A Way To Lower Shipping Costs

Nation's Business, Dec, 1998 by Ken Cottrill

The Wine and Spirits Shippers Association (WSSA) in Reston, Va., is a specialist cooperative that serves about 450 member companies in the alcoholic-beverages trade.

"The weak link in the chain is the small guy, and his main recourse is to join an association," says Geoff Giovanetti, managing director of the cooperative. Most of the WSSA's members are small or medium-sized enterprises, he says.

Each year, the cooperative, on behalf of its members, handles shipments totaling about 20,000 20-foot-equivalent units, or TEUs. (Each unit is based on a 20-footlong freight container.) "As well as negotiating contracts, we handle shipping arrangements," says Giovanetti.

The lower cost achieved through membership in the WSSA is appreciated by Tom Dunkle, chief of purchasing and distribution for the Pennsylvania Liquor Control Board in Harrisburg. "The nonprofit association charter is a good fit for us," says Dunkle.

The board distributes about 9.5 million cases of wine and liquor products annually from foreign and domestic suppliers to 650 retail outlets throughout Pennsylvania. The outlets range from small wine shops to large stores. The movement of about 900 TEUs of wines and spirits shipped from overseas suppliers was formerly managed by a U.S. importer, says Dunkle. The importer still sells products to the board, but door-to-door delivery is now handled by the WSSA.

Transferring this business to a shippers cooperative has given the board "more control over the movement of cargo in terms of ports of entry and carriers," says Dunkle.

More control means lower costs. When the importer managed the entire process, the board paid a blanket fee that included freight rates, Dunkle explains. But any savings-when freight rates fell, for example-accrued to the importer, not the shipper. 'When the U.S. importer made the arrangements, we were paying him the total cost, and that does not change," notes Dunkle. Overseas Expansion Most of the shipping done by cooperatives is domestic, but there is growing interest in international shipping. This is a growth area for the Merchant Shippers Cooperative Association in Augusta, Maine, says George Wilmott, the association s vice president for operations. "A lot of shippers want to get into the international market, but they need help from organizations like ours," he says.

Food and agricultural-product companies in the Midwest hope that a new shippers cooperative being formed there will yield enough savings to improve their competitiveness in international markets. Formation of the new co-op is being sponsored by the Mid-America International Agri-Trade Council (MIATCO), a Chicago-based trade association that develops export markets for Midwestern agricultural producers. Plans call for the co-op to be launched during the first quarter of 1999.

The goal, says Gary Winget of Global Resources Associates Inc. in St. Paul, Minn., is to create an organization that will "transform hundreds of small- and medium-volume shippers into a large-volume shipper." Global Resources, a consultancy specializing in international trade, is helping MIATCO set up the cooperative.