Outsourcing and the International Forwarder
This is the third in a series of op-eds that IAM is running to shed additional light on problems associated with privatizing the household goods program to a single source contractor.
Defining the Role of the International Forwarder
In the DoD personal property program, the traditional, non-asset-based International Forwarder/TSP (Transportation Service Provider) provides much needed capacity to the government in the way of organization and coordination. This capacity is achieved through the numerous agreements and contracts with local moving companies, trucking companies, port operators, and U.S. Flag ocean carriers. In the DoD program though, one can argue that the International TSPs are indeed asset based (contrary to the traditional definition of a freight forwarder): they maintain a supply of wooden liftvan containers to safely transport and efficiently move household goods for relocating DoD families. The staging, coordination, and movement of these containers in just the right quantity, at just the right time…worldwide…is what makes the international program go.
The biggest asset of any organization and business model is its people. International Forwarders employ men and women around the world that dedicate their business lives to safely and effectively moving prized possessions for our service members.
History of the International Forwarder in the DoD program
The International Association of Movers (formerly Household Goods Forwarders Association of America) has been in existence for more than 50 years, and is the largest trade organization in the moving and forwarding industry. It was a group of Forwarders that started this organization, and to this day, IAM’s governing membership remains the International TSPs that operate exclusively in the DoD program.
Many changes have been weathered in the DoD’s personal property program on both the domestic and international side. The DoD instituted numerous pilot and test programs in an effort to “re-engineer” the way the DoD moves its service members during the last 25 years—some with positive results, some not. What we have today is the DP3 program, a matured result of these efforts now in place for 10 years. Over the course of those 10 years, we’ve seen a steady increase in the average Customer Satisfaction Score.
The International Forwarder community has made it through these programs that advertised much needed change, but we have realized that truly, the more things change, the more they stay the same. These various test programs had different rules, contracts and conditions to the performance of business. What stayed the same over the past 50 years is that household goods under the care of an International TSP, are still handled at the curb by the local moving companies, trucked to/from the port, and loaded on a ship to final destination. All this by the way of the liftvan (also known as the type II container); the key requirement by the DoD that has worked for all these years.
Currently, 80–100 International TSPs are solely dedicated to handling approximately 120,000 sea and air household goods shipments under USTRANSCOM’s DP3 program on an annual basis. This volume can only be moved with years of experience behind it and a significant inventory of liftvans!
Looking FORWARD – Value of the International TSP in the current DoD program and the Outsourcing pitfalls
The landscape on the international side of the DoD personal property (DP3) program is one of stability. The requirement by the U.S. Government for International TSPs to utilize U.S. Flag ocean carriers is a primary reason for this stable environment. Most of the through rate charged to the DoD by the TSPs is the underlying ocean cost; this cost is the same for all TSPs, creating an even playing field and encouraging competition. This group of 80-100 TSPs create the best value to the government not only in pricing through the ocean arrangement, but due to the fact the TSPs co-load and consolidate their liftvan shipments together to create scales of economy. Quite simply, the process works; these TSPs are competitors, but work together much like on the domestic side.
In a contract that is outsourced to a single prime contractor, this cohesive and competitive environment of International Forwarders that have provided lift to the DoD for over 50 years will be compromised. Under the current Best Value system in the DP3 program, the International TSP is rewarded with traffic from the right combination of quality service and competitive pricing. The potential development of this distribution model being replaced by a single entity could quickly result in an emphasis on price only and take away the incentive to compete on the basis of quality. This loss of expertise and readily available capacity in the international market will result in diminished efficiency and poorer service for our military members.
Perhaps the biggest potential loss of value to the DoD in an outsourced environment on the international side may not be competitive pricing, liftvan inventories or scales of economy. It could be the loss of personnel at the International TSPs with years of experience in helping DoD families moving from one duty station to the next: an incredibly challenging and stressful time of their lives. In view of this potential loss, a lot of folks in the moving and forwarding industry surely have the belief that
“If what we did was easy, the Government wouldn’t need us.”
They need us!!