What were once proposals are now laws. Actions that once seemed innocent mistakes can now bring swift, costly retribution. Changes that have been in motion since Sept. 11, 2001, have now settled into concrete, irrevocable policy.

Shippers are having to deal with a new world when it comes to security-at the same time they must keep paying attention to an information-fueled business evolution whose pace is as inexorable as it is rapid.

Over the last two years, a flood of legislation has poured through the U.S. government. Those new rules began to take hold last year and are now fundamentally reshaping world trade. Anyone wearied by the ceaseless warnings and endless string of stories about security had better beware, warns Peter Gatti, executive Vice President of the National Industrial Transportation League.

Stakes are high

"It can't be ignored," Gatti says of the new security environment and its effect upon the transportation world. "You've got to get it right or you're going to wind up paying financial penalties as well as seeing your cargo stalled and delayed," he says.

"The stakes are now pretty high," says Jennifer Gold, Director of Project Management and Business Analysis for Philadelphia, PA-based BDP International Inc. Companies that formerly focused on shaving dollars from their transportation costs now need to concentrate on functionality and following the rules more than ever before. "It's not just driving a few pennies out of the transportation budget any more," she says.

Making the situation even more difficult is the fact that many of the people who wrote the laws have little if any familiarity with the transportation industry. "You've got people who are promulgating the new regulations, but who are not familiar or cognizant of the commercial applications of the business process," Gatti says.

In a way, the entire global shipping business needs to be reinvented. "The challenge we're seeing out there is understanding the processes by which goods move," Gatti says. This is placing a tremendous burden upon those who work with world trade and transport every day: freight forwarders.

"From a general standpoint there is greater reliance and greater demands being placed on the forwarding industry as really never before," Gatti says. Forwarders and customs brokers are immersed in the complexities of global transportation transactions.

Because new laws require more information earlier than ever before, shippers need to work more closely with their forwarders and provide more information than they have in the past, says Peter H. Powell Sr., chief executive officer of Westwood, MA-based C.H. Powell Co., and chairman of the board of the National Customs Brokers and Forwarders Association of America (NCBFAA).

Security tops the list of concerns

Though people may be tired of hearing it, security is now the number one concern of any company involved in transporting goods anywhere into or out of the United States of America, Powell says. And though security efforts initially focused on the maritime and air passenger industry, they are now influencing every business dealing with the movement of goods.

"Irrespective of the mode of transport, the security of the supply chain from origin to ultimate user is of prime concern to all parties to the supply chain-not only to the government but to the private sector," Powell says.

Now that capturing data accurately and presenting it to the government rapidly is more important than ever before, shippers will need to work very closely with their forwarders, Powell says. If they don't, it's likely that the transportation of goods will be stalled.

Others agree. "Shippers certainly need to increase their collaboration with their forwarders and third-party logistics providers," Gold says. Forwarders are preparing for this by increasing their levels of expertise and adding resources. Forwarders themselves say that the situation is a good fit.

Despite the emergence of some massive players, freight forwarding is still a business dominated by small companies providing individualized services. That's exactly what shippers need right now when it comes to both security and technology, experts say. In a market where uncertainty reigns, shrink-wrapped solutions are useless.

"The services that provide the most benefit from forwarders today are the flexible solutions that they offer to individual accounts. Not off-the-shelf processes that force a customer to adapt, but truly unique solutions per customer," says Lucy Echon, Communications Manager at TransGroup Worldwide Logistics, which is based at the Seattle/Tacoma airport in Washington State.

Shippers can learn security from forwarders

It's key that shippers recognize that adapting to the new regulations means not just dealing with shipments but taking on whole new ways of business. This includes taking part in such efforts as the Customs-Trade Partnership Against Terrorism (C-TPAT), or upgrading systems and operations to meet the needs of a qualified C-TPAT provider, says David Benton, Director of Corporate Communications for Redwood City, CA-based Menlo Worldwide Services.

"Forwarders can help their clients minimize disruptions to their supply chain by providing guidance on the most cost effective security measures they can take to prevent the compromise of their products in the transportation mode and by participating in voluntary, self-assessment security programs such a C-TPAT, a certification which Menlo Worldwide has received," Benton says.

C-TPAT involves engaging in training, setting up systems, and allocating manpower to meet a series of requirements set by the Bureau of Customs and Border Protection. Once companies achieve C-TPAT certification, Customs essentially puts them at the head of the line when their shipments are moving through the system.

Shippers must not be intimidated by the new security rules, Benton says. Meeting their requirements is essentially a matter of applying time and money and then making fixes as things move along. Customs and other government agencies have shown a willingness to work with the private sector, he adds.

"Any security measures taken will entail a combination of manpower and technology. Some security measures can be enhanced by a simple review of documentation. Others may require the implementation of high technology, including X-ray or explosive detection," Benton says.

Even though dealing with security is vital, some experts fear that the amount of energy that is being paid to the topic is draining resources away from the multitude of new technologies that are transforming the transportation industry. The reality is that security and technology are utterly intertwined.

Industry must evolve to meet new government demands

"As the government changes their systems so too must trade over a period of time," says Michael Ford, Vice President of Regulatory Compliance for BDP International Inc. For customs brokers and freight forwarders, one of the biggest changes coming in 2004 will be the Bureau of Customs and Border Protection's Automated Commercial Environment (ACE).

ACE could be very good news for the transport industry, Powell says. "The whole concept of the ACE system is a single entry point to satisfy all government agencies without having to provide redundant data to many agencies," he says. Customs is currently testing ACE with a few selected companies, and progress has been very gradual.

"The new ACE system is slowly coming on. It will be an evolving process, but it will also be the biggest technological scenario for the year," Powell says. That doesn't mean other technological scenarios won't be playing out. Chances are good everyone in the industry is going to have to step back and take a look at the technologies they've installed and how well they work in a rapidly evolving environment.

"Some of the technologies are going to have to change fundamentally," Gold says. "The enterprise resource planning systems companies have implemented over the years won't necessarily provide the information and timing cycle the U.S. government would like," she says.

Brokers and forwarders are revving up their own technological systems to meet the new demands. Internet-based inventory and shipment management systems will play an increasingly important role in the business in 2004, says Jerry Levy, Vice President of Marketing at BAX Global Inc. in Irvine, CA.

As an accessible, affordable communications medium, the Internet is a near-perfect tool for world trade, and executives see the industry making increasing use of it. "The hottest technology in the forwarding sector is global, web-based connectivity and just as importantly, 'web services,' which enable firms to quickly integrate the supply chain information into their own POS, payment, and operations systems," Levy says.

Such web-based systems will both allow users and forwarders to seamlessly move and work with data and deal more effectively with the outside world. In addition, companies will be able to gain access to the information regardless of where it is entered. This will help with the vital task of tracking and monitoring shipments, Echon says.

"Certainly, as the global markets become more accessible the need for visibility of transport status updates and inventory information are brought to the forefront," Echon says. As is the case with many of the new security systems, forwarders are developing expertise for their customers by going through the learning curve by themselves first.

"Forwarders are seeing increased efficiency by integrating their operations, billing, sales, quality as well as inventory systems through seamless programs that interact across their systems," Echon says.

Lack of standards will stall RFID for now

One area that generated a lot of hype that will not see a huge amount of action in coming months is Radio Frequency Identification (RFID) technology, Echon says. Though retailing giant Wal-Mart's commitment to RFID should bring a seismic impact starting in 2005, too many fundamental questions still remain to be answered.

"RFID is hot and industry standards need to be adopted," Echon says, but the rules that will set the standards that will allow the technology to work on a worldwide basis are still unformed. "RFID is in a similar stage as bar code labels in its infancy. Once the standards are set we can accelerate progress in this technology," she says.

While the troubles with RFID might have been predicted, one factor that will shape relationships between shippers and freight forwarders through the year was not. Shippers are increasingly unhappy with the transportation technology they've been buying, and they are looking for freight forwarders and their service-oriented approaches to help ease some of the disappointments and bring increased efficiencies.

"We continue to see 'technology offload' as a primary driver in our customers' purchasing decisions," Levy says. "Retailers and manufacturers spent millions in the 1990s on logistics tracking and decision support software and have not obtained the ROI expected," he says.

Many in the shipping world are very frustrated with the systems software publishers are providing them. "Technology will play a role, but it's got to be in balance with the processes we've seen earlier," Gatti says. "Technology should not be developed in a vacuum and then asked to be forced into the supply chain," he says.

Because of this situation, forwarders see themselves becoming the international trade industry's technology providers of choice. With their intimate knowledge of all aspects of transportation and their existing systems, forwarders are increasingly being asked to take the role of the sophisticated tools that were supposed to replace them. Not all forwarders can do this, but an increasing number have the skills and computing horsepower.

Forwarders becoming technology providers

"In this decade, shippers are asking the forwarders to supply the integrated and automated information in a web environment as well as direct application to application interface," Levy says. The big systems are out. The human touch is in.

"Firms are no longer willing to purchase multi-million dollar stand alone software. Forwarders who can quickly and inexpensively integrate the logistics information with a customer's back office systems have a competitive advantage," Levy says.

Forwarders say they are listening and acting in response to their clients. "Increasingly, our customers really drive the course we take with our technology enhancements," Gold says. "We're providing a one-stop shop for international trade that says, 'What's going on, what do I need to do, what do I need to trace,'" she says.

Velocity of change is relentless

"Velocity" is becoming an evermore demanding constant in the global trade environment, Gold says. Security, progress and competition are ensuring that information is moving faster than ever before. To simply remain competitive, shippers have to demand more out of their forwarders, and forwarders must provide additional services.

It's a certainty that shippers are going to be asking for a lot, Gatti says, even if they have to work hard to do so. "We need to take the onus by telling the technology providers what we need," Gatti says. Some of this may involve analyzing the way the industry works more deeply than ever before.

Many of the requirements being placed on global trade now may face domestic shipments in the near future, Gatti says. Either way, forwarders and 3PLs will have to be faster, smarter and more efficient as the environment grows more intense.

"Logistics providers and transportation intermediaries will be asked to provide shipment information so that customers' freight will move seamlessly and without service failures. Those are the requirements that are going to have to be met and are being required to be met today."