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Wednesday, May 25, 2022

Entrepeneur’s Notebook

After years of double-digit expansion, international trade growth in Southern California slowed to a trickle in 1996.

So why do the firms on the Business Journal’s List of L.A. County’s 25 largest freight forwarders and customs brokers the folks responsible for moving cargo throughout the region report that business is expanding as rapidly as ever?

That apparent contradiction is easily explained by a trend sweeping through U.S. industry “just-in-time” shipping.

In such systems, manufacturers, wholesalers and retailers keep their inventories to a bare minimum, in an effort to free up available capital and respond quickly to rapidly shifting market demands. As a result, cargo shipments tend to be smaller and more frequent.

And because brokers and forwarders make their money based on the number and not the size of transactions they complete, they’re doing just fine even though overall dollar volume of international trade grew by just 3.6 percent last year, the slowest rate of growth since 1982.

“Shipping has to be on a continuous basis,” said W. Guy Fox, chairman of Global Transportation Services Inc. in Redondo Beach, which added 10 employees last year, rising from No. 11 to No. 7 on the List. “You’re going to have more transactions with a just in-time process than if companies were shipping large inventories.”

In the world of international trade, customs brokers and freight forwarders are like travel agents for cargo. They manuever shipments through an often-vexing maze of customs regulations, secure letters of credit and cargo insurance, and negotiate air, sea and land transportation for their clients.

The industry is as competitive as it is fast-paced. Service fees tend to be extremely low between $125 and $200 per transaction. As a result, firms compete on the basis of quality of service rather than on price, said Betty Burghard, senior director of Inglewood-based Fritz Companies Inc., which held its place as the second-largest broker/forwarder on the List.

“What you’re selling are your people skills and your systems,” Burghard said. “There is such a low margin in this business, you can’t afford to have poor service.

“It’s a tough market here in L.A.,” she added. “There are a lot of large brokers.”

Those include No. 1 on the list, AEI Inc., which also held the top spot last year; El Segundo-based Expeditors International, which saw its number of employees surge from 165 last year to 215 today; and Burlington Air Express, which has added 50 new employees since last year, bringing its total local work force to 170.

While the vast majority of the firms on the List are repeats from last year, there are five newcomers, including: Inglewood-based Service By Air Inc., Albert Rebel & Associates in Pomona and Vandair Freight Systems in El Segundo.

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