The initial flourish
Several lessons can be learned from the strategic policies implemented by couriers by their collective response to the changing face of business practices, “just in time” deliveries, and rapidly changing IT technology.
Having gained market exposure and enormous growth in the small package and document transfer industry by providing very fast transit times and super competitive rates, the couriers had phenomenal growth and a massive cash flow injection starting in the 1980’s and 1990’s.
These were the days however of fax transmission, and much slower computers, where companies were dependant on physical transport of their company printed matter and internal documents not to mention samples.
Distribution warehouses existed as their own 3PL entity but for the most part were dedicated to large operations that could drive a single facility, support it and make a tidy profit due to the massive volume of transactions and the ability to economize to scale. Little or no attention was paid to the company that required a smaller distribution service which resulted in the small to medium sized companies turning to couriers.
Freight forwarders served the general cargo industry but would not and could not compete with couriers as their minimum costs door to door were double or triple the cost along with indefinite time guarantees.
These were the ideal conditions for couriers to flourish. Meanwhile rapid advances in IT, tracking and logistics software and the internet were impacting the everyday supply chain solution.
The Challenge
With email transfers, company intranets, websites, powerful software and computers, the need for document transport by courier and post declined quickly eating into the core of their business revenue and service. Couriers had to start relying on slightly larger shipments for their revenue; however for anything more than 20 Kgs, their rates were no longer competitive, driving their clients towards the forwarders.
Steamship lines drastically reduced their consolidation services causing a flood of Freight Forwarders offering LCL and air consolidation services. Competition became aggressive and drove pricing down to the lowest levels allowing the small /medium sized companies to ship and store smaller inventories at the freight forwarders’ warehouse for effective pricing. “Just in time” was starting to die.
Advances in lower cost IT and software allowed forwarders to compete with the couriers’ systems of tracking, online booking and quote requests, eating away at the couriers’ “value added service” advantages.
The Logistics Manager became a professional entity. An expert in shipping, managing costs and assessing supply chain needs the logistics guru was an increasingly valuable asset to companies and they started to hire more of them instead of assigning logistics to the purchasing department. Their transportation system now had a guiding hand and a watchman on the needs vs. cost strategies.
This re-examination of companies’ supply chain led to an economization to scale by global shippers. Couriers did not fare well as traditional airfreight shippers changed their inventory strategy and turned to ocean or road transport.
The Reaction
Traditionally, sales efforts and marketing focus was towards the business community, the couriers decided to aggressively chase the consumer market as well in a catch all attempt to increase their brand awareness. They were aware that the everyday man or woman whether an accountant or a historian still has a need to ship something. Grandma does too. Unafraid of focusing their advertising budgets to television, print, sponsorship, charitable activities, their efforts were largely successful.
As organizations were driven to outsource, reduce their overhead and gain efficiency, the one stop shop strategy gained popularity. Fast implementation was the key and it was not necessary to re-invent the wheel, just to integrate it. UPS bought Fritz. Deutsche Poste bought DHL ,Exel, Airborne and Danzas. Fedex bought several more such as CJ Towers. Couriers now owned major freight forwarders, business supply centers, distribution and 3PL operations capturing the services that had previously impacted their bottom line. They did very well with the “ if you can’t beat them, buy them” strategy.
As airlines reduced their cargo capacity, fragmented their service, encountered financial strain and basically focused their customer service on passenger travel, the standards on cargo transport and rates were no longer acceptable to the major couriers and they themselves became airlines. Control of core assets such as airlines and trucks was vital to a company whose number one service was based on time definite deliveries. This move did more to strengthen the trust and credibility by the consumer/business community than anything else as it solidified the courier’s infrastructure and ability to deliver on their promise.
Summary
UPS, DHL, Fedex have all implemented this strategy, in different stages and not without challenges. Yet today, these companies dominate world airfreight shipping volumes and control much of the global transaction count.
A testament to diversification and continuous investment in branding, core assets and the one stop shop.
Gloria Rubaine
Second Review Business Analysts
Http: www.secondreview.ca
Email: info@secondreview.ca
Several lessons can be learned from the strategic policies implemented by couriers by their collective response to the changing face of business practices, “just in time” deliveries, and rapidly changing IT technology.
Having gained market exposure and enormous growth in the small package and document transfer industry by providing very fast transit times and super competitive rates, the couriers had phenomenal growth and a massive cash flow injection starting in the 1980’s and 1990’s.
These were the days however of fax transmission, and much slower computers, where companies were dependant on physical transport of their company printed matter and internal documents not to mention samples.
Distribution warehouses existed as their own 3PL entity but for the most part were dedicated to large operations that could drive a single facility, support it and make a tidy profit due to the massive volume of transactions and the ability to economize to scale. Little or no attention was paid to the company that required a smaller distribution service which resulted in the small to medium sized companies turning to couriers.
Freight forwarders served the general cargo industry but would not and could not compete with couriers as their minimum costs door to door were double or triple the cost along with indefinite time guarantees.
These were the ideal conditions for couriers to flourish. Meanwhile rapid advances in IT, tracking and logistics software and the internet were impacting the everyday supply chain solution.
The Challenge
With email transfers, company intranets, websites, powerful software and computers, the need for document transport by courier and post declined quickly eating into the core of their business revenue and service. Couriers had to start relying on slightly larger shipments for their revenue; however for anything more than 20 Kgs, their rates were no longer competitive, driving their clients towards the forwarders.
Steamship lines drastically reduced their consolidation services causing a flood of Freight Forwarders offering LCL and air consolidation services. Competition became aggressive and drove pricing down to the lowest levels allowing the small /medium sized companies to ship and store smaller inventories at the freight forwarders’ warehouse for effective pricing. “Just in time” was starting to die.
Advances in lower cost IT and software allowed forwarders to compete with the couriers’ systems of tracking, online booking and quote requests, eating away at the couriers’ “value added service” advantages.
The Logistics Manager became a professional entity. An expert in shipping, managing costs and assessing supply chain needs the logistics guru was an increasingly valuable asset to companies and they started to hire more of them instead of assigning logistics to the purchasing department. Their transportation system now had a guiding hand and a watchman on the needs vs. cost strategies.
This re-examination of companies’ supply chain led to an economization to scale by global shippers. Couriers did not fare well as traditional airfreight shippers changed their inventory strategy and turned to ocean or road transport.
The Reaction
Traditionally, sales efforts and marketing focus was towards the business community, the couriers decided to aggressively chase the consumer market as well in a catch all attempt to increase their brand awareness. They were aware that the everyday man or woman whether an accountant or a historian still has a need to ship something. Grandma does too. Unafraid of focusing their advertising budgets to television, print, sponsorship, charitable activities, their efforts were largely successful.
As organizations were driven to outsource, reduce their overhead and gain efficiency, the one stop shop strategy gained popularity. Fast implementation was the key and it was not necessary to re-invent the wheel, just to integrate it. UPS bought Fritz. Deutsche Poste bought DHL ,Exel, Airborne and Danzas. Fedex bought several more such as CJ Towers. Couriers now owned major freight forwarders, business supply centers, distribution and 3PL operations capturing the services that had previously impacted their bottom line. They did very well with the “ if you can’t beat them, buy them” strategy.
As airlines reduced their cargo capacity, fragmented their service, encountered financial strain and basically focused their customer service on passenger travel, the standards on cargo transport and rates were no longer acceptable to the major couriers and they themselves became airlines. Control of core assets such as airlines and trucks was vital to a company whose number one service was based on time definite deliveries. This move did more to strengthen the trust and credibility by the consumer/business community than anything else as it solidified the courier’s infrastructure and ability to deliver on their promise.
Summary
UPS, DHL, Fedex have all implemented this strategy, in different stages and not without challenges. Yet today, these companies dominate world airfreight shipping volumes and control much of the global transaction count.
A testament to diversification and continuous investment in branding, core assets and the one stop shop.
Gloria Rubaine
Second Review Business Analysts
Http: www.secondreview.ca
Email: info@secondreview.ca
