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Sun 15 Oct 2006 04:00 AM

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Time for change

Freight forwarders in the Middle East are experiencing huge business opportunities, thanks to the region’s flourishing economy and prime location as a distribution hub. However, to really benefit from this scenario and compete on a global level, the logistics industry needs to improve quality, increase security and become more innovative.

|~|issa_time.jpg|~|Issa Baluch, author of Transport Logistics, Past, Present and Predictions.|~|Freight forwarders in the Middle East are experiencing huge business opportunities, thanks to the region’s flourishing economy and prime location as a distribution hub. However, to really benefit from this scenario and compete on a global level, the logistics industry needs to improve quality, increase security and become more innovative.

The Culture of Quality
Freight forwarding has historically been an easy business to enter. In many Middle Eastern countries, the entry barriers
are easily overcome, allowing anyone with start-up capital to enter the profession. This can result in a lack of professional integrity, which is something the logistics industry needs to overcome. It’s time to raise the threshold.

Freight forwarders should be accountable to customers, providing a greater sense of security and increasing industry standards along the way. Whilst such a revolution is certainly achievable, it would require the hand-in-hand cooperation of governments from different Middle Eastern countries too.

To start the process of change, freight forwarders should only provide logistics services after undergoing training and certification. A list of industry requirements can be created by national trade associations, in terms of training and certification, which should be fully endorsed by the government. If doctors, engineers and teachers require proof of educational training, why should freight forwarders be exempt?

In Germany and Austria, for instance, anybody wanting to enter the freight forwarding profession usually completes a three-year apprenticeship and business administration programme, followed by examinations. Whilst the government does not mandate these training programmes, they actively encourage them.

Countries such as Germany and Austria highlight the short-term steps that governments can take to encourage the training of skilled freight logistics professionals. Of course, consumer protection organisations should also play an important role in the process, dealing with the commercial disputes that inevitably arise from freight transactions. This may seem like a very basic concept, but such organisations are virtually non-existent in several countries. Even when the organisations do exist, they are time-consuming and cumbersome. This creates an atmosphere where incompetent freight forwarders can freely operate according to ambiguous rules and regulations, endangering their customer’s right to quality service levels.

Another way to improve the quality of service is making professional liability insurance mandatory. This would hold freight forwarders accountable for their actions in case of professional errors and omissions, such as the misdirection of cargo.

Professional liability coverage is not normally mandated by governments, even in sophisticated logistics communities. However, these mature industries are self-regulating, with freight forwarders understanding the importance of insurance and taking the initiative to cover themselves. In fact, a number of trade associations ensure members have purchased a certain level of insurance.

The importance of liability coverage is even bigger in parts of the developing world, where the legislative framework in customer protection is weaker, thereby making insurance a bigger necessity.

The Culture of Security
Cargo security should become a greater priority in the future. Freight forwarders must be ready for new regulations to be implemented in each country, in addition to the global security standards imposed by associations such as the ISO. Therefore, to create a culture of security in the future, these companies should be prepared to continuously invest in the improvement and re-evaluation of security measures. Freight forwarders, not the government, should take responsibility for securing their supply chains.

The Culture of Innovation
To foster creativity and innovation, practitioners must periodically interact with academics, experts and representatives of governmental organisations. If they are to keep pace with global developments, industry players must be exposed to new ideas. This will come about through the public exchange of new information, opinions and best practices.

Freight forwarding associations are the key entity in encouraging cultural changes in quality, security and innovation. Some national associations are merely social clubs and, while arranging networking opportunities for members is important, the most dynamic associations are providing real value to their members in the form of training, arbitration, standardisation, classification and benchmarking. This is in addition to the association’s traditional role as the industry’s voice at a governmental level.

Any country without a national freight logistics association is disadvantaged. Forwarders in these countries should partner to develop a united front. Where freight logistics associations already exist, they must collaborate with governments to create a culture of quality and make liability insurance mandatory. They must also establish consumer protection agencies to resolve freight logistics disputes in an expedient manner.

In summary, the national association must be responsible to members and responsive to the market. It must be ready for involvement in international associations and should communicate with the industry to discover what is required. Without completing these tasks, it will bring little benefit to members.

In addition to national associations, international ones are equally important, especially in the cultivation of quality, security and innovation. Not only are they powerful representatives for freight logistics providers on a regulatory level, they are also good vehicles for importing and exporting best practices.

Importing global best practices can help freight forwarders in each country to assess their own situation. They can then adapt these best practices to local requirements and find homegrown solutions to the challenges they face. Some degree of adaptation is necessary, because what works in one country may not work exactly the same way in another country.

Despite the best efforts of national and international associations, the onus for change ultimately lies upon government.

While these associations can help cultivate professional freight forwarders, regulatory authorities must be open to accepting new ideas and international best practices. Maintaining the status quo in areas such as electronic data interchange (EDI), customs classification, and port technology will do nothing but wreak havoc on supply chains. National and international associations can make great strides in facilitating trade and transport when empowered to do so, but they are merely the catalysts for change.

Issa Baluch is chairman and CEO of Swift Freight International and Immediate Past President of FIATA.||**||

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