COMMENTARY
SPECIALS
CHAT
ARCHIVES
SEARCH REDIFF

The Rediff Business Interview/Jacques Creeten

'Today, you can start a corporation with $5.5'

The $ 4 billion Federal Express Corporation, the express logistics solution provider, has plans to set up a consortium of an Internet Service Providers and hardware vendors. Jacques Creeten, managing director, FedEx India, spoke to Shobha Warrier during 'Logistics 99' in Madras last week.

What is the role of a logistics service provider in e-commerce?

When we talk about e-commerce, we have to break it into two sectors: business-to-business or B2B and business-to-customer or B2C. And they are quite distinct. In B2C, you have a shop that is on the Internet. But you will have a different set of issues if you have a brick and mortar shop round the corner. In the brick and mortar shop, you have to get the customers into the shop. But on the Internet, you have access to 200 million people. Unfortunately, they don't live in your country. But in principle they can buy goods from you.

What is the concern that a person has if he buys on the Internet?

There are a number of concerns that the person has. One, is my financial transaction secure as I am putting my credit card on the Internet? Two, will I get the goods? Three, when do I get the goods?

The logistics plays an important role here because what is essential in this business is reach. Theoretically, any person from anywhere in the world today with a laptop and a telephone line can get access to your business. The issue is, can you get access to that person? So, global reach becomes very important. Second thing that becomes very important is, reliability.

How does a service provider help a business to get global reach?

Firstly, the logistics provider should make sure that the goods would reach the potential customer who resides anywhere in the world. For that, we provide him with a network that gives him global reach.

Secondly, you have to become a strategic partner as a logistics provider because the nature of your business will change, your products will change and all kinds of different expertise will come in. You will be dealing with countries that you don't know anything about. As a businessperson, probably you may not have visited the place. You may be dealing in business with 211 countries. How many countries can a person visit? So, advice on what happens and what is possible in these countries becomes critical for the success of the business.

Reliability becomes as important because late deliveries or deliveries that are not up to the standards will reflect on your organisation. So, the service provider also becomes a part of your marketing strategy. We declare that we will deliver the goods at the door of the customer. Customers cannot come to your shop and say, 'oh, nice shop and nice lay-out.' What they see is, your Website and your courier.

Thirdly, you have to give your customer peace of mind. What your customer wants is an imaginary feel of control over his shipment. So, access to that information is very important. Not only just doing the delivery is important, but the service provider has to give you a very reliable, competitive service in terms of making the information available to the customer.

What is your role in B2B commerce?

Okay, you may have B2B applications as well. You are at a certain point in the growth of your business that you may want to put your business online. You may choose to have extra products that you may not be able to keep in your shop. You may not want to go in for warehousing but want only the ability to ship directly from your supplier to your customer. That is possible today.

Rather than just selling "point-to-point", our business is becoming one of transportation consultant and an engineer to help you understand what is the best way to do your business for the type of product that you are selling.

Is your work and role in B2C and B2B transactions different?

Sensitivities may be different. What happens is, in B2C, the consumer may have ordered only one packet and nothing else is important to him than the packet. When you talk about B2B, other issues also will come to the forefront. Service remains the same whether you are dealing with an individual or a business organisation. A customer will look at it very selfishly.

An organisation will look at it from the business point of view, that is, like how it can be cost effective and how fast it can get information. So, you as a service provider look at it from different points of view.

In today's world, you have to not only satisfy the customer but go beyond that. You have to create a need as it is getting more and more competitive. Ten years ago, if you had a shop, the only person you were competing with was the other shop around the corner. But if your shop is online, you are competing with those in Germany, the UK and the US, and you will have to provide exactly the same service.

You said, in B2B chain management, you have to combine both physical distribution and information distribution. What exactly do you mean by that?

What it means is, if you move away from a slow moving to a just-in-time management system, information becomes very important. The reason that information becomes important is because you have no buffer zones anymore. Secondly, today the Internet gives you the ability to get information that would have normally taken you a month sometime ago.

There are companies that do sales forecasting on a yearly basis, but online they do it on daily basis now. They can make quick decisions because information is instantly available to them. So, they can mould and build information the way they like it.

What will happen to the developing countries that are way behind in information technology? Will they be left out in the competition?

I don't think so. Take the case of India. India is considered a developing country. But India exported $2 billion of technology. You know why? You don't need money to do that. You need a great set of minds, a computer and a telephone line and you can create all the software that you want.

The other reason is, people will be able to sell businesses with much less capital requirement now.

And it will open business to a whole new type of people. Today, you can start a corporation with five-and-a-half-dollars! If the developing countries take care of their prime asset, which is their people, by providing them with good education and an environment that can stimulate creativity, they will have the ability to gain an advantage over others.

You mean the developed countries too?

Yes. You will have an advantage over Europe and the United States too, for example. You don't necessarily always require the traditional capital investment, traditional infrastructure when you work on the Internet. Intellectual capital will become more important than financial capital.

In the past forty years, there was 1500 per cent increase in world trade and in the next three years, by 2002, we expect $327 billion trade to take place on the Internet. The worldwide Internet usage will increase at the rate of 100 per cent per month.

Will technology dominate the world trade?

No, it will be anything. It will be all kinds of goods. Take Fedex for example. Eighty per cent of the volumes moved by us today are processed over the Internet. What I mean by "processed over the Internet" is, all the booking and dispatching are done on the Internet.

All the papers are prepared on the Internet, tracking and tracing are done on the Internet. Although there is a physical movement of goods outside, the entire business is conducted over the Internet.

How do companies in India look at express logistics compared to the business houses in the developed countries?

India is a large manufacturer of goods that are sold in the US and Europe. Eighty per cent of today's Internet is happening in the US. It is the largest trading partner of India. Many companies like Compaq, Gaby International source part of their business or their entire business from India. They are today giving B2B applications. They will want their manufacturers also to do the same and a lot of them are in India. So, you will find them to be the driving forces. The companies in Europe and the US will ask their suppliers in India to become a part of this process.

The global companies that are selling their goods here in India will also be on B2B applications. Now we do a lot of our business on the Internet internally. We do that in India as well as we do in Belgium or the US or Germany. So, you will see a number of driving forces, some of them because of global companies and some of them because of local companies that are part of global process. Even smaller companies may feel, why should we restrict ourselves to the local market when we can have a global reach with a computer, a telephone line and a modem?

You said express logistics is unique. Please elaborate.

We call it unique because no two customers are the same. If I build a distribution system that is tailored for a particular company and tomorrow I have another company that wants the same thing and go online, we can't give them the same system. We can't duplicate one system. It needs to be customised to what you need and what your sales and marketing strategies are and what is the commodity that you are dealing with.

It is also unique because it is not standard. What is true today is no longer true tomorrow. So, you need to change constantly because your competitors are doing it. So, you need to get new services to satisfy your customers because that is what competition is all about.

"What is true today may not be true tomorrow". Really? Is this because technology is fast changing?

Absolutely. Ten years ago, there was no Internet. Twenty years ago, there was no PC. The Internet has changed our lives more dramatically and rapidly than what the television has done long ago.

If you look at people like us, we are from a generation where we had to learn computer after we left school. I have a son who grows up with a computer and he is seven years old!

Ten or fifteen years from now, these are the people who are going to be in business; to them, a computer or the Internet is like what a car or a television set is to me. I had to learn to use the computer; but for him, it is the most normal or natural thing. And that is how he will make decisions. Will that change the way we do our business? Absolutely.

How do you compare the attitude of the customers of the developed and the developing worlds?

I would say, it is more emerging in the developing countries. Concepts we are talking about here are new in the global scene itself. People started talking about logistics management for the last ten years only and the Internet came to our lives just five years ago. The Internet has accelerated global business, as information now becomes global.

I think, people in India are sometimes a little more reluctant to change because that is how the environment has always been. At the same time, think about the people who make it successful in the Internet world. If you go to the US Silicon Valley and look at the multi-millionaires there, how many of them are Indians? So, I'd say, there are two extremes within one country. They will find a way together, I'm sure. But in places like the US and Europe, some of these models may be much more accepted. Resistance to change is human. It is not an Indian or an American but human.

Interviews

Business news