The Star – Express Carrier To Compete More on Service, Less On Price

GD Express Carrier Bhd CEO Leong Chee Tung says this is also a good time to uphold and improve relationships with clients

YOUR outlook on the express carrier industry for 2009?

With the world in recession, the domestic economy is expected to slow down. We expect the industry to register zero to negative growth due to:

● lower rates (from lower fuel surcharge)

● lower volume in international trade due to tight credit and credit destruction and hence affecting contract manufacturers in Malaysia

● drop in capital expenditure and investment from businesses due to less capital raising (from initial public offerings) and budget tightening

● reduced domestic consumption from weaker stock market, lower commodity return, stagnant property market, lesser tourism spending and higher unemployment

● generally pessimistic outlook as everybody is expecting more shockwaves from the US and Europe.

Express carriers for the import and export sectors are expected to be harder hit due to the severe situation in the US and Europe. We expect the industry to be more competitive, and many players may resort to price undercutting.

Due to the shrinking market, international express carriers may venture deeper into the domestic carrier business. Related industry players (for example, transport and logistics) may also expand into the express carrier industry.

Within the industry, we may see a possible consolidation as this economic crisis is likely to claim a few casualties. We expect the economic recovery to be slow, possibily not until 2011.

Challenges for the industry, especially in a slowing economy?

The biggest challenge is to break away from the low price-poor service vicious cycle and get into the price-value service virtuous cycle.

In a slow economy, there is greater downward pressure on price from customers. And the draw on industry players into pricing competition will be stronger.

This will result in the whole industry charging sub-normal rates in general, becoming unable to attract the best people, and worse, driving the talents away from the industry. The end result is an industry that provides sub-standard service from sub-standard people.

The reverse is the starting point to any meaningful development in the industry. Competition should be more on service and less on price. But it still won’t guarantee automatic entry into the virtuous cycle.

Regarding people as our asset must occupy the centre value in any successful development for the industry.

That comes to our next point, which is attracting and keeping good people into the industry. The foreign players are doing well on this. The domestic players have to catch up.

The other major challenge is to seek common ground where the industry players can work together for improvement. The Association of Malaysia Express Carriers has made some headway over the past few years. However, more consensus and mutual trust can be achieved if the key players are convinced there are such all-win common grounds to work on.

Strategies to overcome the economic slowdown?

Revenue is vanity. Profit is sanity. And cash flow is realty. As a company, the most important thing to ensure in an economic slowdown is cash flow.

We must ensure our billing, accounting and collection functions are in tip top form. Between profit and cash flow, the latter must be given priority.

From top management to finance personnel, we must practise forward planning in cash management to ensure sufficient buffer for the worst case scenario. Budget discipline must be upheld and sufficient financial lines secured.

We must also maintain good customer relationships. Never mind sales volume may drop or even vanish during this bad period, we must uphold and even improve our relationship with the customers that have supported us during the good times.

If there is a slowdown in business, it is a good opportunity to upgrade the skills of our people by intensifying training programmes. It is also a good time to inculcate the company’s value system in our people.

In summary, our strategy is to enhance our chances of survival while strengthening ourselves.

How GDex can help companies improve their delivery process during this slowdown and in this era of globalisation?

GDex can provide companies with customised logistics solutions on their various distribution and delivery requirements. We will study customers’ needs and propose a solution to outsource their logistics requirements partially or fully.

The end result must be either reduction in cost or improvement in delivery effectiveness, or both.

GDex’s role is to empower its customers with the “reach capability” to all parts of Malaysia in a timely, controlled and reliable environment.

Areas of growth that a homegrown express carrier can enter in the face of competition from established international players in the global market?

The main areas of growth are in non-document areas. Potential growth areas include business-to-business direct distribution from importers/manufacturers to retailers; business-to-consumer Internet order delivery fulfilment and home delivery service. Other new areas include bio-medical and security-handling delivery services.