FIDI presented a panel discussion in San Diego involving three members of the moving industry - Lorenz Amiet from Keller Swiss group, Steve Lewis from Voerman International and Cedric Castro from AGS - and Don Fisher from Fisher & Son Consulting, an auditor specialising in the household goods moving industry. The session was moderated by Jesse van Sas.
As an introduction Mr Fisher explained that he had a background in the moving industry. His first job as an auditor was to work on behalf of a corporate client to assess a contract with a Relocation Management Company (RMC) to make sure it was cost competitive. He said he found some overcharges and some charges that were over market. He picked up new clients by giving them tighter controls over their HHG rates.
Jesse said that in a perfect world there would be no need for auditors. Lorenz Amiet said that the world isn’t perfect and auditors have a role to play at least in educating the moving industry to do a better job.
Asked whether he thought his role would fade out as movers become more compliant, Mr Fisher said probably not. “Everything is driven by corporate compliance and procurement,” he said, adding that procurement people don’t understand international moving. “I have never met a procurement officer in any of the multinationals that likes sourcing this product.” He said that his job was to work with companies to understand all the elements of a relocation. “Our goal is to ramp up procurement as fast as possible and give them tools by which they are able to source it on behalf of our client.”
Jesse asked Steve Lewis if he thought that auditors had made the service more into a commodity rather than a niche service. Steve said that he thought they had but it was for the industry to present itself in a way that ensured quality levels were high and the assignee gets what they are paying for. “If we don’t, we are just a commodity and we will be treated as such.” He said.
Mr Fisher said that price was important but moving companies should learn how to sell something other than price to the client. “You need to be able to differentiate yourself on ‘why you!’ and most people today don’t know how to do that very well.” He said that his company “never” looks to price to be the determining factor. Companies should know their costs and be prepared to say no if they cannot go lower.
Jesse challenged Mr Fisher saying that in his experience he felt it was always "one way traffic". Mr Fisher said that most of the time his company doesn’t know the company that’s quoting. “Once the bids have come in and we have decided we are going to put out an offer, the offer is based on what procurement wants,” he said. “If they want to base it aggressively we take the lowest price in every cell, and drop it by 10%, no matter who put the price in. That’s how the offer is developed. It will be sent to the providers to say do you want it, or counter. It’s up to the carriers to convince procurement that they cannot go lower and still adhere to the KPIs ... If we pay more, and the quality scores are equal to the person that was a little more aggressive, then the person who had the higher rates eventually will not get the work. Quality will determine volume.”
Lorenz said that a company has to have the resources to complete the templates. Some companies might be too small to do it. He said it was important to know the destinations and the clients to be able to cost the contracts accurately and whether the risk should be passed on to your supply chain or kept within your own company. “Our approach is that we keep most of the risk ourselves. If we did a good job and got the statistics right that means we will not lose out.” Asked whether he shares the necessary statistical information with movers Mr Fisher said that his company had got better at it and tried to represent at least 90% of the business. However, he added that it was necessary for suppliers to do some of their own research. “Our system isn’t perfect,” he said. “If there are ways of improving the template that would make it easier to complete, we are game for that.”
Jesse said that it appeared that the contracts were now very tight so there were no loopholes through which a supplier could make additional margin. Cedric said that if you work well and keep everything to the contract it’s still possible to make a reasonable margin. “Of course, if you don’t pay attention to all the details then this is where you will be affected by lower margin and fines which are difficult to accept,” he said.
Mr Fisher explained that there are fines imposed by the client of KPIs are not met. “We really do try to build a team concept in these things to try to improve the process,” he said. “Everybody is open to criticism. It’s not the client’s objective to give penalties. The client wants a good move and for the providers to work as a team.” He said that his role was to be the buffer between the supplier and the client. If suppliers disagree with him they can go direct to the client. “We do not take offence. We are not the judge and jury.”
Cedric said that there were challenges working both with RMCs and auditors. “But with auditors you can argue straight away and you know where you stand,” he said. With RMCs, Cedric said that it could take much longer.
Mr Fisher said that he was in favour of performance-based pricing so that if companies do consistently score highly there should be a bonus. Steve Lewis said that he had not seen that. Mr. Fisher said that was something that suppliers should talk about during the negotiation. “We would be the first ones to support that,” he said. He added that he was pro-mover. “That’s why I’m here. I don’t feel that RMCs belong in the household goods moving business. They are just data pushers. There’s better value for our clients to own the contracts. We want to see movers make a reasonable margin … whatever it may be it’s up to you to convey that to the client and have the ability to sell it.” He added that he wanted movers to have big contracts and the relationship with the clients that, he felt, was lost in the RMC model. He would not work with RMCs as he feels there is a conflict of interest.
Jesse challenged Mr Fisher on reports that he had accused movers of being thieves. “I don’t think we used that word specifically, but we have seen airfreight charges that are way over IATA rates and pet transportation bills that are 100% over cost. People will do creative billing … maybe the rates that they take are too low and they have to make it up some place else.” He said that this doesn’t make the industry look good.
Lorenz said that he felt the Fisher model, including fines, helps organisations that design the product first and then work out the cost. If people put in costs that are too low, and they can’t do the job properly, they will incur fines. “I think the fines are a good way to protect quality,” he said.
The panel discussed whether SOLAS (Safety of Life at Sea) weights were sufficiently reliable to be used instead of a disputed density ratio. Steve said that in some parts of the world they were not. Mr Fisher said that although some ports were better than others he still looked at the volume on the OBL and the piece count. “Over time it should get better, so we can pull away from some of our rules and standards,” he said. He added that he had just seen a SOLAS weight for a 44cu met shipment of close to 30,000lbs. “It’s industry’s such as yours that need to work together to try to improve on these things.” He also said that he won’t deviate from the 45lbs maximum per item unless there are extenuating circumstances. If companies tried to play the system by packing into small boxes or breaking furniture down into small parts, they would be challenged.
In closing, Mr Fisher, who has a reputation for not engaging with the moving industry, explained why he had asked to attend the FIDI conference. “I came here because there are misconceptions about what we do and why we do it,” he said. “I wanted to say that we are human, we are not perfect, and are always willing to learn. If there are ways of improving the model to help you to price it, that’s our role. We are approachable, we have never said no to anybody. It would be good to hear from movers to get their opinion on how we can improve.”
I was surprised that there were not more questions from the audience, especially as it was clear that feelings were running very high with some companies who felt that Mr Fisher’s business model was having a detrimental effect on their business. Some told me that they agreed to do the work only because some revenue was better than nothing at all. Perhaps they were intimidated, either by Mr Fisher or the setting. For this reason I have conducted an interview with Mr Fisher so that I could ask some of the questions that didn’t emerge in San Diego. It will be published in our June issue.
www.kellerswissgroup.com
www.voerman.com
www.fscadvocate.com