Analysis: Panalpina and CH Robinson, unlikely suitors but well-matched
I have had an imaginary conversation playing in my head over the past week, between ...
Air freight must improve if it is to charge “luxury” pricing, shippers said last week at the World Cargo Symposium in Berlin. But forwarders hit back, accusing end customers of squeezing the industry on price and preventing further investment.
Calling for a “real revolution”, Pascal Meyer, Chanel’s international transport manager, explained that the perfume company came late to the table in the field of e-commerce, over concerns that the luxury brand wouldn’t be able to offer a luxury delivery service.
“The question was how we make the shop experience unique online,” he said. “All we can provide is quick delivery and available information – and that the logistics doesn’t damage our reputation.
“We have to provide logistics that serves the expectation of the customer. It has to be flexible, timely and offer different services. Air freight is luxury transportation.”
Mr Meyer urged his forwarding partners to innovate. “There’s not enough from forwarders. We try to push discussions on innovation and evolution every few months. But they don’t often come up with new solutions or innovation.”
But Kuehne + Nagel’s senior vice president of products and air freight, Marcel Fujike, hit back – to applause from delegates.
“If I had a profit margin like Chanel, of 200 or 300%, instead of this industry’s average profit margin of 2 or 3%, it might be different. You ask us to innovate but that comes at a price. At the end of the negotiations, you end up with the finance guys and the price goes down. Give us more and you’ll get more.”
A higher price for a better service might be fairer, but Robert Mellin, strategy development manager at Ericsson, said there were existing inefficiencies in logistics that could be cut out to keep costs down.
“It’s like you are asking us to pay you to become more efficient. There is so much repetition and inefficient processes. Start with the low-hanging fruit. There are enough companies offering software solutions. The answer is not increasing price but working innovatively.” He said Ericsson could save “an enormous amount” of money if lead times were reduced by 25%.
However, Mr Fujicke also pointed out that shippers could ease processes which would make the chain more efficient.
“Customers demand an individualised approach on contracts. The more individual, the less you can standardise. Customers need to understand that would be more efficient and less costly if you used a generic system. Individual solutions cost a lot of money.”
Panalpina’s head of air freight, Lucas Kuehner, also noted shipper inefficiencies. “We need end-to-end stats and forecasts. How do [shippers] not know what tonnage is coming out of the factory the next day? There is always a fluctuation, and we balance that, but if we had better information it would be better for the whole chain. We can’t use forecasts from blue chip companies – and this isn’t being talked about enough.”
Ericsson is urging logistics providers to work with it on a technology solution to bolster the fragmented transport market. Explaining that the Swedish technology company wanted to work across all transport modes with its model of an ‘Eco-system rather than ego-system’, Mr Mellin invited companies to collaborate.