In order to realise its ambitious goal of a billion dollar revenue from China, Agility has recently appointed James Gagne to head the company’s Greater China operations, covering China, Macau, Hong Kong and Taiwan.
“Our company is aiming for revenue of US$1 billion in the next three to five years in the Greater China area,” says Gagne, who was formerly head of Bax Global’s China operations, and ex-MD, Central China at Schenker before joining Agility.
This ambitious goal of growing the China revenue by over 230 per cent from the current US$300 million will be based on both recent acquisitions and organic growth.
“We plan to achieve our target by adopting a different management approach, using different people and know-how,”Gagne said.
The recent appointment of Gagne – a 12-year veteran of China’s logistics market – is part of a substantial global restructuring exercise that was precipitated by the rapid acquisition-led growth track that Agility has been on in the last couple of years.
The restructuring created a new regional management structure at Agility aimed at helping to better manage its growing network of offices and to engage specialists for industry vertical sectors.
In particular this has led to greater attention being conferred on the robust China growth market. The Greater China operations comeunder the Asia Pacific region which is part of the GlobalIntegrated Logistics (GIL) unit of Agility- one of its three key operating units whichincludes Defense & Government Services(DGS) and Investments.
The GIL unit has four regional CEOs – one for each geographical region and it focuses on worldwide trade growth and the long term outsourcing trends of global logistics.
In Asia, Wolfgang Hollermann holds the CEO reigns; while in the Americas it’s Mike Bible; in Europe, Beat Simon; and in Middle East and Africa, Elias Monem. All report to Essa Al-Saleh, president and CEO of the GIL unit which is headquartered out of Baar, Switzerland.
Agility’s second business unit DGS, leverages its track record to expand and grow the business by tapping increased government outsourcing contracts, while its third business unit specialises in investments through leveraging the company’s global network and unique local knowledge to invest in private equity, real estate and undertake trade facilitation.
Personalised services
In a nut-shell, Agility’s business is best described by its chairman and managing director Tarek Sultan, who says: “Personal service is an idea that resonates with our customers. They need us to be responsive and anticipate where they are going.
“The key to building and maintaining leadership is continuing to provide and improve upon the personal service we offer, globally and locally. It’s what our customers want, and it’s what sets us apart.”
Elaborating on this theme, Hollerman says Agility is building its business and operations around its staff , of which the company has 32,000 around the globe today. “We are among the top 10 global logistics provider, but we don’t want to be asset heavy. We will invest where necessary, and currently we own over 6,000 vehicles, operate over 10 million square metres of warehousing space and 800,000 pallet positions all over the world,” he said.
The company’s gross revenue has risen from US$1.3 billion in 2004 to US$6.29 billion in 2007, reflecting how rapidly Agility has grown in the last four years. Thanks to emerging-markets expansion the group is aiming for total sales in 2008 of more than US$7 billion.
In Asia, Agility’s operation is headquartered in Hong Kong. There it focuses on contract logistics, freight management (air, ocean, land), project logistics, fairs & events and industry sectors. The company, which has continued to develop its go-tomarket strategy, has established vertical market segments that will be a core focus. These verticals include retail chemicals, oil and gas, project logistics, high tech and automotive.
“In the region, we are scaling up our capabilities to cater to these diverse segments,” Hollermann says. He points out that Agility is the leading freight forwarder in the intra-Asia trade, and controls two-thirds of all network in airfreight and sea-freight. With over 40 per cent of Agility’s business generated out of the region, Asia is clearly of prime importance toAgility.
Regional development
Last year, Agility achieved substantial business growth through large customer acquisitions and deep selling, successfully capturing key customers such as Nike in Indonesia; Metro (a large retail conglomerate) in India, Pakistan and Vietnam; P&G and Unilever in Pakistan; Visteon, General Motors, Dr. Reddy Laboratories, etc.
The company, which has also developed an integration model, has applied it to the legacy companies and new acquisitions in Australia/New Zealand, Singapore and China.
Agility has also piloted the Transformation Initiative in the Philippines, and the actions are now being measured in terms of target revenues and productivity deliverables.This programme brings together all the best practices and they will be introduced and replicated in every countrywhere Agility has its operations.
“We substantially grew our contract logistics capabilities in India and Pakistan, as well as our general freight management capabilities in China. We started to build a Centre of Excellence (COE) in Chennai in India to centralise all back-room functions for the country,” Hollermann says.
In India, Agility operates over 3 million square foot of warehouse space, and has been able to reduce product losses from 30 per cent to 5 per cent by combining international and domestic players, as well as improving the method of handling goods, like using trucks with cooling units.
Agility has also expanded its new capabilities in sales as well as established shared services model involving finance, HR and IT in the region and all major countries.
In China, the company plans to adopt a similar approach it has successfully taken in India, but with some modifications, Hollermann says.
Regarding Agility’s strategic initiatives and priorities in 2008, Hollermann says the company plans to grow key accounts and scale up major trade lanes. “We will putrenewed focus on key accounts and trade lane programme especially with the US.”
“Agility will also leverage its integrated and bigger service platform to quickly build up scale,” he adds.
Hollermann says Agility aims to transform and improve efficiency by managing the various internal transformation and change initiatives.
The company aims to ensure that they support Agility’s focus on business growth and customer satisfaction. In addition, the company plans to invest in China to further enhance its growth in the Mainland both organically and through acquisitions that can be integrated quickly.
It also plans to expand its third party logistics capabilities. It intends to do this by investing and growing domestic and contract logistics business in all major Asia Pacific economies, especially, China, India, Pakistan and SEA countries.
China operations
“China is one of the main focus areas of the company,” Gagne says. “Our staff strength is forecast to grow to 3,000 from the present 1,100 in 3 to 5 years.”
Agility, which wants to be recognised as a leading innovative integrated logistics provider, is also building up its domestic ground and air distribution network in the Mainland.
Asked how the company plans to achieve this, Gagne says Agility will do so through organic growth as well as strategic acquisitions. He points out that with the weakening of the US dollar, appreciation of the yuan and the increase of purchasing power among China’s rapidly growing middle class, there would be increased importsof goods and services from the US.
“China is too big to handle as one China, instead, we will handle it province by province,” Gagne says, adding that Agility would grow organically, especially in verticals such as retail, chemicals and high tech, and on the acquisition side would focus on ‘tuck ins’ – companies that could be easily incorporated into Agility’s business model.
He added that Agility, which currently handles around 120,000 tonnes of airfreight out of Hong Kong and China annually, would focus on contract logistics and ground transport in the Mainland.
“Acquisitions will enable the company to gain products, extend its geographical coverage and vertical presence,” Gagnesays.
Trends in China
Gagne says many China companies are going global, and many are also listing on overseas bourses as well as expanding to the Middle East, Africa, Eastern Europe and US.
Many multi-national corporations are increasingly viewing China as a market for their goods, and they are not treating it merely as a world factory. They are distributing their products to even the tier two and tier three cities, which are increasingly becoming important markets as their middle class develops.
With the weakening of the US dollar and strengthening of the Yuan, imports to China are increasing, so, they offer opportunities for freight products from US to China.
Gagne says that managing the growth of organisations in China was differentas it was a different ball game from other countries when it came to hiring, re-trainingand developing the staff necessary forthe business. “There is a dearth of talentin the logistics and supply chain market,”he says.
Because operating costs of businesses are rising sharply, and expected to worsen over the next three to five years, the need for good logistics and supply chain professionals will increase dramatically.
In China, there are few universities and colleges which offer courses in logistics and supply chain management. And Agility plans to invest in this area, particularly in training and retention programmes.
Agility is planning to position itself as the “Employer of Choice” in China in coming years.
Another trend that is creeping into China is inflation, and this is not only affecting food. The rate of inflation in February was between 7-8 per cent, and as a result, workers are going to demand higher wages and salaries, Gagne says.
Another trend is that logistics services providers are setting up their processing facilities as close as possible to manufacturers’ factories, depending on their location.
“In the high tech market, we bring in raw materials and apply vendor managed inventory (VMI) to them for between 400-500 suppliers. So, when the manufacturers need the raw materials, we supply them,” he says.
“We are seeing a trend of some airfreight moving to ocean freight because of their lower costs, but we do not see any significant change,” Gagne says.
“In some areas of high tech, we are seeing shippers opting for the sea-air model with regards to transportation of LCD panels, which creates more value. “This is already happening and this is a challenge to the industry,” he says.
In terms of geographical location, if the hub is at the Yangtze River Delta or the Pearl River Delta, it is inorganic growth. However this would pose opportunities for “tuck-in” organisations.
Presently, Agility has its head office for its China infrastructure in Hong Kong and employs almost 1,100 staff with 30 offices in the Greater China area.
In Southern China, the offices are in Guangzhou, Shenzhen, Xiamen, Zhao Qing, Nanning, Zhanjing, Foshan, Shunde, Zhuhai, Kunming, Shantou, Zhongshan, Jiangmen and Fangcheng, and in Eastern China, they are in Shanghai, Ningbo, Suzhou, Kunshan, Nanjing, Wuxi, Xian. In Northern China, the offices are in Beijing, Dalian, Qingdao, Tianjin, Changchun, Shenyang, and in Western China it has an office in Chongqing.
Agility’s logistics operations in China are supported by two fully equipped logistics centres and bonded warehouses in Hong Kong and Shanghai, which have areas of 180,000 sq ft and 200,000 sq ft, respectively. They cover the Pearl River Delta region in the south and in the Yangtze River Delta in Central China.
Agility has also strengthened its presence in China with the acquisition of Guangzhou Runtong International Transportation Company Limited (Runtong).
Agility has worked with Runtong for the last six years and the company also has branch offices in Guangxi, Sichuan, Fujian, Yunnan and Chongqing. It is primarily focused on ocean freight forwarding services in Guangdong.
However, Agility intends to invest in Runtong and expand its range of services to include airfreight and logistics solutions to customers in south China.
Europe, Middle East and Africa
Aside from the Asia Pacific, Agility is also expanding its corporate footprint in Eastern Europe with a national subsidiary in Poland opening for business from April 2008. The previous partnership with the Hartwig agency will be discontinued amicably from the end of March.
Agility’s Polish organisation will be headed by Wojciech Huczyinski and Artur Laszczka, who will lead a team of 15 at its head office located in Wroclaw. Operating activities are also to be started in Warsaw.
Further plans call for customer service stations to be set up in all major Polish cities including Poznan, Katowiceand Gdansk.
Agility has also acquired all the transportation and warehousing activities of Combalia Transportes Internacionales 1986, S.L. in Barcelona and Madrid, Spain to boost its coverage of the Spanish market.
In addition, it has established a joint partnership with Kurdistan Capital Investment which opens up its operations in the Kurdistan region of Iraq. The joint venture partnership called Agility Kurdistan Limited will capitalise on the vast opportunities presented in the Kurdish region’s developing market while solidifying and strengthening Agility’s role in Iraq as a whole.
Hollermann says there are lots of commercial activities in Iraq and since Agility has been there through its support of military projects, it is in a good position to take up the commercial activities.
Separately, Agility has recently signed an agreement to acquire the Kenyan logistics company, Starfreight Logistics Limited, based in Nairobi.
Starfreight Logistics, which deals with customs clearance and freight forwarding, focuses particularly on the procurement and clearing of goods and machinery into Africa, has over 150 employees and two offices in Kenya.
Its services also include warehousing and project forwarding, haulage, crossborder documentation and transport, air freight and customs examination.
Agility, together with Mubadala Development Co. and Al Bateen Investment have also established a joint venture company – Agility Abu Dhabi.
The JV company will provide integrated logistics solutions including warehousing, transportation, distribution, freight forwarding, project logistics and other value-added supply chain servicesto businesses in Abu Dhabi.