of These Issues
As truckers pick up the slack from railway congestion, the shortage of truck drivers has surpassed 300,000 and is expected to rise drastically in the next few years as a booming economy produces goods at a rate the trucking companies can no longer accommodate. Dissatisfied drivers, high industry turnover rates and increasingly difficult certification requirements make maintaining a full staff of truckers difficult for many trucking lines.
One bright spot in this industry for small businesses is the introduction of high-technology innovations for monitoring shipments. E-mail has been installed in many trucks, allowing both rigs and packages to be electronically tracked. Satellites and global positioning systems, such as Qualcom, allow trucking companies to identify the exact whereabouts of their trucks and of goods while en route.
Railroads for Bulky Goods
In general, railways work best for large quantity shipments that must travel a long distance and, as such, trains are not always practical for small business shipping needs. However, partial deregulation in 1980 has revived the industry. Many railroads have consolidated and are providing more services for small companies.
Before 1980, 25 percent of all railroad companies were bankrupt, and efficiency and productivity were low while costs ran high. Approval from Washington for any specialized services or contracts made rapid change impossible. Now with partial deregulation, railway carriers have become involved in intermodal services, a key resource for entrepreneurs. Intermodal services allow businesses to take advantage of the lower rates of the railway system without having to negotiate separately with each line.
Intermodal Services
Suppose your company wants to ship small machine tools to several destinations but no rail lines are located near your business. The solution is to hire a trucking, shipping or air carrier to transport your goods to railways en route to keep prices lower. In 1980, trains transported three million containers and trailers; by 1997, this number had grown to 8.5 million.
The long-term trend toward consolidation meant that many railroads discovered they could no longer run all their routes profitably. These routes were then sold to entrepreneurs. Large railways now focus their attention on the high-traffic areas, leaving many of the short-line and regional railroads to independent operators. Generally non-union, these light density lines are cost efficient and serve many smaller customers, providing individualized services that the larger railways can’t match.
Not without Its Problems
The deregulated industry, however, still has its share of problems. 1996’s merger of Union Pacific and Southern Pacific Rail created the country’s biggest railroad with almost $10 billion in revenues. This has also created major congestion on freight lines—delaying shipments for as much as a week. While some industry experts say the heavy traffic will ease up in 1998, many companies are considering other transportation options. This means extra business for trucking and freight forwarders.
Maritime Shipping
While rail and truck carriers operate on a mostly domestic basis, more than half of the total waterborne commerce of the United States is transnational. This makes maritime shipping a practical option for businesses either looking to ship domestically or wanting to export abroad. "One thing many folks don’t realize is that ships offer the most environmentally friendly transportation option with the least energy spent per mile," claims John Swank of the U.S. Maritime Administration.
In a trend similar to that of railways, maritime shipping is expanding and increasingly integrating intermodal services to the advantage of small business customers. In some cases, single companies provide both shipping and other transportation services, smoothly transporting goods from one mode to another. Many shipping operations are currently building the infrastructure necessary for efficient intermodal services, with the goal of making this option as quick and inexpensive as possible. In other cases, ship carriers contract with the terminals that contract with the warehouses and so on down the line.
DSL Transportation Services, which moves goods from ships to trucks and railways, has made significant investments in both computer hardware and software to improve the intermodal process. One of its major investments has been a computer-controlled system that manages goods automatically with bar-code technology and more than half a mile of conveyor belts. Mike Marevich, DSL controller, explains that unloading a 30-foot container used to take two hours, while the automated system can do it in as few as six minutes.
The technological revolution in information services has also affected the shipping industry, greatly assisting in the logging and booking of space and the monitoring of transit.
A recent regulatory proposal that directly affects small businesses is the Ocean Shipping Reform Act, which proposes a deregulation in shipping. This would end the requirement for publicizing rates and allow key terms of service contracts to remain confidential. The Reform Act would be a major boon to the shipping industry, helping exporters become more productive and negotiating better shipping rates. Without knowing the agreed-upon price for services, bidding competitors could not demand the same prices.
However, not all industry leaders support the bill because it would preserve anti-trust immunity that allows carriers to set rates collectively at their annual shipping conference. Many small shippers want to end this practice altogether, which would enable them to negotiate one on one with ocean carriers. By decreasing transparency and increasing the secrecy of rates, some fear that higher volume shippers will be able to obtain discounts unavailable to smaller operations.
One way around this problem is aggregating. Shipper associations can represent small and medium-sized importers and exporters in negotiations with ocean, rail and motor carriers. By committing their volume to the association, small importers and exporters give the association the clout necessary to negotiate with shippers and secure discounts, often as much as 30 to 30 percent off of regular prices.
Try a Logistics Company
Logistics companies can be a godsend for small firms, possessing the ability to handle all their shipping needs. Logistics companies offer door-to-door service and make contacts with both air and ship cargo transporters for their customers, consolidating cargo between major cities, warehousing goods, electronically tracking purchase orders and offering documentation and banking services.
Fritz Services, for example, a large air and ocean freight forwarder, also offers customs brokerage with direct links to government customs service agencies to assist companies in meeting international customs regulations.
These third-party carriers are dedicated to transporting their customers’ goods efficiently by any means necessary. As Larry Dinkler of the logistics firm Westransco Inc. explains, "The shipping method we choose is usually time dependent. The least expensive way to ship bulk goods is through rail carriers, but this is also the slowest. Truck carriers offer faster service but higher prices, and air carriers provide even faster service, but charge the highest prices of the three options."
Whether by rail, truck, ship, airplane or use of a logistics company, you can find a mode of transportation to meet your shipping needs. Deregulation and technology advances are continually transforming this industry, making it more competitive and presenting new opportunities for small businesses to distribute their goods quickly and cost effectively.
To find out the latest on transnational shipping issues, contact the Office of Ports and Domestic Shipping at (202) 366-4357. In addition to such agencies as the U.S. Customs Service, the Commerce Department, the U.S. Export Assistance Center and the Export Small Business Development Center, check out the U.S. Maritime Administration’s Web site, which lists U.S. regional offices and U.S. flag liner companies and their service destinations. The address is: http://marad.dot.gov/vessel_.service.html.
Shipping Like a Winner: Royce Instrument Goes from Small Business to Big Success
Royce Instrument Company won the U.S. Small Business Administration’s 1996 Small Business Exporter of the Year Award in recognition of its success as a designer and builder of water quality monitoring and control instrumentation. Royce’s instruments can be found in industrial and municipal water companies and water treatment facilities all over the world.
Owner James Dartez recaps the firm’s evolution since 1985, when he was hired by Rexnard Instrument Products—a company on the verge of financial collapse—to oversee the operation. Rather than simply run the facility, Dartez eventually bought the struggling enterprise and, in 1987, Royce Instrument Company was born.
At that time, 11 percent of the firm’s business was international with nine percent in Canada. Now, more than 45 percent of Royce’s business is outside of the U.S., with only two percent in Canada.
Dartez attributes his success to a lot of work, travel and learning. He also sees close business relations as vital. As Dartez explains, "We build personal relationships with our international companies, which are extremely professional and well run. Most are managed by one individual. I took it upon myself to become close to these people, and this personal touch has consistently paid off.
Certified Transports Incorporated: Former Seattle Seahawk Excels in the Long Haul
With only one truck and trailer, Tony Benjamin (above left) epitomized "small business" when he started Certified Transports Inc. in 1987. A long-haul trucking company that services customers who ship on a truckload basis, the Seattle-based firm—which increased its fleet to 30 trucks in five years—now boasts of such clients as Kaiser Aluminum and Boeing Aircraft Company.
Benjamin, co-founder and president, is a former Seattle Seahawk and ex-financial consultant. Without any background in long-haul trucking, how has he managed to be so successful? "I always had a truly collaborative outlook, and relied on the expertise of others," he explains modestly. "When we began, we used the core competencies of each individual and pulled them all together to build a viable enterprise."
Benjamin did not stop after his first successful venture. He then branched out to address a critical need in the trucking industry—a shortage of able drivers. In 1994, he established Certified Learning Systems, which publishes materials and designs systems for comprehensive driver training.
In 1996, TransportSafe Training Center was created, using materials from Certified Learning Systems, to train people with no prior experience in the nuances of long-haul trucking. This center is one of the first to use a truck-driving simulator as part of the training process. As Benjamin explains, "It is a fantastic tool, because it gives drivers exposure to hazardous situations prior to actually experiencing them on the road."
Benjamin’s favorite saying? "If you got it, a truck driver brought it." The number of truck drivers nationwide is on the rise due in part to his services, and America’s wide dependence on trucking for the shipment of many kinds of goods will only grow with it.
Trucking 101: What to Know Before Your Goods Hit the Road
Finding a reliable trucking service can be one of the most important decisions a business makes. So what defines a good trucking company? While price is everyone’s number one concern, what else is important? Larry Dinkler, executive vice president of the logistics firm Westransco Inc., suggests checking on the following:
Tariff. Ask for a copy of the firm’s tariff. This all-encompassing guide will cover its rules, regulations and policies with respect to rates, claim policies, accessorial services and all other aspects of service. Dinkler recommends this as the first step in choosing a trucker.
Points of Coverage. Where do the trucks go? What is their route? Does the route coincide with where you need to go?
Transit Schedule. What are the times the truck delivers to its destinations? How long does the route take? Does the schedule coincide with your time restraints?
Communications System. How does the firm communicate with its drivers? How does it trace the trucks and your shipment? Does the service have satellite access?
Claims Policy. What are the firm’s policies on damages to cargo? Ask about its specific rules and regulations.
References. Ask for names of customers you can call. Find out how satisfied these customers are with the services, what problems they may have encountered, and what the company does really well.
Customer Service. What special services can the company offer you? Does it have a representative to contact if you need to speak with someone right away?
Excerpted with permission from Small Business Success, Volume XI, produced by Pacific Bell Directory in partnership with the U.S. Small Business Administration.