By Katie Pyzyk
Sometimes, you just can’t do it all. Often you can’t do things as efficiently and effectively alone as you could if you had help. For scrap traders and processors, a freight forwarder or third-party logistics provider, or 3PL, can provide that help with the many intricacies of shipping raw and processed scrap materials. They can make “your supply chain tighter, get rid of the unknowns, and make you as the exporter more proactive, not reactive,” says the vice president of freight forwarding for a New York–based global logistics provider.
“The 3PL knows the logistics side as a core competency, as opposed to an exporter whose core competency is knowing their product,” the vice president says. Essentially, these companies consider themselves “the middleman between people who ship things and a truck line,” says the president of a Louisiana-based 3PL.
What’s the difference between a freight forwarder and a 3PL? The range of services each company provides will vary, but freight forwarders typically serve as brokers of transportation—they don’t have their own trucks, rail cars, or ships, but they use their relationships with such carriers to move your cargo from point A to point B. They also can prepare shipping labels and export documentation, provide insurance, and file insurance claims, and some provide warehousing services. 3PLs say they offer those services and more, including inventory management, order fulfillment, and warehousing. Some have their own transportation assets; others do not. Once customers pack their own cargo containers, logistics providers take it from there. “From the booking to pickups, deliveries, documentation, insurance, and customs entries, we can handle all of that or as little of that as our customer needs,” says the owner of a California-based global logistics business.
Adding in a Middleman
These companies and their customers tout the many benefits of their services:
Time savings. Less time spent on shipping means more time focused on scrap, say scrap companies that use logistics providers. Because they offer “door-to-door services, [that] really saves us a lot of time and energy in linking up different equipment [and] routing,” says David Chiao, president of nonferrous scrap trading firm Uni-All Group (Atlanta).
Wider geographic reach. Logistics providers also help you expand your market beyond the immediate area. IT asset disposition firm Supply-Chain Services (Lombard, Ill.) has a fleet of about 40 trailers and tractors, but that fleet primarily serves the Midwest, says Jade Lee, president and CEO. The company uses national logistics companies to coordinate product movement for its customers across the country in areas “that are not feasible for our trucks to pick up,” she says. Such services “are very important for us.”
One-way trips. Another benefit of partnering with a logistics provider is that it can handle one-way trips, meaning you don’t have to stress about filling and returning your trucks on the back end of a delivery. “I’ll match these empty trucks with the freight I have,” says the Louisiana 3PL’s president. “I’ve been doing this for 35 years [so]… I’ve got a good list of people” who might have material for a return trip.
Wider and deeper industry contacts. The Louisiana company president explains that if you’re reliant upon just one truck line, you might not see broader transportation-industry changes that will affect you. You’re also at risk if that one truck line experiences business problems. Leveraging a logistics provider’s plentiful transportation connections, on the other hand, is “like going to the airport with a ticket to get on any plane,” says a sales executive for a Missouri-based international freight forwarder.
Logistic companies’ expansive agent networks, both domestically and in hundreds of global ports, “help to make the world a little bit smaller,” says the New York–based representative. “A 3PL has a broader base of knowledge of the carrier selection and availability at each particular destination.”
Exporting expertise. Moving materials internationally requires additional expertise that many scrap businesses lack, such as advanced knowledge of the “documentation paperwork that has to go with each shipment,” says the Missouri 3PL’s sales executive. A logistics provider can “get that done quickly so [scrap businesses] don’t have to worry about that headache.” Even tiny mistakes or omissions can “cause delays and additional charges if the shipment doesn’t get through customs,” the sales executive says, so logistics providers that work internationally reduce risk by providing proper, error-free document processing.
Compliance with shipping requirements is a “very key, important feature… [but] a lot of small and mid-sized exporters don’t know what that means,” says the New York freight forwarder. For example, as a scrap exporter, you must know both the end destination and customer for each shipment. A scrap purchaser might be on a government watch list even if it’s not in a high-risk country, such as Iran or Cuba, but in an unassuming destination like Singapore. “[A logistics provider] has to be watching out for you” to ensure you don’t ship to prohibited buyers, the New York representative says. “Our database speaks to the FBI, Interpol, and local agencies” to keep track of that information.
Special handling. Certain logistics companies also offer specialty services. “We need ‘white glove’ services,” Lee says, because a portion of Supply-Chain Services’ business involves refurbishing and recycling large commercial and industrial electronics. Equipment destined for reuse requires special care to ensure it’s not damaged in shipping. These logistics companies cost more but they might, for example, go into customers’ offices to pick up and meticulously pack large electronics, which often do not fill up an entire trailer. Employees of these companies must be highly trained to “understand how to load equipment onto the transportation company’s truck … so when we receive it, we will not have a safety issue,” Lee says. Plus they must know “not to throw the equipment in with other recyclable material.”
Steering Through Shipping Snags
Logistics providers and customers alike note that several product movement challenges have popped up within the past year, within both the transportation and the scrap industries. These service providers say they have more robust resources than the average scrap business for overcoming such adversity.
One barrier is the worsening nationwide truck driver shortage. “Year after year, the older drivers are retiring, and there isn’t a huge younger generation of drivers taking their places,” says the California-based 3PL’s owner. Consequently, businesses attempting to ship materials by truck are experiencing hardships with bookings. The driver shortage causes a cascade of other transportation issues, Lee says, such as timeliness, or lack thereof. “[Trucks] may not show up on time if they do not have a driver,” she says, and lost time leads to lost money. A logistics provider has a “broader base of trucker selection” than a scrap business that might know only one or two firms, says the New York–based representative.
In addition, “the whole game has changed over the last six months … because you’ve got new federal mandates on hours of service and electronic logs” that went into effect in December 2017, says the Louisiana 3PL. Scrap businesses that use a single carrier might be out of luck if their driver reaches the hours of service limit and must adhere to a hard stop because of the electronic logging devices, but a logistics provider can use other carriers with availability to continue moving the shipment.
“All of that, in combination with the record high [freight] volumes, the bad weather that the Northeast has been experiencing, … and capacity issues we’ve already been dealing with for a year and a half” have collectively contributed to “a huge, huge capacity problem” for ground transportation, says the California freight forwarder.
Ocean shipments also have experienced an array of sticking points in the past couple of years, including port strikes, idled ships, and major ocean carrier bankruptcies. These challenges have contributed to higher ocean freight prices. Logistics providers offer carrier diversification, which they recommend to avoid service disruptions.
Although managing these complications is a part of logistics companies’ job, the current state of the industry has made it difficult even for them to coordinate and execute shipments on short notice. Thus, many have slightly increased the amount of advance notice they request when handling an order. They prefer a two- to three-week lead time for each job, although many say they can usually provide quotes within one to 24 hours, depending on the job’s complexity.
Looking at challenges specific to shipping material for the scrap industry, logistics providers point to the plethora of export regulation changes. “For 2018 … there are so many new industry regulations that I would always recommend going to a forwarder first to get some insight,” says the president of the California-based 3PL.
China’s export restrictions and new thresholds for contaminants are the most pressing. After the implementation of the first round of regulations, a “whole slew of carriers started rejecting any type of plastic scrap into China, so we were forced to reach out to other carriers,” says the California representative.
Knowledge of international regulations for scrap trade also is pertinent to changes occurring in Malaysia and Vietnam, or possible upcoming alterations to the North American Free Trade Agreement. Each country or regional body has its “own book of regulations when it comes to scrap commodities [that] … we can help our customers understand,” says the California 3PL owner. “As our customer’s best advocate, we really try to be innovative.”
Finding the right provider
As you would for any business partner, look into the business practices of a potential logistics provider before booking a shipment. Qualifications run the gamut from the obvious—“companies that will give us a good rate and always pick up on time,” Lee says—to the less obvious—a logistics provider has to “provide enough bond to cover their insurance,” Chiao says. In other words, check the provider’s insurance coverages, and talk to your insurance agent or broker, to ensure you understand the extent and limitations of its legal liability. “Insurance is very important. … We will check their record [and] certificate of insurance,” Lee says.
Consider whether your shipment requires additional insurance as well. Logistics providers say many scrap businesses, especially those dealing in lower-value commodities, at first don’t see the value in purchasing insurance coverage. But without insurance, “if the value of your shipment is $20,000 and the ship wrecks” or your cargo container falls off the ship, “you may only get about $500,” says the Missouri-based 3PL’s sales executive. Insurance covers damage to or loss of goods, but it will not ensure a certain cargo arrival date, these providers note.
Make sure you understand each party’s obligations under insurance agreements. In some cases, such as “if there is mishandling by the logistics company, we as the shipper are still liable,” Chiao says. Logistics providers report that sometimes confusion arises over responsibility if, for example, material goes missing from a container. Because these companies generally do not pack scrap containers or inspect their contents, such losses would be the scrap company’s responsibility. Scrap brokers should pay particular attention to this limitation, considering they buy and sell materials from many businesses without always personally inspecting the container contents first.
One of the greatest differentiators among logistics providers is whether they have knowledge of scrap businesses’ specific needs. “[What] really makes us different is our understanding within the scrap industry,” says the California-based 3PL owner. “I would say the majority of our volume is in the scrap industry, for both plastic and metal.” She previously worked for a plastic scrap recycler and feels confident in the specialized knowledge her company brings to the table.
Look for logistics providers who have been around a while, can provide references, and understand the scrap industry, says the Louisiana-based 3PL. “I know the difference between UBC and a load of siding or a load of copper. … If you hire Joe Blow to haul your stuff, and he brings food-grade trailers,” that’s not the proper tool to complete your job, he says.
“Scrap paper is our biggest export [in] the whole United States, more than grain or cars or anything else,” says the Missouri-based company’s sales executive. He points out that partnering with the right logistics provider can lead to a long-term relationship, and sometimes more favorable treatment and prices for repeat customers. “People nowadays are looking for a relationship … with [a logistics provider] who cares about their stuff,” he says.
Some freight forwarders recommend checking into whether a logistics provider has invested in sophisticated technology. Outdated systems and databases potentially could cause lost, delayed, or rejected shipments, they say. “We work a lot with electronic data interchange so we can share information electronically with our trading partners,” says the New York–based representative. Software communicates with ocean carriers to keep tabs on the location of each container, just like tracking a standard package through delivery to your home. “An ocean container is nothing more than a large FedEx envelope,” he says, and customers can receive alerts regarding their shipment’s location via e-mail or text.
Technology also can be a bridge for customers who aren’t ready to fully commit to handing over their entire logistics planning process. The New York firm’s system allows customers to book their own transportation vendors if they desire, but “behind the scenes we provide the compliance, the visibility, the documentation … [and] make sure vessels at sea are properly stowed,” says the company’s vice president of freight forwarding. “The technology allows for a lot of information to be centered on one site so there aren’t multiple log-ins and passwords.”
Prompt and thorough communication is important to scrap businesses. “If [a logistics provider is] very late in responding or neglected our requests or our e-mails, then they’re out,” Chiao says of the standards to which he holds these companies. These firms say they understand that need and prioritize providing substantial and dependable communication. “I’m old-fashioned, and I’ll call somebody to hear their needs,” says the Louisiana 3PL’s president. “I like to get to know customers.”
Treating your logistics provider as a business partner instead of a one-off vendor can also make for a smoother relationship, says the New York firm’s representative. “We want you to succeed as an exporter. In order for you to succeed, I need to succeed.”
Katie Pyzyk is a contributing writer for Scrap.