It's a delicate balance as our industry sources point out
More and more shipping lines internationally seem to be taking on their own agency responsibilties with in-house establishments.
According to the Swiss-based ITJ (International Transport Journal), this break-up of the traditional shipowner-ships agency ties has become very frequent of late - with container lines setting-up their own agency organisations, or expanding and improving their existing ones.
The main reason, it is reported, is a desire among lines to unite all their resources under one roof, as it were, and to achieve greater corporate indentity globally. Also, exerting stricter control and unifying business procedures - through a joint EDP (electronic data processing) network, for example - are quoted as two others.
What of SA? The trend here, according to shipping lines and both in-house and independent ships agencies, is similar. But not that new, and certainly not earth-shattering.
It is considered almost an inevitability once traffic and service frequency become sufficient to justify the cost of an in-house operation.
And the glory expressed to ITJ by Europe-serving shipping lines in achieving such things as an easily identified company logo around the world is just words. It's just painting pretty pictures, according to Ian Wicks, g.m. of Kien Hung Shipping -which has a sort of in-house agency in SA (it being owned by Mark Shih, of the shipowning Shih family of Taiwan).
It almost all revolves around cost-saving, Wicks told FTW.
There are two main principles behind this statement.
First is a saving of the commission paid to agents (about 2% for imports, and 5% for exports). The shipping line still, in theory, pays this out, said Wicks, but the monies stay within the shipping group. A second is that other expenses - particularly redeployment of containers - is likely to see an agent being less frugal than the shipping line, according to Wicks. The agent knows that the line will always pick up the tab, he added. But these are big expenses, and you have no control over them if they are handled by an independent agent. He, remember, is only responsible for himself in the end. Ken Kinoshita of NYK SA agrees. But, he added, it also gives flexibility and control to a line which runs its own agency. As long as the commission normally paid to an agent is income, and covers the cost of your own agency, he said, you can gain by doing it yourself. But NYK, although named as one of the big in-house agency movers in Europe, still employs independent agents, Mitchell Cotts, in SA. And we don't intend to change soon, said Kinoshita.
This is all because it's a fine balance - to go in-house or not, according to Rod Eaton, Johannesburg bulk executive of John T Rennie, one of SA's other, large, independent ships agents.
But it doesn't need to go one way or the other - fully in-house or completely independent agency, he added. It can be a joint venture, for example, he said. We have this with COSCO - where the joint Cosren Shipping venture is active as agents for this Chinese national carrier. Neville West, g.m. of King & Sons, the Grindrod Group's ships agency subsidiary, agrees with this sort of balance of inside and outside agency business.
We, for example, represent the non-liner operation, MACS, he said. With them doing their own sales and marketing in Durban and Johannesburg, and us handling it in Cape Town and the other coastal ports.
There are a number of examples of this sort of set-up - where the line does its own marketing, but leaves the likes of container control and disbursements to agents.
Leaving the true agency work to the agents. And the words non-liner seem to be another clue to the balance described by Eaton.
The main shipping line agencies tend to be for those lines, or sections of lines, in the container liner business - where frequency, regularity and volumes justify it.
This is described by Mike Ford, m.d. of Quadrant Ships Agencies - the agency arm of the Grincor Shipping group.
As an in-house agent myself, he said. I have found that many shipping/freight groups tend to set-up their dedicated in-house structure, but then also have an independent agent who can go after the tramp/non-liner/free-liner business - for example Saflink/John T Rennie or QSA/King & Sons. There are two issues which Ford thinks are important in this.
The shipowner should make absolutely sure that he is not taking his eye off the ball by trying to control every facet of the business himself, he said. Sometimes a dedicated expert does the best job.
By setting-up in-house agents, do they become just another department of the corporate monster, rather than a contractor performing to hang onto his business. Two other things sell an independent agent, according to Eaton.
You can get an independent with the economies of scale - for example, spreading cost-sharing amongst his clients in a sophisticated communications network, he said.
There, the lines can get dedicated, customer-oriented reps, and smart and efficient service, where they could never afford their own facilities at such a level. There is also the independent local agent's intimate knowledge of his surroundings.
Said Eaton: We have got to know every detail of our big shippers' businesses - regardless of what trade(s) they are in. We are, therefore, very aware of the interests of the end user - the shipper - as well as that of each shipping line. A line can't just buy such knowledge. Wicks - although shipping line in-house biased - agrees. In Europe, for example, our agents are all long-standing businesses, with large lists of contacts in every trade. This is partly what we are buying when we employ them. But there is one measure of all this, according to Ford. It is my view that you should only do it yourself if you are sure you can do it BETTER - not just CHEAPER! he said.
