Financial Daily from THE HINDU group of publications
Friday, Sep 20, 2002
Supply Chain Management
Costlier fuel adds to margin pressure of courier cos
BANGALORE, Sept. 19
WITH the deregulation of petroleum prices introducing volatility in fuel prices, express courier companies are caught in a dilemma over revision of delivery charges, although there is no immediate indication of the industry contemplating such a move.
Already the Rs 2,500-crore industry, with a mix of organised and unorganised operators in the business, is facing a severe margin pressure on account of severe competition. Also, increase in input costs such as fuel, tyre and motor insurance has made the courier companies anxious about ways to improve the bottom line.
"We are already working on wafer-thin margins and we have to increase the volumes to stave off any further pressure on margins", said Mr R.K. Saboo, Deputy Managing Director, First Flight Couriers Ltd.
The industry was undergoing a change with the information technology prompting it to provide complete and customised services, he said adding that unless a steady build-up of volumes was maintained it would be difficult to improve profitability.
Mr Saboo said that though his company had yet to take any concrete decision, an internal discussion was already on about the feasibility of a revision in the fees for the services offered to customers.
However, it would be difficult to envisage a quick decision in view of the keen competition and a large number of players in the fray.
Though the industry would welcome some regulation with regard to removing the hurdles for its growth, which at present is estimated at 15 to 20 per cent, it was cautious in its reaction to the proposed legislation on bringing the industry under licensing ambit.
Mr Saboo, however, painted an optimistic picture about his company's performance, which he said was expected to improve during the current fiscal. First Flight had recorded a turnover of Rs 125 crore last year and is set to grow by at least 25 per cent next year.
The company, which has introduced many new products and value-added services, hopes to weather the challenges faced by the industry through larger reach and cost-effective service. To meet the growing demands of the customers, First Flight has been investing two per cent of its turnover every year on information technology.
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