Smaller transport firms find a new niche

Giant global logistics companies are carving up multinational business but they can't do it all. A clutch of smaller transport firms have discovered that they can step into this niche.

Smaller transport companies across Europe are riding a wave of popularity as giant logsitics operators scour the continent for a local presence that will help them plug gaps in their global networks.

Well-run transport firms are at a premium as companies like United Parcel Service and FedEx of the US, TPG the Dutch mail and express group, and Deutsche Post, the German postal authority, gatecrash the transport industry to cash in on the trend by multinational manufacturers to outsource their entire supply chain management.

Companies like UPS and FedEx have perfected the art of overnight and express delivery of documents and small parcels. But the fastest-growing market is third-party logistics for giant retailers and manufacturers who want outsiders to transport their products from factory floor to car showroom and supermarket shelf.

That means the big players have to get into the basic transport business which is far removed from their precision run delivery systems. And as they have to follow their multinational customers across the globe, they must have a presence in most national markets in Europe.

Rather than build up their own transport operations from scratch, these giants have opted to buy well run companies off the shelf, often competing against sizeable trucking companies and distribution firms that also are expanding their operations across borders.

And for a well run transport outfit that makes for a seller's market. Small companies in related sectors from freight-forwarding to distribution are also in demand as European and US operators boost their global networks to safeguard their markets from incursions by marauders like UPS, FedEx, American freight companies and European post offices seeking new revenues streams before they lose their mail monopolies.

The past month has seen some long-established medium-sized firms sell out to the big players. TPG acquired Taylor Barnard,a 100-year old privately-owned Suffolk-based haulier. TPG's first major British acquisition since it arrived in 1978 is likely to be followed by more deals as the company builds its 500-million euro-a-year logistics business. It recently signed a five-year contract worth more than 160 million euro to handle Volkswagen's spare parts and warehousing in the UK. Taylor Barnard, which has 60 depots, 750 vehicles and 325,000 square metres of warehousing, specializes in healthcare and consumer goods and also transports building materials, paper and retail products.

Irish Express Cargo was sold for 70 million euro to Flextronics International, a US contract manufacturer, turning a tidy profit for Finn O' Sullivan who with his wife owned 65% of the company he set up in 1972. Business has soared in the past five years; in 1995, the company still had only 100 employees, but today it has 2,500 scattered across Ireland, the UK, continental Europe and the US and its turnover will rise to 250 million euro this year from 215 million euro in 1999.

Irish Express Cargo was facing a problem that is forcing other medium-sized transport firms to mull selling the business. It needed a capital injection to fund growth to keep pace with the increasingly sophisticated demands of its core computer industry customers like Compaq, Dell and Hewlett-Packard. They expected the company to go on to the next location with them, regardless of the cost.

Typical of the firms being acquired is Germany's Schrader Group, a privately-owned firm with annual sales revenue worth 75 million euro, 900 employees and seven warehouses in Germany, Austria and Poland specialising in automotive logistics which was recently snapped up by TPG. The Dutch firm also took a 51% stke in Barlatier, a French logistics firm with annual revenues of 46 million euro, 700 employees and contracts in the industrial, pharmaceuticals and electronics sectors.

Some privately-owned firms are determined to remain independent, confident they can compete with the big guns by investing in IT, specializing and maximizing the flexibility bestowed by their size.

Ruedi Reisdorf said he would only consider an offer ... made in heaven for Fracht AG, the Basel-based freight forwarder he founded in 1955 which now has 1,000 trucks and 40 offices.

Savvy family-owned hauliers are thriving by diversifying from basic transport into more value-added activities and forging closer partnerships with their customers. For example, European road transport business has fallen from 80% to under 50% of Cranleigh Freight Services' revenues as the firm focuses on storage and distribution in the UK.