Roger Crook: A new face in the forwarding game
Roger Crook took on the job of CEO of DHL Global Forwarding, Freight, in March after a long stay in the company’s express division. Since then he’s been settling into his new position, focusing on increasing marketshare while bringing some of the strategies used in the express arena to the freight forwarding world.
Air Cargo World: Look back at the past year. How has 2011 been for DHL Global Forwarding?
Roger Crook: The year has been — and will be — an excellent year for DHL. We’ve grown both our sales revenue and our profitability. I think the year started out more optimistic than it’s ending. Up until about June, we thought we were going to have a peak season in the second half of the year, and we haven’t seen that happen. It’s peaked a little bit here and there, and then it’s dropped back again. I think many companies are still
looking at their inventory levels and playing “wait and see.”
From my point of view, 2012 is a big question mark, and 2013 probably even more. If you look at us and our competitors during the last two to three months, particularly airfreight volume is down on last year. And you can actually see in our Q3 report that our volume was down 2 percent to 3 percent on average for that three-month period. Everybody’s hurting. I don’t see any of our competitors that I’ve looked at that are in any different position. Everybody’s looking at how can they make money.
ACW: At the start of the year, a lot of talk revolved around ocean carriers taking marketshare from the airfreight world. Is that still the case?
Crook: There was some of that in the beginning of the year. I think it’s switched now. People have held off on the peak season with ocean and now, potentially, you might see in the next few months a small peak of last-minute buys, people’s inventory running out, but it’s not really happening right now. We saw switching in the beginning of the year, but it’s not so much happening right now.
ACW: It seems like 2011 will go out with a whimper. What can you as a freight forwarder do to make 2012 more profitable?
Crook: There’s opportunity to grow even though the market is flattening or even declining. From my point of view, yes we can grow. We can become more effective in the marketplace through our sales acquisition process. The other thing is innovation. Obviously, there is innovation that continuously goes on, and I think we can be more effective about bringing that to market.
ACW: What are your customers asking for now?
Crook: Yesterday, one customer — we’re a big supplier to them from an airfreight point of view — said, “Well, I’m going to retire when this industry finally has the same visibility as the express industry.” What I see — and I’ve been in the express industry; I haven’t been in this job very long — is more and more customers are pushing for more visibility. They’re also looking for more defined or definite time in terms of transit time. They want a timed transit time; as opposed to five days or three days, they want it 60 hours or 80 hours. There is some trend in the industry that’s bringing it closer to express over time, but it’s a long way away before you get the visibility of express.
ACW: You said you haven’t been in this job for long. Has there been a steep learning curve? Do you feel like you were thrown into the fire?
Crook: I was obviously thrown into the fire, but at the end of the day, I knew a lot of people in the division, and I knew a lot of the customers, so the learning side is more about the specific operations. But at the end of the day, it’s import/export, and that’s what I’ve been doing at express. It’s exactly the same process at a high level; it’s at a lower level that the processes are different. It’s been a steep learning curve, and I still have a lot to learn. It’s a big challenge, but I see lots of opportunity to bring ideas from express into the forwarding world and to share what processes or share the way we did things and improve things in forwarding. There are synergies between forwarding and express. We do utilize, for example, the express air network with DGF.
ACW: What are some of the major challenges you see on the horizon?
Crook: At the end of the day, what will happen with the economy, and will China really slow down? What will happen with the European sovereign debt, which seems to be getting worse? The economy will be the biggest challenge because our customers’ business will be impacted as well as our business. There will always be the natural disaster; there will always be the regulation change — like the U.S. security regulations. For me, regulation change is something that we have to manage, and we will invest accordingly. If the regulation change in terms of scanning is not practical, then we will obviously challenge it through the relevant bodies. But I think we’re ready for the U.S. change in terms of scanning. It comes into Europe in terms of the unknown shipper in March 2013. We’re gearing up for that now. This is just the way of doing business. We have to do it for our customers.
Des Vertannes: Giving voice to an industry
As the head of cargo for the International Air Transport Association, Des Vertannes is recognized worldwide as a global leader in airfreight. Vertannes, who assumed the role in 2010 after lengthy stints with Etihad Crystal Cargo, British Airways, Air Canada and Gulf Air, recently sat down with Air Cargo World to discuss the challenges — and opportunities — of his unique position.
Air Cargo World: What do you enjoy most about your job?
Des Vertannes: I enjoy working with members of the industry to incite change and make the global airfreight sector more secure, competitive, efficient, profitable and sustainable. There is a great deal to be achieved, but doing so is only possible if the industry can come together and work in unison. Although the immense economic and financial pressures we’re currently facing only makes this harder, I enjoy the privilege of working with my industry peers and colleagues toward achieving these goals.
ACW: How does IATA view cargo?
Vertannes: Cargo is very high on IATA’s priority list. As you know, we have set some
challenging targets, particularly with regard to issues such as e-freight, and our board expects us to follow them through. IATA’s target is to reach 10-percent volume on live e-freight lanes by the end of 2011, and we are on target to meet that. We are similarly concerned with security, which has garnered enormous political and regulatory attention of late. We’ve been supportive of the work of the U.S. government, the International Civil
Aviation Organization and the World Customs Organization in bringing forward solutions, such as secure freight, and collaborating about ways to manage risk. These organizations are also championing the provision of advance cargo and goods information, which we support.
The big push this year has been to achieve greater coordination across the cargo supply chain. The establishment of the Global Air Cargo Advisory Group as a powerful industry force has been key to that. Since we signed the agreement between the four main associations at the World Cargo Symposium in March, the GACAG has agreed on the terms of reference and work programs in four priority areas. I anticipate GACAG mobilizing the industry and achieving significant results in all areas of focus.
ACW: What are some of the biggest challenges you faced in 2011?
Vertannes: In my opinion, we faced two main challenges this year. The first is the security challenge. The foiled Yemen cargo bomb plot in October 2010 reminded us that security is an issue that can only be tackled collectively. It reemphasized the value of intelligence and a total-supply-chain approach. Our secure freight program works on that principle and IATA, along with the GACAG, has been working through ICAO to get states to adopt a similar approach.
The second challenge is efficiency. We need to enhance our competitiveness in a very tough global market. The air industry’s fuel bill will top $200 billion next year; we need to utilize every possible productivity gain. Fortunately, the expansion of e-freight is giving the industry a tool to do just that. Now, we must all step up and make it happen. We also need to make better use of existing trade lanes and accelerate growth on the market penetration we currently have.
ACW: What is the overall health of the global airfreight sector?
Vertannes: We’re seeing a clear weakening in airfreight, and I’m concerned about the economic turmoil in the eurozone. However, we have been impacted by other factors such as the earthquake and tsunami in Japan, the Arab Spring, high oil prices, commodity price inflation and the recent flood in Thailand. All these events have contributed to weakened global demand, so growth this year has been flat. This must be considered in the context of 2010’s exceptional post-recession bounce, but the negative downturn in the second half of this year clearly signals a need to exercise prudence. We all know that airfreight is a leading indicator of economic health, and in September we saw volumes fall 2.7 percent system-wide, with a notable 6.3-percent decline in the Asia-Pacific. Load factor is also down. For the entire year, airfreight is only up 0.1 percent, and although we are currently forecasting growth in 2012, I expect that to be slightly revised in our December forecast.
ACW: What are your other expectations for 2012?
Vertannes: From a policy perspective, IATA will be focusing on increasing acceptance of the e-airway bill as our part of the push to increase e-freight volumes. The industry can expect to see GACAG gaining momentum leading the e-freight goals, and I anticipate governments becoming increasingly committed to securing cargo across the supply chain. Another priority for IATA in 2012 will be modernizing the relationship between forwarders and airlines to boost collaboration. Still, I think 2012 will be a tough year. IATA’s forecast is for airlines to profit just $4.9 billion next year on a margin of 0.8 percent. I expect freight to become an even more important revenue stream for airlines, which is something we should all look to promote. Just imagine how much the industry could profit if we increased our modal market share by just 1 percent, from our present 2 percent of the global cargo market by volume.