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In its management of international supply chains, the express industry in Oman is on an evolutionary journey
Nazia Khan

Globalisation has, by default, expanded both the scope and the terminology that governs this industry. The erstwhile courier business is now the express business. And it is no longer about moving documents from one place to another. The idea is to create international supply chains and provide global end-to-end transportation solutions.

Through the scope of its activities, the express and logistics industry impacts the competencies and competitiveness of other sectors in the economy. Philip Couchman, regional director, DHL Express, Middle East, gives an example of how express service providers wield an effect on the balance sheet of a company. “Take banks and the distribution of their credit cards. The quicker they get the cards out to their new customers, the quicker they generate revenue.”

Around the world
In the quest for their own revenue generation, most players in the express industry in Oman work from offices in Muscat, Sohar, Salalah and Sur. Door-to-door pick-ups and deliveries happen across the region in the sultanate, and most of the clients are from the corporate sector. Chandrashekhar Iyer, TNT’s manager, Oman, puts the ratio of its corporate to individual customers at 80:20. For DHL, the ratio is 90:10; while for FedEx Express it stands at 50:50.

Providing an exception to the prevalent trend is the Express Mail Service (EMS). Mohammed al Saifi, director of EMS, Ministry of Post Telegraphs & Telephones, Directorate General of Posts, informs that EMS uses the network of about 98 post offices spread across the sultanate. Door-to-door operations occur from Muscat to Rusayl. In other areas, it is post office-to-post office operations. Says Saifi, “At EMS, we have more individual clients than corporate clients.”

As Oman’s economy grows, the express industry becomes a natural beneficiary. More business means more volume of shipments, and more express service providers in the race for a piece of the pie. In this situation, the advantage that global express companies have is that their international contracts are already in place. Working through authorised service contractors, agencies and joint ventures, the companies also have the benefit of their glo-bal networks. As K K Mohan, country manager, UPS, points out, “In many ways, our industry operates through the big four – UPS, DHL, TNT and FedEx. All the other express providers, at some point, use the international network that the big four provide.”

Says Sridevi Shrikumar, FedEx Express’ operations in-charge, Oman, “Within GCC, we have a delivery by 12 or your money-back guarantee. So when smaller couriers have critical packages, they give it to us. There’s a FedEx MD11 flight that comes into Dubai, which is our regional hub everyday. And the regional office works 24/7.”

DHL has a global MD11 freighter that touches the Middle East and connects in with its hubs and dedicated aircraft in the region. It also runs four Boeing 727 freighters and two Metroliners, which are supplemented by subcontracted aircraft as and when needed.

Saifi believes that it is both practical and economical to use such networks. He says, “We have a contract with DHL to reach countries, among them Lebanon and Ukraine, with whom we don’t have contracts. Since we want to satisfy our customers, the arrangement works out well for us.”

But while there are collaborations to extend international reach, there is also fierce internal competition. Says Skynet’s operation executive D Karthikeyan, “There are several express companies here giving very low rates. This tends to erode everyone’s profit.” Iyer thinks that reliability, the time factor and competiti-veness are all important factors in the business. “But we have a reputation to maintain, so we don’t compromise on line-haul costs.” Saifi gives his contention, “This is a business, like any other. And we have got to deal with the competition. In 2003, we reduced our rates by around 30 per cent. And that led to a 60 per cent growth in volumes.”

Fuel factors
Margins in the express industry are affected by other factors as well. And those factors trickle down to reach customers. Says Couchman, “We are in an environment where all costs seem to be going up: the cost of fuel, cost of accommodation, cost of line-haul transport and cost of wages. We try and drive costs down. But indexed fuel surcharges (amoun-ting to 6.5 per cent) are being applied to our customers, because in the transport industry, particularly with air, it is a big challenge to hedge against fuel cost increases.”

Shrikumar explains that FedEx Express has a dynamic fuel surcharge that is applied on its rates. “The surcharge (currently 11.5 per cent), calculated on the basis of prevalent fuel prices as well as other factors, changes every month.”

Adds Iyer, “We have been absorbing the increase in fuel prices so far, but we plan to pass it on to our customers in the future.” Meanwhile, TNT’s inbound load increased by 15-20 per cent in the last year, while the outbound load went up by 5-8 per cent. Mohan continues, “Overheads have definitely gone up. But we have to consider that to have volumes. And so has revenue.”

What has also gone up is the efficiency with which the express industry engineers time. In a business where millions of packages have to be managed through thousands of vehicles and hundreds of airplanes in hubs all over the world, time is of essence. The need for speed drives the business because the smallest delay can cause a chain reaction that could lead to monumental losses for customers. In a way, express services, which are day-definite and time-definite, are a bit like perishable products. A wide spectrum of requirements is met within the scope of next-day delivery (pre-9am or pre-12pm), second-day delivery, three-to-five day delivery and so on. For the express industry, that means the need to evaluate, anticipate and, ultimately, eliminate service failures. Mohan explains, “Service failures could happen on account of origin failures, if it is an export shipment. Or, if it is an import shipment, it could be a destination failure. Also, there could be failures in intermediaries, like hub or airline failures. It is our job to push and ensure connectivity for our customers.”

Touchstone technology
In the battle for supremacy in the express industry, technology is the primary tool. For technology to synchronise with customers, and therefore with commerce, entire caches of e-tools are being developed by companies. Customer-based technologies, where the systems are interactive, are providing the edge for leaders in the market.
Mohan gives an example, “Our airway bill printing software has a direct interface with the UPS mainframe. If I give a live version of my airway bill printing software to a customer, it interfaces directly with the UPS mainframe. The customer can send up to five e-mail alerts to anybody. There are five levels of alerts that can be received – in terms of creation of an airway bill, progress of the shipment, any delay, delivery, and the final conformation of who has received the e-mail and who has not.”

What happens in this case is that the system takes over the customer service role. And since most companies operate on uniform technol-ogy platforms around the world, innovations permeate through borders. In a way, an express transaction is just four clicks away.

Couchman says that about 40 per cent of DHL’s customers in Oman use the e-tools the company provides. “They are gaining more acceptance as customers become more familiar with them. That’s in line with the way the whole e-commerce market is moving. We have got good indicators that customers are using the tools for tracking and tracing. Because when our customers call here, tracking a shipment, more often than not they’ve seen it on the Internet and they have tracked it electronically, and they have a further question to ask about it.”

Saifi informs that it has only been a few months since the track and trace system started for EMS. Currently, the system is in place within Oman and other GCC countries. EMS has plans to introduce the system for other countries by next year. “Once we have those systems in place, we can compete in the true sense.”

Says Skynet’s Karthikeyan, “What online systems do now is allow us as well as the customers to control shipments from A to Z. Technology helps to do things more quickly and more cheaply.”

Oman oeuvre
For the growing market in Oman, business is different also because of the regional peculia-rities. Says Couchman, “Across the Middle East, more so than in other parts of the world, we incur additional costs for security. There are security measures and the screening of traffic, where there’s specialised equipment and specialised staff.” DHL is in the process of initiating a long-term strategic plan for Oman. “We will be examining the requirements that we have for warehousing, retail, customs clea-rance, and expansion, which will allow us to keep pace with growth.” Meanwhile, FedEx Express will shortly be opening an office in Sohar. Says Shrikumar, “With the kind of growth Sohar is experiencing, all the action is shifting there.”

As the discussion veers to more region-specific products and market improvements, Saifi talks about Gulf Express. This is a product developed as a connection between administrations in the GCC, targeting banks and businessmen in particular, among other sections that want their parcels to arrive within 24 hours. Saifi explains, “All GCC countries felt that a speedier service than the existing EMS would help. The trial launch of Gulf Express will happen in June. It will be launched properly in September.”

Karthikeyan believes starting a courier council would go a long way in structuring the express market in Oman. “We could discuss problems on a common platform and come up with solutions that would make the industry operate more efficiently.” A combination of things provides the edge in the express industry today. It is not just the technology, but also the people bringing the technology to customers. With this understanding, and the way the economy is progressing, the express market is sure to evolve at higher levels.