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Monday, Jan 31, 2011
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People now see value in express services
We have seen shifts from sea and air freight forwarders because of the value proposition of time versus money. Companies save maintenance, storage and inventory costs.
TAAREK HINEDI, MD, FEDEX EXPRESS
Days after FedEx Express, a subsidiary of the world's largest express cargo company FedEx Corp, announced the launch of its direct services from India to China, the FedEx Express MD (India operations), Mr Taarek Hinedi, spoke to Business Line about the company's plans; he also outlined the company's journey in India.
Excerpts from the interview:
How do you see yourself in India over the next few years?
We constantly strive to improve our services, our facilities, coverage area and product offerings. There are two sides of our business – international and domestic. India can have its own domestic business. Our goal would be to connect any two points in the world in a maximum of 48 hours. This activity translates into locations that account for 90 per cent of GDP.
How close are you to this target?
In India we are already doing it. Globally, there may be few pockets that need to be covered. Now with new emerging markets – China, Brazil, India – coming in, we are strengthening our service offerings. That is why we are investing in technology. In India we cover 90 per cent of its GDP. In the remaining areas, we tie up with local partners. But 98 per cent of our business is within our control.
How has the business been doing here?
We are growing year over year – 30 per cent in revenue/volume terms. With the customer base expanding, more people are coming over because they see the value proposition that express transportation brings.
In India, customers were earlier used to freight forwarders — getting things done in bits and pieces. The concept of getting express freighters, which are like cargo aircraft, and the time sensitivity that we bring, delivering cargo within hours or two days anywhere, is being understood.
We do door-to-door, multimodal transportation. That kind of value proposition is being developed and understood here.
Typically, what kind of contracts do you have with customers?
Some customers are on a one-year basis, some are on three years.
In which sectors have you seen growth?
We have seen growth in such sectors as pharmaceuticals, engineering goods, automobile spare parts, typical sample business going around the globe — from buyers and fashion houses — hi-tech electronics, chemicals, dangerous goods and diagnostic services. In the North, we see a lot of gems and jewellery from the Jaipur market.
With business picking up has there been an increase in the size of parcels shipped?
The average weight per pack has been increasing. Year-over-year we have been seeing increases in weight per pack. The shipments are becoming heavier. This is for traffic going out of India.
By how much?
These are single-digit growth rates in average weight per pack – in the range of 3 to 5 to 8 per cent. This is very commodity-specific. For instance, automotive spare parts are going to be denser. But there are fragile items with more air in the box. It would be difficult to put an average size on a parcel.
Where has this cargo shifted from?
We have seen shifts from sea, and freight forwarders via air because of the value proposition of time versus money. Companies save maintenance, storage and inventory costs.
India is considered a difficult market with lots of rules and regulations. How have you managed?
By default, when we pursue, and lobby for, improvement, the whole industry benefits. Every time we go and present something, it is usually a no. But we continue and persistence helps. Back in 1997, the aircraft that we put on ground was an express cargo aircraft. India had never heard of an express cargo aircraft at that time — I am talking of the Customs. When we tried to bring cargo into the country, it went to the cargo terminal. It took days to clear. Now it comes in, goes through and within two hours it is out.
We had to lobby, educate, convince about what the concept of an integrator was.
Customs is another area. There are courier regulations now for Customs. In the past, there were no Customs cargo regulations. So we had to create courier regulations – we had to modernise the regulations. Bringing cargo from one end of the world and the cargo getting stuck here for six days just changed the experience.
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