Integres plan angers forwarders
Forwarders are reacting angrily to the plan by Integres Global Logistics, a new joint venture, to target small and medium-sized shippers.
The outrage expressed by mid-sized forwarders to the Integres plan, which was announced Wednesday, has led to a hastily called meeting of the Airforwarders Association for Monday afternoon in Indianapolis. Steve Ritchie, vice president of sales for Integres, will attempt to alleviate concerns by forwarders who fear that Integres will go after their customers. The forwarders also are trying to arrange conference calls with top cargo officials from United Airlines and American Airlines to discuss their roles in Integres. The conference calls will take place Monday or Tuesday.
Integres figures to be the prime topic of discussion at a regularly scheduled meeting of the forwarders group on Tuesday. Some forwarders have threatened to retaliate by diverting cargo they would normally book with United or American to other carriers.
Jim Hartigan, who served as vice president of cargo at United until last month, is president and chief executive of Integres. United is expected to name a successor to Hartigan shortly.
United's sister company, United New Ventures, is one of the three principal investors in Integres, while United and American will be major customers of Integres, along with Roadway Express. Roadway, a leading trucking company, and Unisys Corp. are the other major investors in Integres, which has received $30 million in start-up funding,
"What blew me away is that the business plan that had been presented to us was significantly different from what came out the other day," Dave Wirsing, executive director of the forwarders association, said today. "We need to get some clarification. We also need to have up-front discussions with American and United. We need to know what the relationship is between Integres and these airlines. We don't want this to become a vitriolic situation until we find out what Integres intends to be."
"I smell a big rat, a big, big rat," said Steve Venghaus, an industry consultant and former chairman of Stevens Air Transport. "This is very, very bad."
He added that he expects forwarders will discuss the possibility of boycotting United and American at Tuesday's meeting. Venghaus remains a director of the association.
Brandon Fried, chief operating officer of Adcom Express, blasted United when he heard the news on Wednesday.
"I am so upset," he said. "If United had invested the kind of money they did in Integres in improving their cargo service, they probably wouldn't have the need to go out and start an entity like Integres."
By Friday, Fried had calmed down a bit, but he still described United's role in Integres as "an extreme conflict of interest. "It's not fair, it's just not fair," he said.
"Our primary concern is that Jim Hartigan has access to our customer base and our cost structure and so does everyone else in their new joint venture," said Laura Sanders, director of operations for Lynden Air Freight, a Seattle-based forwarder. "When they join forces and mask this as a freight forwarder, it's not a way to treat customers, small, large or otherwise."
Hartigan said the Integres plan received favorable responses from small and medium-sized shippers that participated in focus groups prior to the venture's launch. He declined to identify any of the shippers.
The Integres plan received a favorable response from Debra Phillips, executive director of the National Small Shipments Traffic Conference (Nasstrac).
"More options enable shippers to do a better job of meeting their companies' business objectives. Therefore, we anticipate that our membership will evaluate this new partnership to determine if it offers service and cost benefits for their operations."
Phillips said the long-term effects of the new partnership will depend on its ability to execute the services it offers, adding that the same can be said of new services being offered by companies such as United Parcel Service and FedEx.
Marianne Daidone, general manager of cargo at United, said her company sees Integres as a virtual integrator.
"Their target mark is smaller customers. As far as United is concerned, they're another customer, another integrator," she said.
Daidone added that United's primary mission "is to serve the freight forwarder community." As far as United's service is concerned, she said, "We're certainly not where we want to be," but added that the carrier's performance this week was up three points compared with the same week last year. She declined to be more specific, but said, "everything continues to move in a positive direction."
Dave Brooks, president of American's cargo division, said he sees Integres as a vehicle for attracting traffic placed by small and medium-sized shippers with the integrators.
"It's not necessarily a market that's attractive to our customer base. I don't think our biggest accounts – worldwide forwarders – would take us to task for doing what we need to do for what's good for our business," he said.
American's largest customers include Danzas AEI, BAX Global, Nippon Express, Expeditors International and DHL, he said.
As for Wirsing's comment that the association had expected Integres to be a service to small and medium-sized forwarders, Brooks said, "It can be. They should have the same access to Integres that a small and medium shipper should have. It could be a tool for them when they call on their customers."
Ritchie acknowledged that part of Integres' business plan includes traditional forwarding. But, he added, "there's also a part where freight forwarders are our customers." The new company's prime market will be "the hundreds of thousands of small and medium shippers that are using integrators and that are being overcharged."
Noting that the forwarders all compete with each other, he said Integres plans to ask for an application to join the Washington-based association. Asked if he planned to wear a bulletproof vest to Monday's meeting, Ritchie laughed and said, "It will be interesting."
