'Local hero' forwarders can survive globalisation
21 / 03 / 2014
Not so long ago, the orthodoxy was that medium-sized forwarders based in a single country – so-called ‘local heroes’ – would either get taken over or become niche players.
Davies Turner has done neither and is still thriving after 144 years of existence as a family-owned firm, recently rising into the top 10 of UK forwarders.
Its chairman, Philip Stephenson, is something of a survivor too, having been in the forwarding business since 1970. That has given him a detailed perspective on what works and what doesn’t in the business.
Key insights are that you need to invest in IT and staff development – and that surviving in a global marketplace does not necessarily mean having offices all over the world.
On the latter point, Davies Turner has always focused on having a strong presence in its home market – the UK and Ireland – rather than opening offices in Singapore or Los Angeles, for example.
One reason, Stephenson admits, is that expanding takes a lot of money “and you have to be realistic about what you can finance”. He also notes that it is difficult to have an intermediate position between having a lot of overseas offices and having none. “If you are clearly building a global network, then you [may] frighten off your overseas partners,” he says.
Another factor, perhaps, has been that Davies Turner’s home market is an island. “If you are based in Austria or Poland, then you are more likely to have a branch in a surrounding country, so you become a regional forwarder. But the only country we have that situation with is Ireland.”
Not having its own global network has not prevented Davies Turner from getting involved in global trade, however. Stephenson says it has always been able to find a good local partner to work with in other countries, and reinforces these contacts with regular visits.
It does also have ‘delegates’ – a Davies Turner employee – in several markets where it sees strong potential and wants to work more closely with customers or local partners.
Examples include Romania, Bulgaria, Turkey and – surprisingly –Iran. “Historically we have also been strong in Iraq and still have very good links to Erbil in the autonomous Kurdish region,” Stephenson says.
Nor is Davies Turner limited to UK and Ireland export and imports by this approach. Stephenson says cross-trade is also important to the business.
“For example, we deal with a customer in China who has shipments to Mexico. Sometimes such trade comes to us because it is controlled in the UK, but that is not always the case.
For example, we have a customer in South Africa who ships all over the world, including to the UK. We get the entire business because we have done good work for them in the past.”
One other supposed disadvantage of local hero forwarders is in IT. The idea is that big forwarders can develop custom-built systems while smaller players have to rely on third-party applications that may not be tailored to their needs.
Davies Turner has defied such categorisation, however, consistently investing in its own systems since 1970. “It’s not easy for us to make these investments, but we make sure that we always generate a surplus so we can do it,” says Stephenson.
“The key thing is that all of our software is integrated. Even when we buy in software – such as our warehousing system – we customise it to integrate it with our existing system. But most of our freight management system is home grown.”
As well as ensuring the smooth running of the business, the aim of all this investment is to give the customer “absolute transparency”.
Stephenson recalls the 1970s when that meant producing “great clumsy print-outs” every two weeks, which then had to be couriered round to the customers’ offices. “But now they want to see everything on the screen and to be able to interrogate it day and night.”
Having this focus on IT has meant that Davies Turner has been active in developing e-freight, but Stephenson admits to frustration “at the various false dawns” on this project, and the slow progress when compared to other modes.
“With one or two partial long-haul exceptions beyond the EU, overland paperless trading is virtually complete, while with sea freight the North American and Far East trade lanes have made the most progress,” he says.
“For years now we have operated an almost paperless system with imports and exports clients, and all UK shippers are automatically emailed a full set of export documentation, while import clients receive all relevant documents and Customs entries by the same means.”
This, he says, is more efficient for the customers – because they can easily store and access shipment data – and reduces internal administration at Davies Turner, giving its staff more time to speak over the ‘phone to customers about topics that really do matter to them.
“But this progressive approach falls down when the goods are ready for presentation to the airline. All too often this returns us to the world of printers and hard copy. In fact, the documentation required to deliver goods to an airline still bears a close resemblance to the situation 50 years ago – except now there can be even more paperwork.”
Davies Turner is working closely with British Airways on EDI messaging trials, and Stephenson is hopeful the logjam may soon be broken.
“The benefits of e-freight have long been recognised by the industry,” he insists. “Our hope is that a breakthrough with a few leading airlines may eventually embrace the whole industry.”
While technology is vital, people are even more important to the success of a business, and this is something on which Davies Turner has always placed great emphasis.
“The company is run by the owners and we always have tried to have a family feel in the business. Also, we have always believed in profit-sharing,” says Stephenson.
“We don’t have a high turnover of staff, and we still bring in a dozen youngsters each year as trainees. It is a very thorough training, lasting 18 months to two years, and the idea is to give them experience of all our activities so that they remain flexible. Otherwise it is too easy in forwarding to get stuck in the same section for years.”
Some companies may worry that the trainees might then leave and work for other, rival businesses, but Stephen-son says this is not in fact the case.
“They stay with us and go on to fill higher posts in the company. It is refreshing to have youngsters in the business. They have ideas and they understand the world very well.”
One other change that the forwarding business has seen since the 1970s is the rise in logistic services. This is another area in which Davies Turner has invested a lot – not least because imports are now much more important than exports in the UK market.
But despite this, Stephen-son says air exports are holding up, because they are at the high value end of manufacturing where the UK continues to have world-class companies.
But he stresses that whatever logistics services Davies Turner does is all linked to imports or exports, and that the company continues to regard itself primarily as a forwarder.
“Forwarding and logistics reinforce each other, but forwarding is still the leading percentage of our profit and turnover, and I don’t see that changing.”