TBY talks to Ingo Babrikowski, Director General of Estafeta, on the advantages of local knowledge, the increased demand for third-party logistics, and the company’s strengthening position in the market.
TBY Estafeta is currently investing heavily. In which sectors are investments being channeled?
INGO BABRIKOWSKI With the exception of 2009, we have invested in Mexico every year since the company began. On average, we invest $25 million per year, and this year we aim to increase the amount to $35 million. The majority of our investments are made in infrastructure, and we operate a fleet of trucks. We also own distribution centers, which sets us apart from the competition as well enhances our security and the quality of our services. Our image and reputation for quality has improved, owing to our company’s flexibility.
Which segments are driving demand for Estafeta’s services?
The courier segment is growing. The sectors experiencing the most demand are IT, computer parts, automobile spare parts, and textile components for clothing and shoes. In Mexico, e-commerce continues to be underdeveloped. We do not have an Amazon.com in Mexico, and we cannot order from department stores through websites. In the US and Europe, the online sector is motivating the courier business. We see this changing and having a major impact on the courier sector.
Is Estafeta outpacing its competitors?
The speed of growth is changing every year. The competition is very strong in Mexico, and much stronger here than in other Latin American countries, such as Colombia. However, 2011 went better for us than for a number of our counterparts. In 2011, we grew by 9%.
What are the main advantages of being a local company?
Our main advantage is our wide coverage—it is the broadest network in Mexico. We cover 15%-20% more postal codes than our competitors, and we can reach any location in Mexico. Another advantage is that we boast a very broad portfolio of products. Aside from our main courier services, we have entered new sectors of logistics such as warehousing and freight services. Currently, we can ship anything palletized in terms of the less-than-truckload (LTL) segment, as well as large-scale freight. Essentially, we can move everything.
Do you see the ratio of courier business changing as you develop logistics infrastructure?
The courier business comprises 80% of our sales. The rest of our sales are in airfreight, the LTL business, and warehousing. We do see the ratio shifting as LTL, freight, and warehousing register rapid growth, and the courier service continues to encounter competition. Currently in Mexico, many companies independently carry out freight and warehousing, with their own feed for distribution. Most pharmaceutical companies do not use third-party logistics (3PL) companies for warehousing and logistics; only 20% of healthcare firms choose to utilize 3PL. However, this situation has been changing over the past three or four years, and we are now observing increased demand. Companies are beginning to realize that they have more of an opportunity to excel in their core businesses when logistics are handled by a third party.
Which main industries are demanding 3PL in Mexico?
International companies mainly demand 3PL, and they understand how to contract a 3PL partner. Mexican companies have not been quick to follow this trend, because they tend to want control of the logistics process. For example, we suggested to a customer the establishment of a warehouse in a location that minimizes the distance required to transport its goods. However, the customer wanted the warehouse in the same city as the main office, in order to observe the facility firsthand. We are encouraging a cultural change that will take time to implement.
How do you characterize the US economy’s influence on Mexico?
Mexico is beginning to depend less on markets such as the US. We do enjoy a very strong connection to the US, and if the economy in the US declines, Mexico experiences large problems. During the economic crisis, Mexico was one of the most affected countries. However, this will be less and less the case. The local market is growing stronger every year, and there are industries such as e-commerce that will gain headway in the future. When individual income increases, people consume more goods. When people consume more goods, there are more movements for a courier company.
What is your ultimate vision for the company?
I firmly believe that we can strengthen our position in the market. Locally, we can act faster than the competition. Internationally, I feel there is room for growth. In the courier segment, it is not possible to compete internationally, but in freight we can perform better than UPS or FedEx. We can be faster and cheaper by moving the goods directly.
For international freight from China, Japan, or Europe, freight can travel directly to Mexico. In some recent bids, we have recognized our great advantage in this respect. We can be more flexible, faster, cheaper, and better in quality than the large companies. We can grow the international segment of our company, as well as our freight and warehousing activities. These new initiatives will secure larger revenues in the future.
© The Business Year