In this piece, we investigate the vetting process for qualifying logistics and transport service providers, having been inspired by the Breakbulk webinar last week. We address the question that shippers are vetting forwarders but do shippers also look at how a forwarder is vetting the carriers, handling and transport companies?
We ask Dennis Mottola, Global Logistics Consultant and former Corporate & Global Logistics Manager for the Bechtel Corporation, to give his seasoned view on vetting of project forwarders and its value over vetting carriers, transport companies and other logistics providers together with the forwarder.
According to Mottola, shippers contract with freight forwarders (FF) for a wide range of services and scopes of work, which may include buying transportation and other logistics services on the shipper’s behalf.
“In my experience, regardless of how limited or broad the FF’s scope is from project to project or shipment to shipment, the shipper would want to vet the FF as part of the selection and contracting process. At the very least, the shipper would want to assess the FF from financial, compliance, safety and capabilities perspectives.
When shippers contract with FFs or any logistics service provider they are hiring the FF to manage a portion of their responsibilities that the shipper is either simply choosing not to manage themselves, or perhaps not capable of managing themselves. “In either case, I believe most shippers place a high level of importance on vetting the FF prior to selection to assure themselves of the FF’s ability to properly manage shipper responsibilities that are being outsourced. After all, the shipper’s logistics manager is ultimately responsible for the FF’s performance. His/her credibility and perhaps reputation is consequently on the line for the FF selected and shipment outcomes. Particularly in project logistics, vetting is not optional in my opinion regardless of the FF’s scope and services to be provided.
Should the FF’s assigned responsibilities include buying transportation services on behalf of the shipper, I believe most shippers leave the vetting of those service providers to the FF.
If the shipper’s model is to leave carrier vetting to the FF, they would want to assess the FF’s vetting processes and capabilities as part of the FF vetting/selection process. They may also want to consider a specification for carrier vetting for inclusion in the FF agreement.” However, some shippers do elect to vet transportation services providers (carriers) alongside their FF.
CEO of Project Logistics Management company XELLZ, Peter Bouwhuis weighs in on how vetting a freight forwarder for Project Logistics Management capabilities rather than just financial risk is required.
“ In the past few decades the project freight forwarder has been (and in many cases still is) used by companies as a bank with payment terms up to, and over 120+ days and the liabilities for damages and delays are put upon them as well. They are covered by insurance and the cost is passed on to the customer, but I believe companies cannot leave this to the forwarder anymore as this is not their core competence, and because corporate reputation matters and the cost and risk of any compliance issues is just too high.
There are now companies (XELLZ is one of those) that have changed the way project logistics is handled and managed. The management of project logistics is becoming part of the internal logistics team and proves to be very beneficial. Shippers are limiting their risk as well as getting a much better handle on projects from a logistics point of view. Logistics is perhaps a fraction of the cost of a project, but the impact of logistics on any project is enormous and could be the fail or succeed factor. This means more involvement is required from the shipper as well as taking responsibility for vetting.
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