Bruno Sidler is president and chief executive of Panalpina, the Basel, Switzerland-based forwarder and logistics company. He is a 25-year veteran of the company, having served in management positions in South Africa, Nigeria, Singapore and Indonesia. He was named chief executive in 1998.
Q. How would you describe Panalpina today?
A. We see ourselves as a pure-play freight forwarder, and that insinuates that we are concentrating on our core business, which is global air and ocean freight forwarding. The third area is supply-chain management - warehousing, distribution and all kinds of services built around air and ocean freight forwarding. The people in investment banking circles compare us to the likes of Expeditors from a business model point of view. The one big difference is that Expeditors focuses mainly on the trans-Pacific into the U.S. and we have a pretty even spread around the globe. When we look at North and South America, South Asia, the Asia-Pacific, and looking at the percentage, we have about the same amount of people in each continent.
Q. How you do you differentiate yourselves from the likes of UPS, DHL and FedEx?
A. The biggest differentiator is that we have an asset-light business model. Note that I say asset-light, not non-asset. When it comes to aircraft, ships, trucks, warehouses, we tend to outsource these activities, so we can follow the customers and be flexible. In the first world, we don't see that any time soon we will have a problem finding first-class subcontractors on a local and regional basis. In Africa and Latin America and South Asia, we have had to go into assets ourselves, because we could not find suitable subcontractors. So Latin America or Africa, we do own trucks, we have heavy-lift equipment, barges and even ships along the coast in West Africa. We always sell a package to the customer; the customer doesn't care if we use subcontractors or not. They tell us exactly what they need, in terms of quality of service, pricing, transit time, but they don't tell us that we have to own the truck and the warehouse.
Q. How would you describe the competitive environment in global forwarding and logistics?
A. It's extremely competitive. We are blessed in a way that we have market growth that is driven by globalization, which fuels growth. We have customers asking for more and more services, but we have also gone through a massive consolidation in the industry. That drives competition. These huge companies really aim to increase their market share, with aggressive pricing with the global accounts. So pricing, yes, it is something that is there, and it is going to be extremely difficult for us to improve the margins. So we have to make it up by improving our product and becoming more efficient. If you bank on getting better prices from your customers one day, well, I wouldn't bank on it.
Q. How then do you go about improving margins?
A. We have taken a two-tier approach. The first was looking at our own operating model. We have spent a lot of time and money standardizing our service and processes. Everybody talks about this, but it's not easy. We segregated the different activities in freight forwarding. We have clearly designed functions covering marketing and sales, operations, procurement and internal services. So this gives us the basis of creating shared service centers, to make us more efficient. So we have to become more and more efficient, to do more business with the same amount of people, or at least not growing the people as much the business. The second approach is on the customer side. There we are trying to go deeper and deeper in the supply chain, becoming more specialized and more knowledgeable about our customers' business. That allows us to suggest process improvements, to reduce time to market, to reduce inventory, really making supply chains more efficient. By doing that, we are becoming much more appreciated as a partner, and it increases customer loyalty. This is not unique to Panalpina. Our entire industry is going down that track.
Q. You've had some turnover in North America. How are things going now?
A. We have had some turmoil, which you always have when you change top management. We are not proud of that, but the new management is headed by an old Panalpina hand, Peter Merath. In 2005 we have stabilized the organization, and we had growth in North America, which is gratifying when you had a bit of a difficult situation. We are back on track, and we are looking forward to building on that. North America is a tough market, but we can't blame the market on what happened. These were homemade problems that have been tackled and corrected.