Alfred Stienen, Managing Director of the F.S.Mackenzie Group was recently invited to give a speech at the WORLD FORUM FOR FOREIGN INVESTMENT 2010, held in Tallinn, Estonia between the 7th and the 9th of June.
The Estonian President, Mr. Toomas Hendrik Ilves, opened the event; the Estonian Prime Minister, Mr. Andrus Ansip, gave the welcome note to 200 delegates from numerous countries, and the well known BBC TV presenter and Journalist Peter Kellner, President of YouGov.UK, acted as the Conference Chairman and Moderator.
Address to World Forum for Foreign Investment Tallinn, Estonia June, 2010, given by Alfred Stienen:
Good morning, ladies and gentlemen. My name is Alfred Stienen and I am managing director of freight forwarder F.S. Mackenzie in the UK. We are UK-based but with an international network of offices.
When I got the call to speak at this conference, I wondered why the organizers selected a medium-sized freight forwarder and logistics provider to give a presentation. My first
thought was “I have nothing to say”.
Sure, we now have 14 offices across Europe, Asia and Africa – opening a new office every year for the last decade – creating a group with an annual turnover of well over $100 million.
But then I thought again. F.S. Mackenzie’s expansion has turned out to be a perfect mirror of how the world has developed economically over the last two decades as demand for freight services completely follows inward investment and the commercial growth of emerging economies.
A case in point has been our two-decade relationship with Russia. As that country has emerged following the massive inward investment it has enjoyed, demand for sophisticated freight services to supply factories and take away manufactured goods, from companies like ours, has grown strongly.
How very different it was when we first entered the market! In the late 1980s, our clients in Eastern Europe were demanding better services to Russia just as that market was opening up. In the early 1990s, I went to Moscow to recruit an agent. I ended a day’s search on a bitterly cold January day in Moscow’s only Western pub at the time, the Shamrock Bar at Novi Arbat.
Even then a pint of Guinness cost $6 and it isn’t much different today. Now before you think I was not working, the pub served as an informal meeting place for western ex-pats working for companies who were just then looking to invest in Russia. Executives and sales staff would meet over a pint or three of Guinness and discuss the problems and opportunities the new market presented. Just by chance, I had the opportunity to meet with senior management from Fortune 500 companies.
Conversation very quickly turned to the problems of moving freight into and out of Russia and I easily sensed a business opportunity we just could not ignore to bring freight forwarding services to that market. Clearly it was a golden opportunity and we were amongst the first foreign forwarders to open an office in Moscow.
Twenty years later, my gamble paid off and we have opened a fifth office to serve the market in Russia.
The point of this recollection is to highlight the role that freight transport can play in the success or otherwise of inward investment in manufacturing and commerce into emerging markets.
Without the services of companies such as F.S. Mackenzie, Russian industry would simply not have been able to export its production nor would the growing Russian economy be able to enjoy imported products, no matter what levels of investment it enjoyed.
Smarter thinking in logistics and supply chain management is vital to make foreign direct investment work. There are so many logistics hurdles that can derail a manufacturing or business operation that can be avoided with just a little planning and the use of specialists like F.S Mackenzie with our specialist operations including customs services.
Of course I would say that but my expertise gained in over 35 years in the freight industry has been built on opening many new markets, often involving my own inward investment in emerging economies.
Transport headaches that can derail the success of inward investment can include:
∗ Customs regulations and regimes that are unfamiliar
∗ Supply chain security weaknesses
∗ The lack of suitably trained or experienced supply chain personnel
∗ Inadequate freight transport infrastructure
∗ Unfriendly legislative regimes or restrictive laws that hinder competition
More than sorting out headaches with Customs authorities, smart logistics thinking and planning can allow even the smallest region or country to compete on a level playing field with the international big boys.
The truth is that as industry and manufacturing has got smarter over recent decades, bringing MBA skills and IT investment to the assembly line, so has the logistics and supply chain industry.
One key development over recent decades has been the creation of forwarder networks. By dealing with one forwarder, a client can connect with a global network of friendly forwarders giving global coverage.
We at F.S. Mackenzie are in such a network. We are part of the Famous Pacific Shipping or FPS network of forwarders. As the name suggests, this network is especially strong in Asia but is also present in many of the other key global industrial spots.
What this means is really when we serve a market, thanks to our membership of the FPS network, the client is able to access some of the most important freight markets on the globe through our connections.
Green supply chains
I know that much inward investment in this decade goes into eco- friendly developments of manufacturing and distribution locations. In fact, it is a rare project now that does not have a green audit and is built to the highest eco-friendly standards.
Not unnaturally, people are beginning to demand the same green credentials are evident in the supply chain. The carbon footprint of distribution is now considered as relevant as the carbon footprint of manufacturing. It is becoming very common for freight forwarders to be required to pre-qualify for tenders by demonstrating their commitment and policies in regards to the environment.
At F.S. Mackenzie we don’t own the planes or vessels our clients’ cargo travels on. This means our work in greening the supply chain comes from smarter thinking. A case in point has been our work with the Ford Motor Company. Again it started in a pub!
A while ago, a senior executive of FS Mackenzie was drinking – yes, it was in a pub again, but this time in London! – with a senior executive at Ford, who told him that they had a problem with their in-house road truck fleet. They were using their own
trucks to take engines from London to Cologne in vast numbers, many of which were returning back to the UK carrying nothing but fresh German ‘luft’, but costing much in terms of fuel, man-hours and drivers’ salaries.
We immediately saw an opportunity. Why not lease us the spare space and we will move goods from Germany to the UK? This immediately ended the wasteful truck movements, wasted fuel, allowed German products to be shipped to the UK and brought a positive result to both Ford’s and our bottom- line. The opening of the FS Mackenzie Germany office, near Cologne, was a natural consequence of this.
Working with Ford like this gave us another opportunity for smarter thinking.
They were moving daily block trains from the UK to Valencia. Everyday saw 60 trailer units moved by rail. Many of these trailers, like the ones from Germany, were returned empty. Like the ones from Germany, they were hurting Ford’s bottom- line.
Our smarter solution? We found return cargo. In the summer, mainly tiles from manufacturers in the Valencia region and, in the season, onions and other products from the Valencia growers.
This was truly a win-win for the customer but on a wider stage, a win-win for the environment. The traffic we generated made use of freight movements that would otherwise have gone to waste. On the back of this initiative, we opened FSM Mackenzie Spain in Valencia.
In another case, we were asked to take clothes for a leading UK retailer to branches in Moscow using hanging garment trailers. The problem we faced was the scarcity and expense of the road trailer equipment that we required.
So we needed another solution and a smarter way to move the cargoes.
Smarter thinking by our planners lead to an oceanfreight solution, sending the garments in containers by ship via St Petersburg rather than moving them by road – across Germany, Poland, Belarus and into Russia.
We rented containers, kitted them with bars and rails which meant the customer got what they want – garments on rail saving costs on such things as packaging, cartons and ironing and also streamlined customs operations as all the our containers travelled on the same customs entry. If they had gone by truck, each truck would have needed a separate customs entry. Anyone who has dealt with Russian customs will be able to see the benefits of the ocean freight route.
By transferring from road to ocean, we solved a problem and delivered added value and win-win scenario for both the client and ourselves.
Inward job creation
Headlines about jobs created from inward investment often involve direct employment, how many jobs a factory or office development might bring. But these are not the only jobs inward investment creates.
Logistics can also bring employment to a region. Where F.S. Mackenzie has established offices – we are in 14 offices across Europe, Asia and Africa – we have taken on local staff. In Russia and the Ukraine, for example, we employ more than 120 staff members.
What this translates into is a massive investment in skills and training by us in local staff. We bring jobs as much as we bring freight into a region we serve.
End of the advert
By now, you are probably thinking this is turning into a 20 minute advert for F.S. Mackenzie. I make no apologies for highlighting the work my staff do to move freight around the world.
But I now want to turn this into an invitation.
It is very easy when trying to attract inward investment to concentrate on the showcase architectural models of glittering offices and state-of-the-art manufacturing facilities. Many also concentrate on the calibre of the local workforce or attractions of the local vicinity.
How many ever put the availability of supply chain and logistics into the equation?
Build a fine manufacturing plant without thinking about the supply chain and you might have, as the British say, a white elephant on your hands. International businesses will not locate in areas where they cannot connect to the global economy.
My invitation is straightforward.
Talk to us before you even start designing a project. Get us in right at the start and we can build supply chain connections from the beginning. Or simply make us aware of any empty freight runs that you would like to see filled with return cargoes. We will happily study each case and find a better solution.
Many talk about how the Internet has transformed supply chain management, transportation and logistics. I do not disagree with that. Amazon, for instance, would not exist without the Internet. Track and trace is now standard with even the smallest forwarder.
But every real estate agent the world over knows there is only one truism: location, location, location. This is the same for your factory as it is for your home.
Do not treat logistics activity as an add-on to the masterplan you develop for a city or a region, to be designed after the first tenant moves in. Work with us and the supply chain becomes one of the selling points of your project.
Smart logistics planning means sometimes looking at a location and thinking of the bigger picture. That is how F.S. Mackenzie is looking at the Baltic States. In themselves, they are relatively small markets but they are located in what real estate agents would call prime locations.
Take Estonia. It is a lovely country, as I am sure you’ll agree, and the presence here of the Estonian Prime Minister shows how serious the country is taking the issue of inward investment.
I can remember a time when cargo to and from Russia transited Poland. As the two countries opened up in the 1980s and 1990s, Poland saw its opportunity to become a hub for Russian traffic. The only problem with this? To get to Russia you had to transit multiple country borders, leading to potential delays.
Smarter thinking soon saw the advantages of Tallinn as a gateway to Russia. As Tallinn grew as a location, traditional thinking still saw traffic from the Far East to Russia routed via Hamburg and Rotterdam. Now, smarter thinking is bringing it directly via feeder vessels to Tallinn, rather than going via rail from Hamburg, shaving days off the transit.
I think the real estate agent looking at Tallinn now might say; location, location, location and location. This last location means where a development, city or region sits in a global network like Famous Pacific Shipping. And one of our objectives is to start a groupage consolidation service from China serving the Baltic states and Russia. We will need a local partner to start that.
Given its location as a supply chain or logistics gateway to and from Russia, I would almost say that any development here planned without thinking of the global supply chain is crazy.
We in the freight industry like consolidation points as much as we like open borders. Tallinn is one but I have also recently visited Greece and Kurdistan to scout out further business opportunities for F.S. Mackenzie. I expect to open FSM Mackenzie Greece in the near future
Let me wind up my address with a few pointers about how we in the logistics industry can boost inward investment potential.
Going back to the start of my address, I realised soon after the call that throughout the 60 years that F.S. Mackenzie has been trading, there have been many occasions when we have made significant inward investments ourselves in new and challenging markets.
We know the risks, the troubles, the headaches and the worries. We also know that inward investment, if planned and executed wisely and with a little flair, can bring rewards and success as it has in our case.
Thank you for listening and I look forward to meeting with many delegates during this conference to discuss how F.S. Mackenzie can present you with transport solutions to solve your transport problems.
And if you know a good pub in Tallinn that serves a decent pint and has a scent of business about it, let me know and I’ll be happy to buy the first round.