Panalpina

Asset light asset right┬áWhile many competitors in the transportation and logistics business have built up debt through acquisitions of vehicles, Panalpina has taken an entirely different approach, as Alan T Swaby learns. You would think that the name of the third- or fourth-largest mover of freight in the world might be vaguely familiar, particularly as the writer spent a couple of years living in Switzerland, where the Panalpina Group has its corporate headquarters.  But Lucas Kuehner, managing director of the USA operation, is not surprised and takes no offense at the lack of awareness.┬á ÔÇ£ItÔÇÖs a bit of an insider joke,ÔÇØ he says, ÔÇ£that we are the industryÔÇÖs best-kept secret, at least as far as the consumer market in North America is concerned. We should probably promote ourselves more, but where it matters we are very well known, so itÔÇÖs not a priority.ÔÇØPart of the reason is that, unlike many of its competitors in the transportation and logistics markets, there are no massive fleets of vehicles carrying the Panalpina brand. In a few of the 50 North American cities where Panalpina has a presence, you might find a handful of Panalpina-owned vehicles; but, on the whole, Panalpina uses subcontractors and is quite happy to take a back seat in terms of identity.This, in essence, is PanalpinaÔÇÖs corporate ÔÇ£asset lightÔÇØ approach or, as Kuehner prefers, the Asset Right approach. ÔÇ£It means,ÔÇØ he says, ÔÇ£that the company is highly flexible and able to adapt quickly to changing circumstances. It also means we are debt-free, which in todayÔÇÖs climate is a distinct advantage. Customers find our lack of exposure reassuring, as it renders negligible the risk they face from our becoming insolvent.ÔÇØ Globally, operating in 160 countries and with dedicated offices in 90 of them, Panalpina provides air freight, ocean freight and supply chain management services across the board. However, there are a half-dozen markets on which it has focused attention and accumulated in-depth knowledge and experience. By and large, Panalpina in the US follows a very similar pattern.┬á Supply chain management services account for around 30 percent of PanalpinaÔÇÖs revenue, with another 30 percent coming from ocean freight and the remainder from air freight. But in reality there are few transactions that donÔÇÖt include at least some element of logistical support.ÔÇ£Our largest industry market segment in the US,ÔÇØ explains Kuehner, ÔÇ£is oil and gas, which we manage from our Houston office. This is a segment that supports our own flight operation known as the Dixie Jet. A wet-leased aircraft flies regularly between Huntsville and Luxembourg, providing a reliable service for customers from all industry segments, but for the oil and gas clients we offer connections from Luxembourg to the Middle East or any of the African projects we are managing. Such a service is unique in the industry.ÔÇØPanalpinaÔÇÖs defined industry segments oil and gas, automotive, fashion, healthcare and high-tech consume a considerable amount of logistical input. And this is where in-depth market knowledge is of paramount importance. ÔÇ£Essentially, moving goods from place to place is relatively similar, regardless of market,ÔÇØ says Kuehner. ÔÇ£But such a lot of the work we do is so labor-intensive that tendering for these projects would be financially risky without knowing the industry, how it works and what it needs. We spend a lot of effort finding the right people and training them. Certainly we need to work to set procedures, but this canÔÇÖt be at the expense of personal initiative.ÔÇØKuehner cites the case of the logistic services it provides to New YorkÔÇÖs 5th Avenue retailers of some of the worldÔÇÖs most prestigious clothes. Shops place orders through Panalpina, which coordinates the requirements, places orders with Italian suppliers, then bags and ships the garments to US retailers. But the sheer volume of retail outlets and suppliers, not to mention countless colors and sizes that need to be carefully managed, means that there is a considerable amount of manual work involved to perform the job satisfactorily.Similarly, should an oil rig in West Africa need spares, the entire supply chain is in PanalpinaÔÇÖs hands. Orders and documentation are processed, components are sourced and packed in purpose-built crates, then shipped via the Dixie Jet service to Europe and onward shipped to Africa before finally being delivered to some remote site, probably by barge. Any loss of production would be financially painful, so reliability and prompt delivery are essential. With perhaps 50 handovers of the goods between links in the chain, there are a lot of opportunities for things to go wrong, meaning that the only way to ensure they donÔÇÖt is a considerable amount of individual effort.One of the most demanding of all market segments is automotive, leading the way, as it does, with lean manufacturing built around just-in-time deliveries. In Montgomery, Alabama, Panalpina manages the Hyundai supply chain. Using a system known as Just in Sequence, Panalpina gets an hourÔÇÖs notice of which parts to deliver to the assembly line, where the operators need do no more than turn around to find the components they need at their fingertips in the correct sequence.ÔÇ£In this type of work,ÔÇØ says Kuehner, ÔÇ£there is absolutely no margin for error. IÔÇÖm pleased to say than in the two years we have worked with Hyundai, their assembly line has not stopped once through a fault of ours.ÔÇØ While this is admirable, some people are now taking a wider view on efficiency and wondering about the impact this has on the environment, and the automotive industry in particular is already looking at ways it can source products closer to home. Kuehner, however, has no doubt that purchasing decisions based on the cost of fuel would not be good decisions. ÔÇ£On high-value items,ÔÇØ he argues, ÔÇ£the cost of fuel and transport in general constitutes a minuscule part of the total cost. It would be cost-inefficient to sacrifice the overall productivity of these items simply to save pennies in fuel costs.ÔÇØAdding value to the entire supply chain is PanalpinaÔÇÖs strategy for the next five years and more. As well as investing in ever more effective IT systems, the group is working at a more consultative level, helping guide customers at an early stage on how to make savings through alternative sourcing. ÔÇ£Our business is global supply chain management,ÔÇØ concludes Kuehner. ÔÇ£We deliver compelling solutions that provide value to all customersÔÇöevery time.ÔÇØ No doubt many of these customers will also become asset lighter as a result.┬á