CEO Ed Feitzinger reveals how UTi’s recent decentralisation aims to offer a personalised, five-star service to customers in both forwarding and contract logistics
Ed Feitzinger’s 15th floor office at UTi’s headquarters looks out toward the mouth of the Los Angeles River and the edge of the port of Long Beach. In recent months, what should be a bustling scene of cranes lifting containers and ships moving in and out of the harbour had become something of a watery still life.In February, at least a dozen or more ships floated eerily still following labour disputes that slowed handling to a crawl. One of Feitzinger’s morning hobbies became counting the moored ships in the port (though not all visible from his window, the official count reached as high as 40).
Although a deal was eventually struck, the disruptions have continued to cause headaches for many in the logistics chain, with material stuck on ships or in the port yard. Japanese carmakers like Toyota, Honda and Subaru have spent millions flying critical parts from Asia to North American plants and dealers.
For Feitzinger, the ship congestion has been a reminder of the complexities of the freight forwarding business, one of UTi’s two main divisions together with contract logistics, and one which he reorganised shortly after becoming chief executive officer in December 2014. In recent years, the division’s revenue had been stagnant and its profits falling, even as contract logistics grew at a healthy pace. To fix the forwarding business, Feitzinger not only had to cut jobs and costs; he may need to avoid trade on some of those very ships trying to get to Long Beach, where the main business is based more on price than service.
“We are not looking to compete on getting capacity between Shanghai and Long Beach, or Dubai and Heathrow, where Emirates flies something like 30 wide bodies every day,” says Feitzinger. “Getting capacity for trades like that is not a problem.”
Until, of course, a crisis like the one at the US west coast port makes it a problem. In that case, finding ways of moving cargo at ports would be the kind of niche service UTi should be able to provide customers, especially those with which it has close relationships, such as in the automotive sector. It is precisely these specialised services, whether providing security, customs clearance or reliable trucking, that Feitzinger wants the company to rediscover.
For several years, integrating acquisitions and running internal projects had become a distraction for UTi, he says. “In forwarding, you can’t pretend to be big. You can be big, generic and omnipresent, but with less focus on individual customers. Or you can be a small, niche player that can get intimate with clients in the way the bigger guys can’t.
But you don’t want to get caught in between. We may have erred on the side of trying to be a big guy, while our roots are really in client intimacy,” he admits.
The automotive industry offers many of the ‘specialised’ trade lanes on which UTi hopes to focus more. For example, UTi is one of General Motors’ biggest freight forwarders, delivering a large amount of critical material out of Asia Pacific and China, says Jens Möller, senior vice-president for automotive. Feitzinger also points to the expertise involved in moving parts out of Thailand during the monsoon season, or exporting wire harnesses from Egypt at times when almost no diesel fuel was available. “We are positioning ourselves to handle more of these unique lanes,” he says.
Going local in service, global in negotiating
Previously, forwarding at UTi was divided between four large regions, with business functions collected beneath each regional head, while the corporate office handled other key operations, including the rollout of a new global IT system called ‘1view’. Feitzinger eliminated those four regions as business units and subdivided them into around 16 areas under one global organisation. While the forwarding division reports directly to Feitzinger, more of the business is in a single organisation than before, including responsibility for sales, human resources and operations (such as the 1view system), managed across 187 branch offices.
“A lot of the day-to-day forwarding business used to come into this office,” says Feitzinger. “That slowed things down because it is hard to be involved with investors and clients on the one side, then get into the features of complex IT and operational systems.”
Devolving this power is critical, says Feitzinger, because so much about good forwarding is local, especially for landside operations such as port handling and trucking.
"In forwarding... you can be big, generic and omnipresent, but with less focus on individual customers. Or you can be a small, niche player that can get intimate with clients. But you don’t want to get caught in between"- Ed Feitzinger, UTi
“One of the jokes is that shipping lines are like seals: great in the water, bad on land,” he says. “When you have landside challenges, especially in markets like Zambia or Nicaragua, you need boots on the ground.”
At the same time, economies of scale and global business interactions remain essential. Local branches may be able to make better operational decisions than a corporate office when it comes to getting material out of a port, or securing trucks over a border, but they are unlikely to influence a shipping line’s decision on ports of call, or on settling disputes over fuel adjustments (which has emerged as a recent issue with airlines). Feitzinger believes that eliminating the four-region structure allows UTi to act as a global organisation in a way it couldn’t before.
Take the ships outside Feitzinger’s window. Without a powerful, corporate relationship with shipping lines – or airlines for expedited freight – it would be hard to gain priority. “At the moment [the port dispute] is a disaster all around, but the less pull you have with the steamship lines, the harder it is to get anything done and compete,” he says.
Feitzinger wants to ensure the company builds global relationships with key customers in contract logistics as well as forwarding. While he has kept the company’s industry vertical approach, the three largest sectors – automotive, pharmaceuticals, and energy/mining/projects – now report directly to the CEO, whereas previously they sat under the head of sales. This alignment is meant to put the company’s most significant customers closer to top management, while ensuring they have a global view of procurement.
“We have a few clients, the majority of them in automotive, who are buying freight but also other services truly globally, and so having the automotive vertical report to the CEO is a unique benefit,” says Möller. “These clients want to be treated globally, and they want to see consistency on both the forwarding and contract logistics sides.”
The Hyatt of warehousing
To some extent, decentralising the company is intended to mimic strengths in contract logistics. These operations for UTi are at once locally focused in specific plant or warehouse networks, but based on global standards across a variety of established and emerging markets, from South Africa and Spain to India, Thailand, Brazil and Egypt.
UTi started striving for this consistency following a global project several years ago in which the company audited its facilities using a checklist of around 200 items. Feitzinger likened it to a five-star hotel approach, where clients expect the same level of service, cleanliness and values globally.
As a result, the majority of warehouses across UTi’s network comply with its global standards, even in developing markets like India, where maintaining quality and consistency can be tough. “That has been really well received by companies like Ford and Volkswagen, where they can get the same touch and feel of a facility as they might expect in a European or American environment,” says Möller.
For Feitzinger, the goal has been to make UTi something like the ‘Hyatt’ of warehousing (he recognises that few customers are willing to pay for the ‘Four Seasons’). Meanwhile, the companies who would rather go with the cheaper, local option – bed bugs and all – are not the clients for UTi. “There are local players that are great, and we aim to compete in all local markets, but we will provide the right experience and for those who are not interested, it is a ‘buyer beware’ scenario.”
This ability to replicate services in contract logistics is a trait that Feitzinger would like to develop more for UTi’s freight forwarding business as well. While most air or ocean services are already global or at least international, it can be hard to define a unified approach, especially across 187 forwarding branches in many different countries. However, an important standard has been set with 1view, which was largely the work of Feitzinger’s predecessor, Eric Kirchner. The system is live in around 85% of the countries that UTi covers, with 97% of its business transactions touching the system for either purchases or payments.
The company can now collect common data on payments, costs, freight visibility and other metrics. It is currently running competitions of such KPIs among its branches, with the top performers getting prizes, and those lower on the list subject to further investigation.
The new organisation has only been in place since January, however Feitzinger points to enthusiasm across UTi globally, from managers in local regions to the sales teams.
“We are back close to the clients and the teams are excited to get to work without interference from the centre,” he says. “We are in many ways returning to our core values, but with our systems and networks now in place, this is a more modern version of the old UTi.”
A new partnership in China with Beijing Changjiu, an established provider of finished vehicle and aftermarket distribution in China, could also open up opportunities for trade within the country and across its borders. The companies have agreed to explore opportunities for new business over the next year, before possibly forming a joint venture.
Ed Feitzinger acknowledges that while UTi had a strength in forwarding, its business with contract logistics in China was focused on select clusters along the coast. Working with Changjiu is a way of gaining scale without having to swallow a much larger company. “Nothing about our contract logistics business in China today says that we are going to be a $1 billion company in ten years,” he says. “With Changjiu, that is more possible.”
UTi is also looking at investments and expansion in Mexico. The company has recently invested in a site in the Bajio, while an earlier acquisition gave it certified ‘Maquila’ status, which means it can process imported components from the US and other parts of the world, then re-export them without tax. The company has also purchased a small customs broker to augment its
cross-border operations.
“Our trucking business in the US is starting to move across the border, whereas traditionally it had been more US-focused,” says Feitzinger. “US-Mexico flows are going to be critical for investment in both forwarding and contract logistics.”
Africa remains an important area for UTi, with its historic strength in South Africa – which Möller refers to as the company’s “growth laboratory”. “We do a lot of our training there and it is the basis for many of our services,” he says.
While South Africa has struggled with labour disputes and supply disruption, some have pointed to potential in Nigeria for production and sales. However, while UTi is supporting business in the region, Feitzinger feels high rates of corruption and low transparency in east Africa are holding back growth in the region.
Ultimately, while UTi is constantly looking at new markets – including opening a new branch office in Malaysia this year – Feitzinger believes that political stability and a lack of corruption are vital to the automotive supply chain, and in that sense South Africa retains an advantage over its neighbours.
Likewise, Feitzinger, points to the government crackdown on corruption in China, which he feels has been somewhat under reported in the West. The result could be to the benefit of companies committed to transparent business practices. “It is having a big impact, and a lot of people in China are spooked. It’s an interesting trend and it could be important, especially if it draws more people to companies like ours in China.”
