Schenker is making the right move in the U.S.
July 27, 2011
LM recently ran a story on how DB Schenker Logistics is making significant changes to its North American business model.
In short, the company said it is transitioning from operating its own dedicated air fleet to a non-fixed asset model and focus on a smaller number of customers who require North American domestic transportation management services. Schenker added that it will continue to provide shippers in North America with international ocean, air, contract logistics, and warehousing operations and services.
In a company-issued statement, Heiner Murmann, CEO of Schenker Inc explained that as a result of the prolonged recession and spiking fuel prices, more of its customers are opting for expedited ground-based solutions instead of domestic air freight and are looking for partners who can provide transportation management services rather than transactional transportation.
Given the uncertain nature of the economy, coupled with lessons learned from DHL Express in the U.S. and how it was forced to exit the U.S. market not all that long ago, this seems like the right move by Schenker. After all, should things improve, it can always come back with dedicated air cargo service here in the U.S.
And since I filed that story a few days ago, I have since heard back from a Schenker spokesperson who explained to me in detail the rationale for this decision.
“Over the past 24 months, there have been several unprecedented events that have significantly changed the marketplace—a rapid and sustained rise in fuel prices, a global economic crisis, and a sluggish U.S. recovery,” she said. “These events have driven many of our customers to transition their airfreight requirements to expedited ground. We have seen a corresponding decline in Domestic air business and growth in our expedited ground offering. Our decision to restructure the way we provide our air services to a non-asset based model reflects the market direction and customer demand. We have been actively taking measures to make our air business more viable over the last 24 months as the demand has shifted. The final decision to restructure was made within the last month.”
With this announcement pertaining only to the North American Domestic dedicated air fleet, the spokesperson said that Schenker has thousands of customers in North America who utilize its International Air, Ocean, and Logistics services, which will not change. But with respect to its North American Domestic Air/Ground product, she said the company is still working through which customers will find the new offering attractive.
Another difference, she explained, is that Schenker’s current offerings will be enhanced with transportation management technology to help shippers optimize their supply chains.
It looks like Schenker made the right decision at the right time. When it comes to asset-based models, it is fair to say even the most profitable and well-run companies are always thinking more than a few steps ahead to see what is coming next. And what Schenker is doing in this case is no exception.
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