THE STAGE OF EVOLUTION OF INTERNATIONAL SUPPLY IN BRAZILIAN COMPANIES – THE PERSPECTIVE OF “INTERNATIONAL FREIGHT FORWARDERS”

The objective of this work is to present research results on the existing market and the potential for providing international supply logistics services by “International Freight Forwarders” (IFFs) in large companies operating in Brazil.

Abroad, more and more companies are responding to the challenges inherent to the internationalization of business by using logistics service providers in activities outside their core competencies, in search of flexibility and capabilities outside their specialties.

The results indicate that the role of the IFFs in the international supply process of Brazilian companies is still that of a simple provider of physical handling services, with an incipient level of technological adoption and integration into the companies' production system.

Despite the favorable conditions found in the international scenario, the research found no evidence that Brazilian companies are adopting innovative changes in their international supply process that favor the demand for “value added” services to support the companies' production process.

Thematic Area: Industrial and Services Production
INTRODUCTION 

The globalization of markets and increased competition have enormously increased the logistical complexity of companies. With international competition, companies are experiencing an increasingly demanding market for better services with high levels of efficiency. In this new competitive environment, the final consumer customer becomes the focal point of a cause and effect relationship, which propagates a strong demand for rationalization and customization throughout the supply chain.

In Europe, the US and Asia, leading companies are adopting global supply, manufacturing and distribution strategies in order to take advantage of the comparative and scale advantages of the international economic environment in order to maintain the expansion of their businesses and the high level of competitiveness in their sectors. However, the greater geographical dispersion of operations generates great challenges in the daily management of their businesses in these companies. This has encouraged companies to concentrate their efforts on activities within their competence, delegating those ancillary activities to specialized companies.

More and more companies are responding to the challenges inherent to the internationalization of business by using logistics service providers in activities outside their core competencies, in search of flexibility and capabilities outside their specialties. According to Bowersox (1996), the scope of these services related to international logistics shows strong growth, demonstrating that contracting companies are eager for innovative solutions to overcome the difficulties imposed by a more complex business environment. The author observes that the uncertainties of the international environment are added to the domestic ones due to issues related to diversity, distance, demand and regulation.

In fact, Rao (1994) noted that the degree of strategic importance of activities associated with international logistics is one of the main factors that influence the hiring of third-party services. The author also found evidence that the level of importance of these factors are, in turn, influenced by the level of complexity of the logistics network, the movement process and the product.

Both GM and Dupont are good examples of companies that opted to hire logistics operators to move materials and finished products, integrating them into the global strategy to support their manufacturing and marketing. The strategy adopted was to work together with the International Freight Forwarders (IFFs) in intermodal handling, as opposed to simply passing on the cargo to be transported to them. In both cases, the intensive use of information systems is identified as a necessary condition for the success of these logistics partnerships, where service providers are integrated into their customers' logistics systems. These logistics operators maintain careful planning of the entire movement, which starts from the delivery schedule to the destination, working backwards through all the links in the supply chain. In the case of GM, contingency plans are put into action when necessary, keeping the assembly lines fed by air, until the reestablishment of the normal flow, by sea.

Bowersox (1990 and 1996) points out two main reasons for the growth of this type of service: economy of scale that generates opportunities for efficiency gains; and “expertise” in providing necessary services, aiming at operational efficiency. However, the author also identifies the need to develop a more stable interorganizational relationship format since these service providers are inserted as an integral part of the contracting companies' logistics system. This becomes even more important in situations where there are heavy investments in specialized equipment. In these cases, the relationship tends to be long-term, better known as a logistics partnership. The fundamental difference between partnerships and the traditional contracting of third-party services is their innovative format, in which the parties share efficiency gains.

Another aspect of great relevance observed is the tendency of shipping companies to concentrate their operations in a few IFFs. This, in a way, is a consequence of the need for a closer relationship between the parties, and the search for opportunities for economies of scale in operations. In the GM and Dupont examples cited above, as well as the Eastman Kodak Co. , these companies drastically reduced the number of IFFs as a result of efforts to further rationalize international logistics.

Özsomer (1993) points to a recent survey that reveals that 92% of US companies use the services of IFFs. The author also argues that the increase in international trade has motivated small and medium-sized companies to engage in exports due to the growth of national and international competition. These companies are no longer protected in the domestic market, with knowledge about emerging markets being a major motivation for using IFFs and also an important selection criterion.

Another point of extreme relevance for the expansion of logistical services is related to the ability of the IFFs to manipulate information. This is due to the recent revolution in communications that has given rise to EDI, integrated communication networks and satellites; the revolution in data processing capacity with the advent of increasingly powerful microprocessors; and the emergence of decision support systems (“Management Information System”-MIS). For example, Digital Equipment Corporation is a company that relies on a sophisticated computer system for the periodic evaluation of its entire network of facilities and logistics flow, worldwide.

According to the experience of large international companies, competence in designing and providing integrated logistics services must be based on skills developed from the intensive use of information technology. Eastman Kodak Co., when reducing the number of IFFs from 16 to a single service provider, considered communication and tracking capability as key selection criteria.

In fact, information technology is identified as a competitive differentiation factor among logistics operators. However, even in the USA, the current level of adoption of information technology in the supply process of companies is considered as incipient, both in terms of “hardware” and “software” .

For example, the proper use of EDI often results in more accurate, real-time information at a lower cost than other traditional systems (eg, forms, telephone, and facsimile). However, despite a rapid advance of EDI in companies in general, the level of adoption of this technology in the transportation sector is still below the average in the USA. Recent research indicates that the level of EDI adoption is around 50% in transportation companies. On the other hand, the same survey indicates that 85% of IFFs will be using EDI in the coming years.

In short, EDI was pointed out as necessary, but not sufficient, for the success of IFFs. According to the same survey, vanguard companies will stand out for the adequate use of new information technologies in their operations. This survey also demonstrated that large IFFs are more aware of the benefits of EDI than smaller ones.

In Brazil, the market for logistics service providers is still in its initial stages of organization. There are few companies that provide comprehensive and quality services. In terms of international supply, the situation is aggravated by the lack of infrastructure in the country, whether port, telecommunication or road. These obstacles inhibit the emergence of efficient and effective logistics operators that are able to offer a single package of services, from the point of origin of supply, through the various stages of intermodal movement, to the final destination (i.e., door-to-door service -the door).

The trend towards outsourcing activities outside the “core competencies” and the concentration of use of IFFs, as well as the increased demand for more quality services at lower cost, observed in companies on the international scene, points to important changes in the role of IFFs as logistics service providers to companies operating in Brazil. This is the main motivation for the development of this research, which aims to know the current stage and perspectives of the IFFs as logistics service providers.

This research aims to investigate the existing and potential market for the provision of international supply logistics services in large companies. The research questions to be answered are the following: What are the services currently used in international supply in large companies located in Brazil? Which of these services are offered by IFFs? Is there currently a demand for door-to-door service? What are the prospects for future developments in the demand for logistics services?

METHODOLOGY

This research was divided into two phases. The first aims to obtain general information about the current international supply system in companies, considering: (1) the services used during the international supply process; (2) which of these services are offered by service providers (IFFs); and (3) their quality. The second phase aimed to verify the existence of plans for changes in the manufacturing and supply strategy of the companies that favor the role of the logistics operator as a provider of "value added" services, such as pre-assembly operations of subassemblies to the assembly line , from processing to packaging and storage.

Data collection for the first phase of the research was obtained through a structured questionnaire, which was developed based on bibliographical research and preliminary interviews with shipping companies and an IFF. An initial list of services offered in the market was presented to the interviewed companies, with these companies having the opportunity to add other services not considered. Respondents were asked to indicate whether they used the listed services, as well as the level of perceived quality for each of them, using a Likert scale.

Chart I presents the list of possible services used in the companies' international supply process that was included in the questionnaire adopted in this research. During initial interviews this list of services was tested and validated. The traditional services of the IFFs, that is, intercontinental transport from the port/airport of origin to the port/airport of destination, were evaluated according to some dimensions of service performance, namely: cycle time, consistency of deadlines, frequency, operational flexibility (example: urgent deliveries), ability to respond to contingencies (example: itinerary changes during movement due to port problems, etc.).

At the end of each interview, each interviewee was asked to give a general assessment of the IFFs used, in terms of price and quality, using a Likert scale.

The second phase was developed through a non-structured interview, when it was possible to evaluate the prospects for changes in the manufacturing and supply process in companies that could influence the current form of relationship with their IFFs. In this case, an attempt was made to establish contacts with senior management executives of the companies surveyed due to the more strategic focus of the issues to be raised.

The set of companies interviewed were selected, through the periodical “Melhores e Maiores” according to the following criteria: high percentage of imported inputs, revenues greater than US$ 100 million/year and location in Vale do Paraíba and ABCD Paulista.
RESULTS ANALYSIS
General features

The data collection phase lasted two months and ended in October 1996. The analysis of the 21 companies surveyed indicated that the vast majority of these companies basically belonged to four sectors: Electronics, Telecommunications, Automotive and Chemicals/Pharmaceuticals. Of these 21 companies interviewed, 76% actually answered the questionnaire, while 46% participated in the second phase.

Chart 2 presents the general characteristics of the group of companies surveyed.

Therefore, the typical company in the sample of this research, considering the median as an analysis parameter, is characterized by:

• be a large multinational, with revenues of around US$ 400 million;

• having had growth of 24% in the last two years;
• predict a growth of 15% for the next two years;
• having input purchases representing 45% of revenues, of which 60% are imported;
• having around 90% of imports made by maritime modal, handling 462 TEU/year. According to Table 2, the companies belonging to the research sample have very different characteristics from each other. In cases of multinational companies, two types of physical flow were identified international supply, classified according to the origin of the purchased inputs: “intercompany” and third parties.• “Intercompany” imports, which are characterized by centralized supply management at the company's headquarters, which includes decisions such as the company's purchasing policies corporation and selection criteria for suppliers and logistics service providers (IFFs). In this case, the physical movement is managed by the head office, leaving little room for managerial maneuver on the part of the branch during the physical flow, until arrival at the port/airport of destination;• In imports from third parties, the branch has a greater degree of control on procurement operations. In general, the subsidiary has freedom to choose the supplier and logistical service providers.

  The maritime modal was characterized as the basic means of international transport, used by the shipping companies surveyed for the flow of imports from Europe, the United States and Asia. It was observed that the air modal is used only when the value of the input has a small volume and high added value, or as an operational contingency.

  The Compound and the Quality of the Services Provided

  The services used in the international supply process, according to the companies surveyed, can be divided into those related to physical movement and ancillary services. The handling services that occur from the physical departure of the cargo to the final destination in Brazil are listed in Table 3 below, ordered according to the physical flow observed in the international supply.

In general, the results presented in Table 3 indicate that the average level of satisfaction perceived by user companies regarding the set of handling services is higher when the intercontinental transport mode is air. That is, companies rated the marine service package with a satisfaction level of 6,8, while the air service package received 7,4. Significant differences were observed in deconsolidation and customs storage services in Brazil.

Storage, both abroad and in Brazil, was observed as the handling service with the lowest level of use by the interviewed companies. On the other hand, the customs storage service in Brazil was better evaluated than storage abroad.

Chart 3 also demonstrates that transport services, both pick-up/delivery (in Brazil) and collection (abroad) are the most requested by companies. However, the quality of these services is evaluated differently when the intercontinental modal is considered. In the case of the maritime modal, these services are the best evaluated, with a 7,2 level of satisfaction. On the other hand, in the case of air modal, these services were perceived as the fourth in quality, despite having received the same level of satisfaction (7,2 ).

In general, IFFs provide collection services from suppliers, storage abroad and consolidation abroad. Other services, namely deconsolidation in Brazil, bonded storage in Brazil and delivery transport, are provided by independent companies. That is, the IFFs offer handling services from the supplier to the port/airport in Brazil. The shipping company is in charge of contracting and managing handling services on Brazilian soil.

In only two cases did the IFFs offer all physical movement services, door-to-door, to their customers.

Chart 4 demonstrates that accessory services associated with the availability of specialized equipment, processing, EDI and data processing are not being used by the surveyed companies. In general, these services are found in long-term relationships between logistics operators and contracting companies. These services are classified as “value added”, which are often the basis of competitive advantage among logistics operators abroad.

Regarding the use of EDI, the level of adoption of this resource in Brazilian companies is far below that of North American companies. While the results of this research did not indicate the use of EDI in international logistics in Brazilian companies, in the US, the research results point to a level of use of 50%.

Respondents indicated that the accessory support information service, which is related to cargo traceability, is basically done by telephone or facsimile. This service was evaluated as just fair, receiving an evaluation of around 6,0 for both modes. In no case was any type of interconnection of information systems between contracting companies and the IFFs identified.

Interconnection via EDI between service providers and contracting companies surveyed was not observed.

Customs clearance is not a well-evaluated service in terms of quality, despite being present in all import operations. This service is offered by independent companies, with the exception of two interviewed companies. In these cases, the company offering the clearance services provides computer terminals for consultation by the shipping company.

In short, the results demonstrate that the information technology content used between shipping companies and IFFs is very low.

Regarding the Quality of Services Provided by the IFFs:

Table 5 presents the interviewees' assessment of the quality of the intercontinental movement services provided by the IFFs, considering both maritime and air modes. The service level was evaluated according to the following performance dimensions: cycle time, deadline consistency, frequency, operational flexibility and responsiveness.

In general, it is observed that the contracting companies are more satisfied with the services of the IFFs, via air transport. Although there were no significant differences, the international supply by air received a better evaluation in all quality dimensions considered in this research. While the maritime service received an average of 6,5 in the evaluation, the air service was perceived with a quality level of 7,0.

As a rule, the companies interviewed stated that the high level of uncertainty in the import process via maritime transport is circumvented by high levels of inventory and the use of air transport as a contingency. This statement points to a situation where companies appear to be accommodated with the low level of efficiency in which they operate, given the current conditions of infrastructure and customs legislation in the country.

Regarding the Evaluation of the Price and Quality Relation of the Services Provided by the IFFs:

Table 6 presents a general evaluation of the IFFs by the clients, regarding the price and quality of the services provided. In this sense, it is observed that there is a reasonable level of satisfaction among the surveyed companies.

However, the survey showed that only two companies, or 12,5% ​​of the total sample, receive door-to-door service from their IFFs. In fact, during the interviews it became evident that companies are not, at the current stage, demanding more sophisticated services from their IFFs. The search for improvement is related to improvements in the efficiency of existing processes. As will be seen below, changes in processes are a key point for the emergence of demand for more advanced logistics services.

Prospects for Changes in the Supply Process

This second phase of the research aimed to verify whether there are plans to change the supply and manufacturing strategy of companies that favor the role of the international logistics operator (IFFs) as a provider of "value added" services, such as the pre-assembly of subassemblies, packaging processing and storage.

Since during the first phase not a single company was identified that used the "value added" services of logistics operators, the companies interviewed in the second phase were selected according to characteristics that made them more prone to the globalization of their supply strategies and manufacture. In this sense, the automotive, electronics and telecommunication sectors stood out due to the current level of internationalization of supply sources, the high added value of imports and the manufacturing process characterized by the different stages of assembly of components.

Below are listed important questions about the perspectives of changes in companies, based on the interviews carried out, according to the perception of the executives:

* Reduction of inventories;
* Cost reduction;
* Reduction in supply time;
* Reduction in the number of suppliers;
* Reduction and standardization of components;
* Increased frequency of deliveries in smaller batches;
* Increase in the percentage of items in the JIT (“just in time”) system.
* Increased flexibility
* Pre-scheduled delivery
* Concentration on "core competencies", transferring activities related to pre-assembly, packaging and supply to assembly lines to third parties
* Customs clearance as part of the logistics operator's service package

The aspects mentioned above, according to the arguments raised in the bibliographic review made earlier, can be considered favorable to the emergence of demand for IFFs with an expanded service package to support the companies' international supply process. However, respondents cited a number of reasons that inhibit the hiring of these service providers, namely:

* Loss of flexibility;
* Increased costs;
* Uncertainties regarding confidentiality;
* Low reliability;
* Subject to Headquarter policies abroad;
* Low added value of inputs.

It is interesting to observe that the interviewees do not relate the perspectives of changes in their companies with a potential participation of logistic operators in their manufacturing processes and international supply. That is, the interviewees are not convinced of the possible benefits of this type of relationship. This fact becomes clear when we verify that the objectives of reducing costs and increasing flexibility are not perceived as benefits of a possible use of third-party integrated services.

It was also observed the need to implement integrated information systems and the solution of bureaucratic and regulatory obstacles in the country (eg Manaus Free Zone), as prerequisites for a viable partnership relationship between shipping companies and providers of integrated logistics services. .

However, no clear intention was identified to use logistics operators, including IFFs, integrated into the supply, manufacturing or distribution process. In short, the executives' testimonies do not indicate a strong propensity to use “valued added” services from logistics operators.

As seen previously, and despite the results of this research, there are many experiences of international companies that are operationally integrated with logistics operators, where success depends on a partnership relationship between the parties. In these relationships, investments in dedicated resources, information technology and physical movement are often necessary. The speed and accuracy of abundant information between the parties appear as key factors for the full benefits of an integrated operation to be enjoyed.

CONCLUSION

The research identified that there are few companies that demand or receive door-to-door service. This means that these companies use more than one logistics operator to obtain the necessary physical handling services and accessories in the international supply process, from the point of origin to the destination. On the other hand, the use of third-party “value added” services by contracting companies was also not identified.

The results pointed to the fact that the role of the IFFs in the international supply process of Brazilian companies is still that of a simple provider of physical movement services, not presenting a significant level of integration with the companies' productive system. In general, the IFFs offer handling services, from the international supply source to the Brazilian port/airport, not getting involved in activities related to the displacement to the final destination. Even in exceptional cases, where IFFs provide door-to-door service, no level of involvement of these service providers with the productive strategy of these shipping companies was observed.

Customs, delivery and bonded warehousing services are opportunities for the development of integrated services by national IFFs. According to the interviewees, the large international IFFs are reluctant to extend their services beyond Brazilian ports/airports. Knowledge of the operational and legal particularities of Brazil constitute an important factor for the development of partnerships between national operators and large international logistics operators.

The interviewed companies evaluated the level of service provided by their IFFs as satisfactory. However, the requested services do not present any level of sophistication in terms of information technology. Both the integration of information systems and EDI, a fundamental tool for the development of vanguard services and partnerships, are still not part of the reality of international logistics companies. In other words, the traceability of loads, in a timely manner, fundamental to predictability and, consequently, to the rationalization of planning and production scheduling, is found at levels below those found in other countries. In short, the current market for providing services in the international supply process is still incipient in Brazil.

Despite the favorable conditions found in the international scenario, the research found no evidence that Brazilian companies are adopting innovative changes in their manufacturing process that favor the demand for “valued added” services that presuppose the integration of IFFs into the companies' logistics process. However, the trend towards market globalization indicates that there are great possibilities for future growth in integrated logistics services, given that the opening of the Brazilian market is still incipient. There are many companies that still hesitate to increase their supplies from international sources due to the low reliability of this option, even in cases where purchase costs are lower.

BIBLIOGRAPHY

BOWERSOX, D., J., CLOSS, D., J., Logistical management: the integrated supply chain process, McGraw-Hill, 1996

RAO, K., YOUNG, RR, “Global supply: factors influencing outsourcing of logistics functions”, International Journal of Physical Distribution & Logistics Management, Vol. 24, No. 6, p.11-19, March 1994

“The 12.000 – mile pipeline”, Distribution, p. 46-48, June 1996

“Don't go with the flow”, Distribution, p. 54-58, October 1992

BOWERSOX, DJ, “The strategic benefits of logistics alliances”, Havard Business Review, p. 36-45, July – August 1990

“Family breeds confidence”, Logistics Management, p. 67-71, March 1996

MURPHY, P., DALEY, J. and DALENBERG, D., “Profiling international freight forwarders: a benchmark”, International Journal of Physical Distribution & Logistics Management, Vol. 22, No. 1, p.35-41, January 1992

STOCK, JR, LAMBERT, DM, Strategic logistics management., Homewood, Ill.: RD Irwin, 1987. Apud MURPHY, P. (1992)

ÖZSOMER, A., MITRI, M., CAVUSGIL, AT, “Selecting international freight forwarders: an expert systems application”, International Journal of Physical Distribution & Logistics Management, Vol. 23, No. 3, p.11-21, April 1993

MURPHY, P., DALEY, J. and DALENBERG, D., “Shippers Control Export Moves”, Transportation & Distribution, p. 75-79, Vol. 32, Nº 10, 1991. Apud ÖZSOMER, A.

ARNTZEN, BC, BROWN, GG, TRAFTON, LL, “Global Supply Chain at Digital Equipment Corporation”, Interfaces, p. 69-93, January-February 1995

MURPHY, PR, DALEY, JM, “International Freight Forwarder Perspectives on Electronic Data Interchange and Information Management Issues”, Journal of Business Logistics, p. 63-84, vol. 17, No. 1, 1996