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The
Cost of Global Communication from an Agent’s point of view
Contribution
of Peter Koopmann, Managing
Director of the Peter W. Lampke (GmbH & Co) Group, Germany
Mr. Chairman,
Ladies and Gentlemen,
first
of all permit me to say that I am honoured to have been asked to contribute
to this forum today and speak in front of this distinguished audience.
The subject
been given is an evergreen as we all know and has at all times been accompanying
the agent’s life, yet , as I feel, with changing importance and emphasis
and, if I may say so has not always been treated with the best of prudence
neither by our principals but at times also not by ourselves.
My remarks,
and especially figures and comparisons and also conclusions will be rather
subjective as they basically result from our own 40 years of experience
as a shipping agent and the particular structure of our group of companies
that I have the pleasure to run together with my Partner since 1968. —
We may indeed be an interesting example. Whilst being still an independent
shipping agent we have experienced throughout the years of our activity
almost every development that is possible in our fields.
Today
we are agents for 23 liner principals, of course with a wide range of
different importance, we are forwarding agents, we are doing trucking,
we are operating joint ventures with NVOCC’s and with ship owners
and in year 2000 we are clearing some 250 tramp vessels per annum. The
total amount of vessels to be handled by the group this year will come
to some 825 units. — So you can imagine that the variety of the matter
of communication expenses we are confronted with is rather broad.
I shall
try to use as little as possible figures and data, but some of it is necessary
for which I shall use some charts. I would like to highlight the following
5 subjects:
- Justification
of reimbursement of communication expenses
- Development
of communication in Shipping
- Justification
of reimbursement of communication expenses
If you talk to your neighbour who is not involved in shipping
you will find it difficult to explain, why an agent requires reimbursement
of expenses for utilising communication which your neighbour is using
every day as a tool to perform his job. He would consider this as
part of normal company running expenses. - But, your neighbour also
does not really know, how agents are earning their income. —
Would he know that our income has been for a long time and basically
still is today dependent on the ability to be successful in concluding
business for our principals as a broker , irrespective of constant
and variable expenses incurred to the agent to serve his principal,
he would probably understand better. — The question, however,
remains, if this income scheme and the inadequate consideration of
agent’s general expenses are still applicable in our modern days.
- Development
of communication in Shipping
The days of New Boe code and telegram communication are over since
the late fifties when telex became the most advanced means of communication.
The use of long distance calls in those days was subject to a management
decision and one was very careful about it. This I believe is the
time when we became really conscious about communication expenses,
as we were convinced that the cause was not part of our original duty
to generate cargo for our principals and handle their vessel’s
local operations but rather was it due to the increasing communication
demand of our principals, for which he naturally should reimburse
us. — This period was soon followed by various generations of
fax communication, Courier mail and today by the ultimate: the blessings
of e-mailing and EDI interfaces.
- In the early
sixties the first EDP investments were made by some of the major agency
houses, at tremendous cost and with some times disastrous consequences.
I would dare to say that in those days no one would have come to the
conclusion that using EDP could be considered part of communication
in the traditional sense. These investments were rather made to improve
the agent’s own administration and the hope to economise on staff
expenses. — Actually hardly any of these targets were achieved
within expectations. — To the contrary, also our principals discovered
EDP and rapidly their demand of EDP supported reporting and administration
increased with exploding expenses on both sides. - One had the impression
that at times neither party really knew to whose or what benefit these
investments and the use of it were actually made.
- For whatever
reason the solid road of distinguishing between activities liable
to commission and those that were to be performed " at cost"
and to be reimbursed had been left at that time. This is what I referred
to earlier when I put at doubt if we agents have always been treating
this subject prudently. - Be it as it is; this situation cannot be
reversed and I believe all of us are totally convinced that today’s
usage of EDP related systems must be seen to a large extent also as
part of modern communication without which we could not exist any
longer. Along herewith the performance pattern of "the Agent"
has greatly changed an some of us "independents" are mutating
to backoffice servants where high investments in EDP and communication
systems has become the backbone of this philosophy. I also thought
at times, this was one trend to be followed to survive but it seems
that more and more even the finest agency software packages especially
designed to comply with local data flows and to interface with different
principle systems is to make way in favour of closed principals systems
being imposed upon the agent. If that continues, our present philosophy
might be justified that is to concentrate on any viable niche even
if it may not be compatible with our existing master software. The
result is that we run today some 93 different software products, of
course including Office programs like Word, Excel, Outlook and Power
Point etc. — That sounds kind of chaotic, but you will be amazed
if you checked your own systems.
- Cost Development
Communication by cable, telex and trunkcalls in the early days
of business communication were controlled by solid cost consciousness
of the agent and it was reimbursed nearly to the extent of 100%. His
only investment were cost for switchboard, telex- and faxmachines.
Mind you, rather expensively during the days of national communication
monopolies. — In the following years with increasing reporting
and information demands the exact determination of what was to be
regarded "communication expenses" became an art. —
I hope you agree with me that latest as from the late eighties the
following items are contributing to the agent’s new experience
of communication cost environment :
- 1st
chart - Communication Cost Development
- Internet related expenses ( e-mail )
- telex expenses ( which have become rather marginal )
- EDP- related staff
- Hard- and software (depreciation)
- Courier mail
- EDP current operation expenses for host, LAN’s, maintenance
of all kinds
- traditional telephone expenses/Fax incl. leased lines etc.
When it was already difficult to convince principals to pay us a fair
contribution to our communication expenses before the EDP evolution,
it now became really a headache. We all know these discussions as
to how much tool investment and maintenance an agent should provide
at his cost to run his business and how much or little of contribution
principals considered adequate. — Eventually this cost element
was greatly sacrificed to the competitiveness of the market.
- Benchmarking
I could probably have saved you a lot of time had I not bored
you in listening to the aforesaid, which basically you all know yourself
and is not really any new contribution to the subject, but, Ladies
and Gentlemen, I was given 20 minutes to fill. — Reality seems
to be that at the end of the day communication expenses have decreased
or at least remained rather stable, if you are prepared to benchmark
it on the parameters that I have chosen.
Lacking of empirical data I have taken the years 1990 and 2000 of
our own records and have brought those cost elements which I earlier
determined as today’s communication expenses into a comparison
on the following parameters:
2nd chart — Development of Business Key Figures
— Deviations from 1990 to 2000
- Number of vessels handled
- Number of TEUs handled
- Number of Bills of Ladings/Invoices issued
- Number of liner vessels handled
- Total operational costs
- Gross Profit
- Gross Profit before Company Taxes
- Staff expenses
- Number of staff employed
- Freight revenues generated
- freight tons ( break bulk only)
3rd chart — Comparison of Total Communication
Expenses — related to mayor Key figures
- cost per B/L resp. Freight Invoice
- percentage of total operational costs
- percentage of Staff expenses
- cost per head Staff
- last but not least — development of contribution from principals
in percentage
- If this is representative
then it seems that EDP as communication tool has indeed improved our
productivity since 1990. It probably could not have worked earlier
if the US study is right, which found out that in spite of some 2000
billion US Dollar investment in the innovative information sector
of the US during 1960-1990 no significant improvement of productivity
in this field was achieved before 1990.
- Conclusion
— Future
I would
assume you agree with me that there is no such thing any more that one
would be able to regard as "communication expenses" in the old
sense. Communication today is a summary of communicating amongst individuals
with all existing means and on all levels, it includes data transfer and
all activities that need to be performed and prepared to make information
and data transportable or transferable and it is also required to satisfy
our demands of receiving information. Our increasing consumption of information
seems to have become endless. As an agent I would only wish that our principals
gave us a fairer chance to cut our cost. They only need to realise that
this what we today regard as communication expenses in the widest sense
is respected anywhere close to what they experience as communication cost
elements themselves. — Please forgive me that I have not specifically
answered all the questions proposed to me by the organiser of this event.
Even the principle question:
How
best should a shipping agent deal with all these extreme expenses?
Cannot
be answered with one unique solution. — We apparently have been able
to manage communication costs to a certain extent by applying the normal
rules of economy of scale. I do hope, many of my colleagues will find
similar answers to their benefit.
I thank
you for your attention and patience.
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