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OPERATIONS

The Shipping Blues

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Nestled in a farmhouse overlooking a cornfield in Yardley, Penn., Joe Pfender and his 10 employees at Cargo Express couldn't feel farther removed from the war with Iraq. But, the company, a transportation logistics solutions provider, deals with the ramifications of the war and the threat of terrorism on a daily basis.

Founded by brothers Joe and Bob Pfender in 1996, Cargo Express arranges for the shipping of a laundry list of goods, from Pfaltzgraff stoneware to Clarks shoes, as well as handling their clearance through U.S. Customs. Since the World Trade Center attacks, the Pfenders have been coping with skyrocketing fuel prices and beefed up shipping regulations. Though the Pfenders haven't had any security problems with their containers, which are shipped between the United States and 21 countries in North America, Asia, Europe, South America, and Australia, a frequent, and concerning, problem with stowaways has increased their worries since terrorists and smuggled weapons are a threat.

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Besides security threats, Pfender has had to contend with the U.S. Military. The large number of military vessels on the high seas has created traffic and has slowed shipments. Additionally, the stricter maritime standards put in place by the federal government further slows the shipping process. To tighten security at points of origin, U.S. Customs agents are being sent to ports worldwide, and shipping manifests now require much more detail, which means more time spent on paperwork.

One of Pfender's biggest concerns is the increase in so-called war risk surcharges to insure ship cargo during dangerous times. Pfender expected a surge in charges in the Middle East, but he was surprised to see increases in the Mediterranean and on the Indian subcontinent, where Clarks shoes are manufactured. Soaring fuel prices are also a problem. "The cost of fuel alone has risen 150%," says Pfender, adding that those costs are passed on to the client.

Despite the turmoil in the international trade business, Cargo Express did experience a 50% increase in revenues during the first quarter, basically due to the fact that more and more manufacturing is being done overseas as a result of the struggling U.S. economy. However, the rapid spread of SARS could deeply affect the business's bottom line. None of the agents Pfender works with in Asia are sick. However, if the epidemic spreads through the factories of his clients' companies, the results could be devastating for Cargo Express, which derives 90% of its business from Asia.

Last updated: Jun 2, 2003




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