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Tunia Cherian George

The Budget initiatives that have will give a boost to the manufacturing sector should do well by the express industry, says the FedEx Managing Director for the Indian Sub-Continent, Mr Jacques Creeten. Any measure that pushes international trade and spurs industrial activity would automatically improve the prospects for the express industry. The Budget emphasis on strengthening the infrastructure, especially the plans to upgrade the Delhi and Mumbai airports and the road network should hearten the express sector, he said, in an interview to Business Line.

Excerpts from the interview:

The new trends in products, services:

Two major trends are emerging in the express industry as the export-import market matures. First, express companies will have to go beyond the single, generic offering as customers seek solutions tailored to their distribution needs. Improved flexibility, through the use of technology, will help the service provider achieve this. Second, customers are looking for products that answer their entire distribution needs. They are looking to outsource the management of their distribution needs, and, of course, maximise value for themselves; this could mean opting for the best services or the most cost-effective solutions, usually both.

Besides, operations within the industry are also gradually undergoing change. Earlier, the traffic manager reported to the finance department and his/her operations were driven by the need to identify the most cost-efficient way of reaching a package to its destination, the accent being on reducing costs.

Today, the decision has become more a marketing one, especially in the larger companies, where distribution models are constantly scrutinised to enhance services.

Impact on customer charges if war breaks out:

I do not think that the outbreak of a war will necessarily affect our pricing as security and insurance charges, which had risen after September 11, have already been factored into our costs. The only variable is the extent to which fuel prices will react. It is impossible to comment on this issue with any certainty.

The potential for growth:

As an express carrier, we do not carry general cargo. But there is good potential for the growth of air cargo in the country. India is an entrepreneurial country and people are realising this. We are confident of exploiting the growth potential thanks to our portfolio of distribution models as compared to that offered by classical airlines.

Expansion to secondary markets:

Last year, we started expanding from the metros — Delhi, Mumbai and Chennai — to secondary markets such as Hyderabad, Kochi, and Moradabad. , which have also yielded higher growth rates.

Business and finance in the metros have also seen a shift to the suburbs where land is cheaper and the pollution and other regulatory norms not as strict. We are looking to service the business districts emerging in the suburbs. Our alignment with Prakash Roadline/wayshas helped us reach out to customers in these regional centres. Prakash has a dedicated team of agents for pick-up and delivery of packages.

Besides, we also have an alignment with Jeena which is responsible for our nation-wide brokerage. The alliance, which has helped decentralise our Customs clearance operations, offers our customers 100,000 sq ft of warehousing space across 300 locations. This is especially useful for customers who have to export commercial shipments. Besides, they are able to interact with our local representatives in their own language.

On FedEx's growth strategy over the years:

We are quite young in the Indian market, having begun our own operations five years ago in 1997. The initial growth phase happened in 1997, 1998 and 1999. In 1999, we were the first company to start moving packages on our own aircraft rather than having to rely on passenger airlines. The enhanced belly space allowed customers to expand their express portfolio, from samples to commercial goods consignments. This established the first wave of growth.

Next, we focussed on the export market, where five-six commodities push growth. The second growth phase was driven by the customised solutions that we offered exporters. For instance, Fashion World, designed specifically for garment exporters, which delivers a consignment in a customised package in shelf condition. We also provide the exporter information on the regulatory norms, since garments are subject to quota restrictions in foreign markets.

Product Express, targeted at the heavy engineering sector, simplifies shipping a 1,000-kg unit to posting an envelope. The product saves the exporter the bother of involving a broker, buying airline ticket, etc. We also offer a high-security product for gems and jewellery customers, besides a product for the safe movement of hazardous cargo booked by chemical and pharma units.

Operations post-9/11:

Interestingly, we had a great year in India. Following 9/11, exports dropped dramatically and export growth slowed down to just 3 per cent for the whole year. Despite the low numbers, we were able to grow by virtue of the fact that we are the second largest airline, but are not saddled with the problems of passenger airlines. Our entire flight and ground operations are dedicated to moving express packages.

The immediate fallout of 9/11 was that people put off their travel plans. As passenger traffic between Europe and the US fell by 35 per cent, airlines cancelled flights or downsized to smaller aircraft. The absence of freighters in the country and the cost-cutting measures adopted by various airlines meant that customers in India had problems getting their business out.

Secondly, US customers were delaying their orders in an uncertain environment. Having a fleet of aircraft at our disposal and the earlier investments on security ensured that we were able to operate our business without much impact. On the other hand, passenger aircraft suffered from lower lift and extended transit times on account of a dearth of connections in Europe. Our services during this period earned us a lot of customer loyalty.

The differentiating elements for FedEx in this market:

FedEx has certain obvious advantages over its domestic competitors which relate to its size and the resources at its disposal. These elements also differentiate it from the local players. To list a few:

The local companies are limited by the fact that they only have national networks. Their global operations are dictated by the alliances they forge with foreign players.

Second, with its fleet of 650 aircraft FedEx can reach the most diversified range of products to clients in the widest network of cities across the globe.

The third differentiating element would be the technology solutions we offer our clients. These elements are complemented by our group philosophy, PSP, which emphasises on employing the best People to offer Services that help realise Profit.

On FedEx' worldwide operations:

We have established leadership in the US, our home base. But following the establishment of a European hub in the late 1990s, we have been able to offer overnight delivery to about 70,000 postal hubs in Europe.

The ability to fly directly into Charles de Gaulle airport in Paris has helped us replicate the same service levels in Europe also. Thus, our European customers enjoy Monday pick-up and delivery, for everything from an envelope to a unit of 1000 kg. The shipment is done with complete transparency — customers can monitor the average delivery time and services available to their consignment online.

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