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Risk management and cost focus

Before the global economic crisis, growth rates in the transport sector appeared fine; however those times are long gone, confirmed Jens Bjørn Andersen, CEO of global transport and logistics company DSV, at PA Consulting Group’s Executive Seminar on 21 November. It is clear that the transport industry is closely connected to the global state of the market.

Today, Jens does not regard the management of DSV as ‘crisis management’. Indeed, the lessons learned from the economic crisis have been embedded across the company, and tight risk and cost management have become business as usual.

“We don’t use the term ‘crisis’ anymore; however the market and our industry have changed markedly, since the prosperous years leading up to 2008,” said Jens.

PA’s IT and logistics expert Søren Lehn explained how the transport sector accounts for 9 per cent of global GDP, yet it still faces major challenges in each sector such as road, railway, air freight and sea freight. For example, said Søren, the increase in online trading is a challenge to B2B, while road pricing challenges pricing policies. Moreover, the new railway from Europe to China will change traditional transport patterns. According to Søren, the growth rates of the transport industry are influenced by the global state of the market; and we can see that transport costs are under pressure and today’s growth markets are primarily in Latin America, Africa and parts of Asia.

Today DSV employs 22,000 people, despite the significant dip in demand for transport after the crisis began. Today DSV’s share price is about DKK 160 (the highest ever), the company is the sixth largest in the global market and has won market shares across all sectors.

Asset light

According to Jens Bjørn Andersen, DSV’s success is due to a number of factors, including a very tight cost control, which resulted in the layoff of 5,000 employees in 2008 and 2009.

“It was necessary to protect the company and the remaining employees. Had we not taken any action, we wouldn’t have become competitive. We were consistent,” said Jens.

DSV’s focus on costs and productivity means that the business has centralised parts of its administrative functions in Poland. One reason that DSV survived the crisis is, according to Jens, the fact that the company is ‘asset light’ – for example subcontractors own the transport vehicles that are operated by DSV. Another reason is consolidation. The transport industry is highly fragmented and acquisitions have become part of DSV’s strategy, both in markets where DSV is already present as well as in new markets.

 

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