Focus on Service Spurs Above-Average GrowthFri, 09/01/2017 - 11:07
Q: What have been Hellmann’s main drivers of growth since 2016?
PZ: Depending on our line of business, we are growing between 10 and 15 percent year-on-year, which is above the logistics industry’s average of approximately 5 percent. Service has been a priority for Hellmann and has been the cornerstone of our growth. Unlike other companies that focus on building their commercial presence first, we seek to be as close to our clients as possible. We open operations offices wherever we are needed. We prefer to not offer our services when we know we cannot comply with clients’ requirements and we have found they value this honesty. There is nothing worse than a failed project and having a negative reputation preceding you.
Our staff is also a huge part of our success. Our talent turnover per year is less than 1 percent, which gives clients confidence in how things are run at our company. Our clients always deal with the same person, which ensures continuity. At Hellmann, we always try to develop our own talent first, before hiring someone new to fill a high-level position
HR: We saw good results in 1Q17 and among our different Vertical Industry Solutions (VIS), the automotive industry was among the most successful, representing 40 percent of Hellmann’s total revenue in 2016. The arrival of new OEMs has proven an advantage for the company, both through direct targeting them directly as well as their supplier chain.
Q: What are Hellmann’s plans to offer added value to automotive clients?
HR: In Mexico, 40 percent of our operations are managed through ocean freight, 40 percent with airfreight and the remaining 20 percent is divided between road freight and intermodal services. Until now our focus was on Tier 1 and Tier 2 companies but we have started working with various OEMs located in Mexico. We already work with several European automakers in their home countries. We have enough experience in road, rail, sea and air transportation and we also offer sequencing and distribution solutions. Now, we are trying to bring all that knowledge to Mexico.
PZ: Having developed our sea and airfreight services it is time to bring our warehousing and distribution operations to Mexico. Challenges regarding local infrastructure make these services crucial for clients to remain competitive. We are analyzing how our clients’ distribution centers are spread across the country and based on that, we are creating the best solutions for the company. This will also help us minimize waste in the supply chain, which is where we see the biggest opportunity in the Mexican network.
Q: Why had Hellmann not explicitly targeted the Mexican OEM sector before?
HR: Today, Hellmann’s operation in Mexico has grown enough for us to offer this service effectively and with good revenue margins. We secured an OEM client in March 2017 and we are negotiating an umbrella contract with another company to offer a similar service to what we do in Europe.
Q: What do you see as the main obstacles for Mexico to grow as a logistics hub?
PZ: The automotive industry keeps growing but the road and rail infrastructure is reaching its peak. Meanwhile, sea and air transport providers are not normally aligned to the needs of the market, causing over or under-capacity situations that have to be addressed. Ports and custom offices are also critical factors that cannot be overlooked. Mexican ports are among the most expensive in the world. All customs offices have different points of view and bureaucracy is increasing costs radically. The only way for Mexico to compete with other logistics hubs is to integrate customs agencies into the supply chain.
Investment in logistics infrastructure and human capital development is vital for Mexico’s growth. Talent will be Mexico’s tool to compete with more advanced economies and companies can contribute by helping young people reach their full potential. Having a cultural exchange within Hellmann has helped our Mexican team learn best international practices and it helps foreign employees understand how the local market works. We want to bring our international best practices to Mexico, which means all spending on training is an investment more than a cost.
Q: How have Hellmann’s operations in Mexico impacted your client-attraction strategies?
HR: We are selective with our clients because we think we can offer a better service if we remain specialized. Many of our existing contracts have been sealed thanks to referrals from our existing network.
PZ: As a family company, we are flexible enough to transform our operations locally and globally. We react quickly, which proves a clear advantage especially with automotive companies. But not all companies match Hellmann’s philosophy and just as we choose our providers, we choose which companies we can cater to. The only way to have a healthy client portfolio is to have a mixture of big, medium and small clients. Moreover, clients that move one container per month are just as important as those moving 100 containers in that same period. Rather than just numbers, clients are faces that we recognize each day.
Q: How is Hellmann innovating in technology and what new applications are available?
HR: Our real-time, end-to-end cargo monitoring system for sea, air and road transportation, Hellmann Smart Visibility, is gaining ground in the market thanks to its security advantages. We have also created a variation of this platform called Sky Angel, which connects cargo directly with the police force. The original platform allowed clients to know where the cargo was and how the operator was performing. This new version sends an alert to authorities, shortening the response time in case of any eventuality and increasing the recovery rate of stolen containers.
The original Smart Visibility add-on is a growing technology advantage and we keep working on improving it. Customs cannot release the system as part of the cargo, representing added costs for clients. This has forced us to limit this solution to the export market. With Sky Angel, however, we have had more success in national freight. We noticed that the biggest security risks are in the last stretch of the cargo’s journey. We presented this product in 2017 and are gradually overcoming the fact that prevention culture is not that common in Mexico.
The company is also focusing on improving the IT department and establishing a better connection with clients’ operations. This is particularly important in the automotive sector where large amounts of data are generated and shared. We are consolidating the clients’ ERP software into our own platform, offering companies a much more condensed analysis of how their cargo is moving, which components are being shipped and what transportation providers they are using. These projects are still limited but we expect more companies to be interested before the end of 2017.
Q: How do you see the relationship between Mexico and the US impacting logistics operations?
HR: Due to our German origins, our biggest market opportunity is in logistics operations from Europe, Asia and South America. But what we saw was more fear and uncertainty than an actual negative impact to general operations. We had many secured contracts and both OEMs and suppliers kept coming to the country despite announcements made in the second half of 2016.
After the announcement of an OEM divesting in San Luis Potosi, many companies that were planning to follow that OEM panicked. Luckily, they did not lose the business and they only had to transfer their operations to other production sites. Companies also have many markets to develop other than the US and some Mexican plants are the sole manufacturers of certain vehicle models that are distributed globally. Although the US remains Mexico’s biggest client, companies are taking advantage of Mexico’s other trade relationships.
The only clients that remain more cautious are the ones supplying predominantly to OEMs in the US. These companies are waiting to find out how the business relationship between Mexico and the US will develop before continuing their own growth initiatives. This does not mean they are diminishing their production capacity or previous investments in the country.