Irish Express Cargo profits by moving into virtual freight market through e-commerce

While freight forwarding was once simply a delivery business, the advent of e-commerce means that Irish freight companies are moving into providing a physical infrastructure for a virtual market.

One such company is Irish Express Cargo (IEC) whose managing director, Mr Finn O'Sullivan, said that the company saw the need for a new focus as the nature of their business changed. They decided to look at adding value along the supply chain as customer demands grew in tandem with developments in technology and the rise in the use of the Internet.

The company now covers everything from setting up and running call centres for clients, to handling accessories for computer manufacturers and even laser printing keyboards in different languages to meet demand in different countries as it arises.

However, another major development has been a pan-European contract which it has with Hewlett-Packard to handle the product logistics for HewlettPackard's e-commerce European Shopping Village for consumers.

The village is a sales site for Hewlett's computer products and has been very successful for the company in the US, where it now has Internet sales of $35 billion (€36.33 billion) per year. This figure is expect to rise to $100 billion a year by 2005. If successful in Europe, the company expect sales to follow a broadly similar path.

Mr O'Sullivan said that the value of the contract to IEC is unquantifiable at present because it depends solely on the success of the Hewlett-Packard site.

However, he said IEC's success has been based on adding value all through the supply chain and providing key information to its clients about the flow of their goods from the manufacturing to supply and consumption stage.

Hewlett-Packard is also preparing to launch a business to business website in Britain this month. IEC will handle the logistics of the site, based on the existing e-commerce village model.

By taking partners in different countries and concentrating on managing the flow of products, IEC has become the largest provider of supply chain management in Europe.

The company has grown by 50 per cent each year for the last three years and it now claims to employ up to 2,600 people in the Republic, Europe and North America. Such is the nature of the current marketplace and the unpredictability of the technology sector, Mr O'Sullivan said that even though such companies always make forecasts, they are rarely right. With this in mind IEC works only on the last 15 days' demand - holding only 15 days supply of products at any one time.

The company wants to expand further in the United States. It has just won two additional contracts there worth £10 million and £17 million. The contract involves handling accessories and other services for Hewlett Packard.

Demand from consumers for companies' products varies wildly even from week to week. What IEC offer to clients such as Dell, Gateway, Compaq and Hewlett-Pacard is a system where they can see at any time what is happening with the products they ordered or supplied, the demand for the products, the numbers being manufactured anywhere in the world.

Mr O'Sullivan said that although many freight companies are concentrating on distribution solely, IEC is focusing on managing this and linking with partners around the world to handle the actual delivery.

When you access a technology company's website and place an order online, you don't see is what is behind the website - the technological and physical infrastructure which enables you to receive your order in a few days.

As technology changes, it makes products more time-sensitive and so time taken to bring the goods to the market becomes even more important according to Mr Barry O'Dowd, project manager at IEC.

He said that "postponement" is becoming a key word in the industry and IEC is taking advantage of these last minute demands by moving into semi-manufacturing.

For example, IEC allows its customers to supply customised generic servers which IEC then holds in the system and at the last minute installs the software, numbers of drives and configuration required by a vendor or client.

The advantage of IEC's system is that it reduces inventory to a minimum and avoids fully finished products being outdated by new technology and made redundant, while allowing companies themselves to focus on their core activities.

IEC's revenues have grown from £90 million in 1997, to £124 million in 1998 and £170 million last year. Mr O'Sullivan and his wife hold a majority share in the company (50 per cent) and a private investment company owns 20 per cent. IEC's managing director for Ireland, Mr Jerry Tyrrell holds 17 per cent.

The company is examining different options to finance the investment which will be needed for further expansion but says it will not be going public in the near future.

Mr O'Sullivan said that IEC didn't see itself moving into the retail side of things, but may move into video and CD delivery for Internet companies while remaining in its main market of telecommunications, technology and networking.