Public-private partnerships take flight
Last year, Belgium-based DHL, the international express-delivery subsidiary of Germany's Deutsche Post World Net (DPWN), purchased Airborne, Inc., the third-largest U.S. express-parcel carrier, for $1 billion. That transaction was one of the more dramatic examples of a trend that has been developing over the last 10 years in the international transportation arena. While competition is still the name of the game, alliances–and outright acquisitions–are becoming more and more common between national postal services and private delivery companies.
The impetus for these public-private "marriages" is growing demand from shippers for comprehensive, global services. Shippers that do business globally want to deal with fewer carriers and logistics service providers. Postal services, meanwhile, are seeking new sources of revenue. They see parcel, express, and logistics as natural avenues for expansion–and private parcel and logistics companies as a ready-made entree into foreign markets.
Europe's partially privatized postal authorities have been on the leading edge of this trend, but the concept is spreading worldwide. It's a development that could have far-reaching implications for international logistics managers who are looking for one-stop service.
DPWN, TPG Dominate
The Airborne acquisition was only one of a number of moves by Deutsche Post World Net to take advantage of the private sector's market access. In January, DPWN's wholly owned U.K. subsidiary acquired London-based Speedmail International, an expeditor in both the domestic and international mail markets. Through DHL, DPWN also is expanding its collaboration in mail, express, and other services with the postal service of the United Arab Emirates. And last year alone, DPWN completed its takeover of Securicor Omega, a U.K. parcel and logistics provider, and bought Canada's Mayne Group express and parcel company, an airfreight forwarder in Chile, a third-party logistics company in Turkey, two express and value-added logistics companies in the Netherlands, and a parcel company in Italy.
Those are just the latest in a long string of acquisitions and alliances that began in late 1997. To achieve DPWN's stated objective of becoming the largest global provider of integrated mail, express, and logistics services, the company snapped up or launched collaborations with dozens of players, big and small, in parcel delivery, freight forwarding, and international logistics, especially in Europe.
Although Deutsche Post quickly became the biggest postal-private conglomerate, it wasn't the first. The Netherlands' TNT Post Group (TPG) claims that distinction. The company, once government-owned but now fully privatized, includes the Dutch Postal Service, TNT Express Worldwide, and TNT Logistics.
Like DPWN, TPG has actively pursued acquisitions and alliances with private providers. Two notable examples include its strategic alliance with Japan's Kintetsu World Express, which allows the two companies to provide globe-spanning express delivery, logistics, and distribution services; and its acquisition of U.S.-based third-party logistics company CTI Logistx. CTI, which was folded into the TNT Logistics organization, gave TNT a stronger presence in North America and made it possible for the company to offer more services to global automotive manufacturers. In addition, TPG has joint ventures with private-sector providers in the Nordic countries, Italy, Turkey, and France. In recent months, moreover, TPG executives have announced their intention to enter the international freight forwarding business, either through acquisitions or a joint venture.
Follow the Leaders
DPWN and TPG may be the pioneers when it comes to public-private collaboration, but many other postal organizations are following their lead.
France's national postal service, La Poste, owns a private parcel-delivery company, GeoPost. Geopost, in turn, has acquired a half-dozen private providers in other countries, including U.K.-based Parceline, which has been expanding into logistics services. Earlier this year, a top GeoPost executive announced that the company was actively seeking more acquisitions to expand its international delivery and logistics capabilities.
The U.K.'s Royal Mail Group in 2002 launched a returns-management service through an alliance with U.S.-based ReTurn Logistics Ltd. Royal Mail has also acquired the coverage it needs through its ownership of General Logistics Systems (GLS), the Netherlands-based provider of pan-European express, parcel, and logistics services. GLS itself has interests in a number of parcel delivery companies throughout Europe.
Of special interest to U.S. shippers is the agreement between the United States Postal Service (USPS) and GLS. GLS offers USPS customers access to an operation that includes 25 hubs and 500 depots in 14 countries. Through partnerships, GLS reaches 30 countries in all, serviced by a fleet of 16,000 vehicles that deliver, on average, one million packages daily. Under the terms of the agreement, GLS will work with the USPS Global Express Mail (GEM) service to offer U.S. customers access to 14 European countries. The program, described as a new model for package delivery in Europe, will employ GLS' proprietary scanning capabilities to track items from acceptance through customs clearance to final delivery in Europe. In addition, users of the GEM-GLS service will qualify for a reduction in customs administrative fees in European Union (EU) countries.
Perhaps the most important capability the company offers U.S. shippers, says GLS spokesperson Tina Haag, is its pan-European logistics network, which operates with identical procedures and services throughout the continent. The network also employs IT systems that accommodate the new supranational regulatory requirements of the expanding EU. At the same time, each operating unit retains its own national identity, maintaining the ability to respond to customers' region-specific requirements, she explains.
Another public-private collaboration is that between DHL and the U.S. Postal Service. As a byproduct of its Airborne acquisition, DHL has inherited a partnership with the USPS. "These alliances have developed over time and have a history," observes Martin Mosley, DHL's director of marketing for mail products for the Americas. Airborne coupled its home delivery service, airborne@home (now DHL@home) with the Parcel Select consolidation service offered by the USPS, he explains. "The concept was to have the private company take product from customer locations, sort it, and take it to the final destination post offices for USPS to make the ultimate delivery," Mosley says.
Mosley believes this type of arrangement contains a critical element that logistics planners should look for: a single source that will provide both private express delivery and public postal services. "If we can bundle courier service and postal service, we're essentially offering a one-stop solution to the customer," he says. "We can help them save on their own mailroom costs by picking up all of these postal pieces along with the courier shipments or freight shipments, whether domestic or global."
Partnerships Offer Savings, Reach
The number and complexity of these postal-private alliances and others like them have caused some uncertainty, if not confusion, among logistics managers. The real issue is to understand that the rules of international delivery have changed, and probably will continue to do so in the foreseeable future. It's not easy, moreover, to sort out how to effectively utilize this new array of options offered by members of these still-evolving alliances.
Once managers do, it becomes clear that matching the breadth of coverage and infrastructure of the postal services with the expertise, market savvy, and innovation of the private parcel delivery and logistics companies creates a winning combination for shippers.
RELATED ARTICLE: Public-private alliances raise policy questions.
Alliances between postal service and private delivery organizations, for the most part, have been equitable and successful, but they sometimes raise policy questions regarding competition.
National postal services, for instance, may simultaneously play both competitive and regulatory roles, observes David Bolger, UPS public affairs spokesman in Washington, D.C. UPS has worked closely with national postal services throughout the world over the years, he says. But it also has aggressively lobbied governments to establish public policies that separate postal services' activities as regulators of delivery services from their activities as competitors of private-sector providers. That separation would help to protect the private delivery company and its customers from unfair competition, he adds.
That issue, along with concerns about postal services using revenues from mail monopolies to subsidize services that compete with private delivery companies, has been brought several times before the European Commission's Competition Directorate. (UPS several years ago filed such complaints about Deutsche Post in both the United States and before the European Commission.)
That could become a moot point in the future, though: The European Union plans to liberalize the postal sector by the end of the decade, possibly integrating national organizations into a single EU postal operation.
John Paul Quinn reports on a broad range of business topics far journals in the United States and Europe. Staff reports were included in this article.
