United, American airlines, others in logistics venture
Six leading transportation service and technology providers have formed a joint venture aimed at providing small and medium shippers with the same quality of service that large shippers are able to command – and at similar prices.
United Airlines, American Airlines, Roadway Express, UTi Worldwide, Unisys Corp. and G-Log are partners in the venture, to be called Integres Global Logistics.
The new company will be led by Jim Hartigan, former vice president of cargo at United Airlines, and will essentially act as a freight forwarder, according to Hartigan.
In a telephone media conference Wednesday, Hartigan estimated that 5% of all freight forwarders control about half of the $50 billion in heavy freight moved in North America each year. The other half is controlled by 4,000 or so small- and medium-sized forwarders, whose customers typically pay a premium 35-40% above the price paid by large shippers, Hartigan said.
Hartigan said Integres, scheduled to begin operating in the third quarter, will also save shippers time by eliminating the tedious task of shopping rates from multiple airlines.
The initial investment in the company is approximately $30 million, Hartigan said, adding that the company is working to raise additional capital. United, Roadway and Unisys will be the majority owners, while American will be a customer. G-Log will receive an equity stake in return for providing its supply-chain technology. Unisys will also contribute its technology, while UTi, a freight forwarder, will provide international fulfillment, including customs brokerage.
Integres will be based in Rancho Cordova, Calif., near Sacramento. The company has a staff of about 20 now, but Hartigan expects it to reach 75-80 people by year-end.
Integres will offer its services in two ways: as "a private label" that American, United and Roadway will be able to offer their customers via their Web sites, and as "a direct solution" available to small and medium shippers via Integres's own Web site, www.integres.com. Direct shipments via Integres could begin by late July, said Hartigan.
Carriers will be selected based on time, price and service reliability, he said, adding that the choice could be someone other than American or United.
"We think this is a breakthrough service," said Bob Stall, vice president of new ventures for Roadway Express.
Integres is also negotiating with other carriers that Hartigan expects to become customers, but does not plan to add additional freight forwarders.
Integres will not be competing directly with integrated carriers such as FedEx, United Parcel Service and DHL, Hartigan said, because it will focus on large shipments from small and medium shippers, while the integrators concentrate on small shipments from large shippers. He expects the average shipment booked through Integres will be about 200 pounds. Asked whether large shippers would also be a target for Integres, Hartigan said that they are adequately served by large forwarders.
While the company will initially be focusing on the airfreight market, it will begin looking at ocean freight in about 24 months. "We hope to provide a comprehensive solution to small and medium shippers," he said.
"The small and medium shipper is probably the least well-served player in the industry today," said Dave Brooks, president of American's cargo division, which expects about $800 million in revenue this year. Without the Internet, it has been inefficient to serve these customers, he said.
G-Log, based in Shelton, Conn., will provide management information technology to Integres, according to Mitch Weseley, G-Log's chief executive. "The Integres vision is to transform traditional ways of doing business," he said, noting that customers would previously need three different software packages to accomplish what Integres will be offering them in a single format.
"Our industry must move to the virtual integrated model," said Joe McGrath, executive vice president of Unisys.
