Unlike many of its global competitors that remain largely focused on air networks with limited domestic ground operations, TNT took the bold step nearly two years ago to do something quite unheard of in Asia by creating a transnational road network nearly 4,000 km long connecting 120 cities in six countries from Singaporeto China.
The final pieces of this ambitious puzzle, which was created to augment its existing air network, are nearly in place with the recent linking of Vietnam into the network,to be followed by China later this year.
"TNT excels in developing, setting up and managing road networks," said TNT Southeast Asia MD, Onno Boots in reference to the express carriers’ European road network, the largest and most dense onthe continent.
"We started about two years ago here in Asia setting up the initial tracks for the road network running out of Singapore into Malaysia – Kuala Lumpur and Penang- and onto Bangkok."
This was then extended through Laos, into Danang in Vietnam, connecting to Ho Chi Minh City and then Hanoi and soon up to the Chinese cities of Kunming andGuangzhou.
"Basically it stretches the road network all the way from Singapore up to Chinaand that feeds into our domestic network in China," Boots said.
TNT acquired Chinese domestic freight and parcel delivery company Hoau in early 2007 which provided TNT with an instant network of 1,100 depots, 3,000 vehicles and 56 hubs covering all major and second-tiercities in China.
TNT is now completing the integration of Hoau’s operations and network into its business and once that is complete, the road network will largely be complete. Clearly not a trivial task considering thecustoms and other regulatory issues involved.
Redefining the rules
"I’d like to think that TNT set new rules for this," said Boots. "This was a newphenomenon for Asia and also for all the customs authorities associated with thedevelopment.
"We worked very, very closely with customs authorities in every country to basically develop, define and implement new methodologies of putting in the infrastructure,"he added.
While this has been ironed out for the majority of the network, he acknowledges that one final hurdle remains. "To be honest, it continues to be a challenge now thatwe’ve made the move up into China.
"Again we’re going through a process of redefining and establishing the rules for doing this business, and again in close consultation with Chinese and Vietnameseauthorities."
"They are," he’s quick to add, "extremely helpful and extremely willing to learn in helping support us as we build thisnetwork."
Boots said Vietnam and China were ‘connected’ in December with trials running through January and TNT has now got it up to a standard where they will beginmarketing it commercially.
Vietnam on track for growth
This final piece of the network puzzle was not by chance, as TNT had, for some time, been anticipating the growth of tradeflows between the two countries.
"Vietnam is producing exceptional growth, although of course the economic base is much smaller, but the growth rates we are achieving there are phenomenal,"Boots said.
In particular the electronics sector has seen substantial growth as manufacturers shift part, or all, of their production from Korea and even China, into rapidly developingVietnam.’
"I expect a further boom this year since a lot of the OEMs have been setting up their plants in the northern part of Vietnam and a lot of those OEMs tend to be our customers in China, so I would expect some of that manufacturing business to transitinto Vietnam this year," said Boots.
Integrating road and air
Now that TNT’s Asian road network is complete the group is busy redesigning its China and Southeast Asian air networks to better complement the ground system and once that is complete in the coming weeks, they will be ‘plugged in’ to the European network, to create an integrated, seamlessproduct offering, according to Boots.
"The road network not only provides a road mode of transportation for parcel and freight products to customers, it also provides a feeder service into our hubbingpoints," he said.
Counting on spurring even more growth, TNT is set to open a new Bangkok road hub following the recent openings ofnew hubs in Penang and Kuala Lumpur.
Next in line is Singapore, which will see a major air and road hub built at Changi Airport that will see TNT B747-400 freighter flights from Europe hubbing at Singapore before continuing on to Chinaand returning to Europe.
"We’re ramping up the infrastructure as we speak – almost doubling it – for thatoperation to start," said Boots.
When complete the new air and land networks, which can also tap into some of the traditional sea connections throughout Asia, will translate into a seamless product offering which Boots said will be a key differentiator from other express companiesoperating in the same markets.
High growth Asian volumes
While Asia – led by China and followed by India and Southeast Asia – is producing "high double-digit" growth for TNT, the new road network is now comprising nearly 20-30 per cent of total Southeast Asian volumes, according to Boots who said the majority of the volumes were new and not a result ofcannibalising the air volumes.
"It’s especially impressive when you consider that two years ago the roadvolumes were zero," he added.
"TNT believes that that sets us apart and since it connects into all our domestic networks in these Asian countries, it has turned out to be a phenomenal success which is why we are bringing forward some of the linksin our strategy."
Next in line will be India, which after recently completing the integration of its Indian road express division, TNT Speedage, will soon see five cities chosen as hubs, around which a similarroad network will be constructed.
The same strategy is already in place in the Middle East with a road network stretching out from Dubai to the Gulfcountries and Saudi Arabia.