UPS’ failed attempt to take over TNT Express left a shadow of uncertainty hanging over the Netherlands-based express carrier. But it has emerged with a clear strategy for success as TNT Express Services UK & Ireland Managing Alistair Cochrane tells Steve Hobson.
The proposed takeover – which UPS had said would lead to the disappearance of TNT’s famous orange brand – had left managers and staff uncertain about the future of the company and its services.
“Now we are the other side of the anticipated merger with UPS, all the employees are delighted. The culture here is very strong and we have a lot to be proud of. The organisation – 68,000 employees across the world – is very brand conscious and strong behind the colour,” says Cochrane. “It is difficult for me to comment on the UPS approach; the insight I got into UPS was pretty limited because the bid hadn’t gone far enough.
“What I know is we are very customer focused. When we go and see a client we want to talk about their business and how we can assist them by putting a supply chain around it. We are prepared to create solutions, and build relationships with our customers. Customer satisfaction means a lot to us and we have a lot of people in our customer services area to interact with our customers.”
Strong relationships
These strong customer relationships stood TNT Express in good stead during the UPS bid process.
“Our customer base grew last year and is growing this year,” says Cochrane. “If I look at my domestic business, it is holding up really well. We have come into this year in pretty good shape. The international business struggles because of what is happening in Europe. Customers didn’t see any difference to the way we were treating them through the merger process. The customer came first and still comes first.”
Cochrane is upbeat about the state in which TNT Express emerged from the long period of uncertainty, and is full of praise for employees who kept faith with the company.
“Staff retention is still right up there and when I look at my attrition rates for last year they were an improvement on 2011,” he says. “Considering what we have been through I think that is hugely positive. We have a lot of home-grown timber, a lot of people who like me have been in the company for many, many years.
“It has been business as usual. People wanted to know how it would have looked but we weren’t in a position to say because it wasn’t clear to anybody. Now we have come out with what our standalone strategy (see Stand and Deliver! below) looks like, people can understand it and they have got behind it. We have shared more information than we have in the past and they can see how and what we need to do now to stay standalone.”
Tough market
Like every carrier in what remains an incredibly tough market, TNT Express has taken a long, hard look at its business and is focusing on what it can do better than its competitors.
“The good news about Deliver! is that we are looking at the sweet spots we see within our business,” says Cochrane. “When we look at the segmentation and product offerings we can see where TNT Express clearly has differentiation. Yes we want to grow the international business and international portfolio but not forgetting we have big domestic businesses around the globe. When we look at single source customers they don’t just come to us for one product. There are customers coming to us with domestic, international and special services needs.”
The boom in e-commerce has given small and medium enterprises (SMEs) the chance to take on the big retail brands and Cochrane will be targeting these smaller businesses.
“We are not forgetting about our corporates and majors but we see opportunities in the SME sector,” he confirms. “SMEs in our book sit very well with what government wants to encourage here at home and from an export perspective. We have great links with UK Trade & Investment and have been doing a lot of work together encouraging export from the UK.”
Cochrane talks of TNT Express being a “one-stop-shop” for the full range of his customers’ delivery needs, from high value documents and small packets to heavy parcels and full pallets.
“Special Services is also hugely important because we see ourselves as being pretty unique there – you can come to us for a one-stop-shop,” he explains. “We are not a one trick pony. We have a product offering from small parcels to palletised freight. What attracts customers is that we will pick up a box as much as we will pick up a pallet. We will hold your product and even offer a pallet storage solution. Creating solutions is where we see our forte.”
Pallet network
Although TNT Express has not traditionally been seen as a pallet carrier, Cochrane says pallets are an integral part of the network.
“In the hub we have machines that are sorting the boxed freight then underneath are the pallet sorts,” he says. “That is why we still run 7.5t trucks, so we can deliver or collect a pallet and a box at the same time. We have designed our network and our automation to offer that structure to the client. We have a huge European road network but we also have the European air network so we can fly it or road it out of the country.
“Pallets and parcels will always go on the same vehicle because it is not about creating a parcel network and a pallet network. It comes back to flexibility for the client – if you’ve got a box and a pallet to be delivered do you want that on two separate vehicles? That is inefficient for the carrier or integrator – it is more efficient to have the whole lot delivered in one.”
While 7.5t trucks with tail lifts are well suited to a B2B pallet/parcel operation, they are probably too big for a B2C service.
“We also brought in some 5t trucks in the last fleet replacement we did,” says Cochrane. “People say ‘TNT is not into B2C’ yet a fair share of what we deliver in the UK domestic market goes to a residential address.
“Yes the majority of the fleet is 7.5t trucks but two years ago we bought 250 5t trucks without tail lifts because , when you consider some of the city centres and high streets we deliver to, a 5t truck can get around a lot quicker. We look at the assets we need based on what is required on the delivery routes and the services we offer. In the Business Solutions and Logistics Solutions arenas and what we do with the banks, it’s all vans.”
Self-employed
TNT Express also sub-contracts a proportion of its home delivery work to self-employed couriers.
“We have a number of third parties who work with us as well as having our own fleet,” says Cochrane.” A lot of the third parties are single-man vans, with small Berlingo type vehicles through to long wheelbase Transit types. So it’s not that we don’t have that in our mix – we have been pretty smart in creating the network around the deliveries we have got.”
Around half of linehaul in the UK is now sub-contract, and the company has greatly improved the efficiency of its in-house trunking operation.
“As we have got more and more clients who go direct to hub then we have been able to look at what’s the most cost efficient way of dealing with the volumes,” says Cochrane. “When we put another linehaul leg on we look intently at whether it should be third party or our own resource.
“Not many of our linehaul drivers just do one leg. They do multiple legs. Whereas in the past it used to be the ownership of the local depot to run all their linehaul we now control it centrally. So if we have a driver coming from Luton to Atherstone say it may well be that he goes out to Leicester and then back to the hub again before taking his return trunk back. You have to think differently; the whole world has changed and TNT Express has looked to change with it. We have had to get smart with some of the tools we use, and that includes around our linehaul.”
Growing volumes
As the UK economy improves and most other European economies still mired in recession, the rise in C2C and B2C home deliveries is hard to ignore for a company looking to grow its revenues.
“In the UK business we are seeing a growth in our volumes today and are cautiously adapting our strategy to capture certain attractive parts in B2C,” says Cochrane. “There is also volume growth in the B2B arena. The revenue per consignment is where the challenge is.”
The growth in B2C fulfilment is because consumer demand changes the dynamics of how they want to receive their goods.
“I see opportunities in B2C evening delivery. When can I guarantee or at least have more of a chance that you will be at home? B2C is all about first time delivery – the carrier wants that but so does the recipient. You don’t want me dropping a card on your doorstep and you having to do something about it. It’s about simplicity,” says Cochrane. “We recently launched a product called TNT Direct – you can book, track and pay for deliveries. TNT Express does see an opportunity in B2C but how often have you seen companies mixing a B2B and B2C type delivery structure together and be successful? We are looking at evening deliveries and we already have high end clients using that service who can clearly see the value of offering something a bit different to a standard B2C delivery.”
One solution to the problem of failed home deliveries is a click and collect model, where shoppers can order online and have the parcel delivered to a collection point where they can collect their parcel at their convenience.
“There are some clients who want us to offer facilities like that,” says Cochrane. “But the price point is so low in the B2C arena – especially in the UK domestic market. So there are still a lot of companies who deliver direct to door.
“However you can see that in Europe then ‘pudo’ – pick up, drop off – is more prevalent and we can see this coming into the UK market. We are seeing some competitors where they have a high proportion of B2C deliveries offering facilities to collect. We have had that in place for years.”
Rates depressed
Despite many carriers capping volumes in last year’s Christmas peak, and demand growing faster than capacity, rates in the parcel market remain depressed.
“The market is still very, very competitive,” confirms Cochrane. “The customers are the ones with the buying power and they are looking at where best to spend their money. Are we at a place where rates are rising? I wouldn’t say so, not at this moment.
“More and more companies are spreading their volume over multiple organisations as there is not one single company that can handle it all. The B2C price point is a challenge and will be for some time to come. That could well be when you see the pudo model come more into the market as it is more cost effective to deliver multiple parcels to one location than deliver one to one.
“If clients bring volume to me I will sit down and talk to them. It is not often we turn business away. But we like everyone else have to make money and our strategy at the moment is that we are a B2B carrier who has some services and opportunities in B2C. When you look at Christmas volume I can see companies coming under a great deal of pressure because of the volumes they are trying to deliver through that period. We will look at volume where we can make a return on it.”
Stand and Deliver!
Deliver! is the TNT Express three-year strategy to prosper as a standalone company following the demise of the UPS bid. Developed by then acting CEO Bernard Bot it spells out a range of actions needed to align TNT with the tough market conditions that are expected to continue into 2015.
These include:
- The sale of TNT’s Brazilian and Chinese domestic operations
- Focus on TNT’s key areas of strength and grow International and Special Services, small to medium enterprise customers and higher weight consignments
- Boost revenue by 2% a year in Europe, Middle East and Africa
- Improve profitability by some €220m (£190m) a year by 2015 by optimising all the company’s processes and optimising hub and depot networks. About 4,000 positions will be affected and one-off costs of €150m incurred
- Invest €200m in infrastructure and IT
