Schenker counts on global marketing and IT
Despite the uncertain economic outlook and its possible adverse effects on the logistics business, Schenker CEO Håkan Larsson is confident that his group has good prospects of success in the international market over the next few years. ITJ editor-in-chief Ursula Schmeling talked to him recently in Essen.
In future, Schenker intends to market its airfreight services to its overland customers more aggressively.
(Picture: Schenker)
In spite of the current economic downturn, Schenker presented excellent half-year results for the first six months of 2001. What do you think is the reason for the growth in earnings?
Above all it is due to our high productivity and very efficient cost management, as market conditions changed very little in the first half of the year.
What developments do you foresee for the second half of this year and what are your forecasts for 2002?
Our surplus will be higher this year than last. I am quite optimistic in this regard. As far as 2002 is concerned, I am less certain. Against the background of recent events in America, it is difficult to sensibly forecast economic development over the next months. Internally we were already implementing a restructuring program. We have upgraded our central marketing management in recent months and introduced key account management, which should energize our sales operations. In future when selling our overland, air and sea freight products, we intend to emphasize the fact that they come from a common source more strongly. And we intend to continuously create innovative, efficient logistics solutions for individual sectors of the industry and to market them aggressively.
Schenker is one of the five largest providers of overland transport services in Europe, although your overall market share is relatively small. How do you intend to improve Schenker's position?
As a company that specializes in European road and rail transport we have a dense network of scheduled liner services connecting the key economic centers in all European countries. We intend to consolidate our market position by integrating our networks, by standardizing operational processes and by making full use of internet solutions such as IQ-online (instant quote online, see ITJ 38/2001, page 37) and of our track & trace system, which we have now introduced in 32 countries, Europe-wide. I am convinced that we offer the most efficient and comprehensive overland transport network in Europe. Although our market share is below 5% in Germany, it is between 35-40% in Sweden. The more large corporations getting into the business of awarding transport contracts, the more important it will become to provide a pan-European distribution network and the greater the likelihood that the market share of big players such as Schenker will grow.
Schenker has been cooperating with DB Cargo in Railog since June 1, 2001. Does Schenker intend to focus more on rail than on road haulage in future?
Our joint venture offers a platform for dialogue with rail transport operators. We see great opportunities in rail traffic and want to significantly increase the volumes that we move by rail in the near future. We are already one of the largest shippers in the intermodal transport sector. But Schenker is of course continuing to expand its truck services too. Our services adapt to our customers' changing requirements, and our large customers are increasingly demanding a rail option.
Contract logistics is still a very small part of overall turnover.
That is ultimately a question of definition. A large proportion of our business in our European and international networks is logistics-based, even if we don't report it under this heading. As far as complex logistics projects and SCM contracts are concerned, we are in the process of extending our logistics centers located where global good flows converge and of building up our client-base in this segment. We perceive exciting potentials in the automobile, the consumer goods and the electronics industries.
Do you intend to increase your investment in storage space? How asset-light will Schenker be in future?
As asset-light as possible. We are currently reassessing our real estate portfolio. Our integrated logistics centers continue to form the cornerstone of our strategy – the financing of these centers too will be 'asset-light'. In future directly-owned trucks will constitute 10-15% of our total fleet – so that we have a certain inhouse capacity to fall back on and to maintain high standards of service – the rest will be outsourced.
How big a factor is IT in competition with the other global players in the logistics industry?
In recent months we have strategically realigned the IT systems that we employ for managing sea freight and air freight with those for overland transport. In the future we want to raise our seafreight and airfreight customers' awareness of our overland services and vice versa. Our IT developments compare well with the best in the industry.
Your competitors say the same.
What is remarkable is that we are all investing very heavily in IT and that we are all pursuing similar goals. After all, Schenker, Panalpina, Danzas and Kuehne & Nagel are all partners in the INTTRA internet platform. The number of joint projects in distribution logistics is also on the increase, as our well-publicized partnership with Panalpina for the Hewlett Packard contract shows. However, Schenker must make an effort to draw more attention to the quality and cost advantages of its IT services in future. We also have to improve the coaching of our staff so that they can make the best of our web platform in everyday use. At present less that 5% of all transport contracts are being finalized online.
Like your competitors you market your services under a strong uniform company brand.
That is correct. We highlight the Schenker brand and look to strong corporate branding worldwide. The feedback that we getting all the time from our customers makes it clear just how important this 130 year old brand is for our business.
In recent months your competitors (Danzas and Kuehne & Nagel) have made several acquisitions and thus repositioned themselves in the North American market. What is Schenker's strategy in this region?
We intend to give the US market a higher priority in future. We must substantially improve our position in North America in the long term, if we want to be taken seriously as a global player. Our large customers demand that we are present on all major world markets. In North America we have up to now mainly relied on organic growth. For the future, however, we are prepared to make acquisitions should the opportunity arise. But we have a very clear idea of what we want. We are seeking trade line specialists (in the transpacific and transatlantic trades) that have an attractive customer base or companies with a good track record in contract logistics. It could also be one or several companies with a strong regional position. The current economic downturn in the USA naturally opens up a whole range of new options. Schenker already has an efficient infrastructure, including 50 sites in the USA and 70 locations in the whole NAFTA region. This provides us with an excellent basis for future expansion.
What are your plans for Asia?
We also want to grow organically and by means of acquisitions in this region so that our position in the transpacific trade is consolidated. Our existing network of branches and distribution centers such as those in Singapore and Shanghai, affords an excellent launch pad.
What impact will this strategy of expansion have on your bottom line?
The share of air freight and sea freight in total turnover is likely to grow with increased volumes in the transatlantic and transpacific trades. We currently hold the second or third position in the seafreight business worldwide and the fourth or fifth position in airfreight.
Some of your competitors offer the management of associated financing services in addition to management of goods and associated data flows as part of their service portfolios. Do you feel tempted to emulate them?
Discussions with our customers lead me to believe that financing only plays a secondary role. Network coverage, service and IT quality, product know-how etc. are far more important. But it that's what a customer wants, we will be happy to provide assistance in financing in partnership with banks.
International Transport Journal – ITJ
