What do you do if you have a problem and you can't find anyone to solve it? Solve it yourself.
That's exactly how Alexander Meerovitsch, managing director of Time Grand, sorted his logistics troubles. The founder of a watch business that supplies parts for Swiss-made watches and then distributes the end products globally was getting clobbered by transportation costs last year -- at a time when the financial crisis meant there were dozens of ships, trucks and aircraft sitting idle or half-empty. But when Meerovitsch tried to negotiate with the heavy-hitters in the industry, prices remained as high as they were during the boom years.
Given the downturn, he had to cut costs, and reducing logistics expenses seemed a better idea than retrenching staff or cutting wages, which of course was a solution for many companies last year.
So in April 2009 Meerovitsch went into the logistics business, taking advantage of the freed-up cargo space. He solved his problem and also offered to help out other chief financial officers of small and mid-size companies looking to lower their overall costs. In its first eight months his new company, Thrift Logistics, has nearly trebled its staff and had a turnover of more than $1 million.
Cost cutting
"If you look at the majors, their business model is to be fully integrated, which means they have a lot of costs -- owning planes isn't inexpensive," said Meerovitsch. "I figured I didn't need those costs as a simple definition of a logistics company is a travel agent for goods." Meerovitsch pointed out that most travel agents don't own the planes and taxis and hotels; instead they are typically middlemen who find the best fit for a vacationer. He does the same for cargo.
"I figured that in this economic climate it didn't make sense to have all the bits-and-bobs of a logistics business because we can navigate better rates with several airlines and shipping companies. If you build up the relationships during the downturn, they will be there for you when business bounces back for others as well."
His other service -- borne out of the frustration of talking to logistics-providers' employees who didn't care one way or another if he used or liked their options -- was to be more customer friendly and solutions oriented.
"Logistics companies have been brainwashed by how logistics has traditionally been offered," said Meerovitsch. "I decided to offer boutique services."
To ensure that his own company doesn't become precisely what he didn't like in others, he limits his sales team to a maximum of five customers. And Thrift Logistics' services include not only transporting but also assisting foreign companies that are entering the Hong Kong and China markets navigate the mass of paperwork -- from insurance advice to offering contacts. For example, Thrift Logistics recently worked with a Canadian coffee bean company to set up distribution points in Hong Kong.
"This is what we mean by boutique, personalised service," said Meerovitsch. "We find out how we can best serve our clients and then make it happen."
That also means Thrift Logistics is more flexible about payment. Clients can even use their credit cards to pay for their logistics.
Lessons for others
"When I found myself doing due diligence and research on behalf of the logistics companies I was paying to offer me logistics, I knew something was wrong," said Meerovitsch.
And that's when he decided he was better off hiring the experts himself and keeping the business internal rather than paying another company to offer solutions he wasn't happy with and found too expensive. As Meerovitsch said: "Sometimes opportunities offer themselves to you -- often during difficult times -- and you just have to take those opportunities."
This story was first published in the March 2010 issue of FinanceAsia magazine.
