Moving companies expand services to draw customers
The nation’s major freight-forwarders are diversifying in an effort to gain an edge in the competitive industry.
Two dozen local and multi‑national firms are fighting for market share while expanding the range of their services to woo an as‑yet underdeveloped customer base. Freight forwarders now typically divide their work between the distribution of goods around the country, importing, exporting and customs clearance, as well as personnel relocation and moving services.
On moving on
One of the most prominent freight‑forwarders is Interdean Interconex Ukraine. In operation since 1997, the company devotes approximately 75 percent of its activity to corporate‑relocation services – a position that General Manager Ihor Marchuk says provides insight into the state of the economy. While many industries have rebounded to exceed levels reached before the 1998 financial crisis, Marchuk said he isn’t sure whether his business had.
“We bring in the top managers but, since there’s been little foreign investment, there are no people coming here to work,” he said. “I think that’s really a bad sign not only for us but for the economy, too, since one thing really depends on the other.”
The result, Marchuk said, is a tenuous stability in the freight‑forwarding and moving business, as companies like Interdean Interconex look to expand their reach across Ukraine and to broaden the services they offer. The recent additions include providing interpreters and city‑guide support.
“We have diversified our portfolio of services here quite a bit in order to grow and in order to keep up, provide something interesting, in the moving world,” Marchuk said.
“Part of our relocation business is now concerned with helping people integrate faster and more effectively into the environment; and that includes much more than simply transporting their belongings here.”
Interestingly, Marchuk said another new trend in the industry is that corporate relocations are beginning to include an increasing number of Ukrainian citizens going to work abroad or returning from assignments outside the country. Oleksandr Pakharenko, general manager at Kimet Plus, a freight forwarder, said his company, with headquarters in Kyiv and an office in Minsk, is also eyeing a bigger share of the local customer‑base – currently measured at about 10 percent of the company’s business.
“We’re looking to offer more service to Ukrainians who can’t afford the rates asked by other companies; while maintaining European standards,” Pakharenko said.
Due to a number of variables, Pakharenko said it’s difficult to provide a sample of prices. Factors influencing the rates are a frequency of dealings with a particular client, a need for insurance and an agent at the point of arrival.
Natasha Fedoseykina, sales manager at the Kyiv office of the Corstjens World Movers Group, said that in the case of airfreight, movers have to divide cost estimates into two categories: the cost of removal and the airfreight charge. The latter can only be officially determined at Boryspil Airport. The pricing formula can be confusing, and has at times drawn charges of deliberate obfuscation from members of the expatriate community; an accusation Fedoseykina denied.
“Clients should understand the whole procedure,” she said. “You can imagine that in our business it’s not going to help us if we fail to make the situation clear to the client,” she said.
Fedoseykina added that while rates change each year, they tend to go down.
“Rates have gone down in general since 1997‑98,” she said. “First it’s because there was big growth in those years which has now stabilized but also because of overall competition in the market.”
Fedoseykina said Corstjens views the current market as competitive yet profitable – and with a lot of untapped potential. Pakharenko said that while the number of big players in the moving market isn’t likely to increase greatly, the range and scale of their activity in Ukraine likely will. He said some improvement in customs clearance procedures is helping.
“The situation with customs is better now: the rules are clearer and there is less bureaucracy,” he said, adding, “though the bureaucracy’s still there.”
Bureaucracy aside, Interdean Interconex is in the midst of a million‑dollar project to build two mixed‑use warehouse terminals on Kyiv’s Left Bank. In addition to serving the company’s own storage and distribution needs, the facility may also offer a range of modern freight‑forwarding services, including offices and storage space for other freight‑forwarding firms.
Fast‑forward
International Container Transport GmbH has grown significantly since it entered Ukraine in 1992. The company, which operates 16 offices throughout the country, opened a 10,000 square‑meter commercial and bonded warehouse earlier this year and continues to expand the range of its activities.
“We’re now offering the full scope of transport services, logistics supply‑chain management to the Ukrainian market, including containerized shipping, rail, airfreight, domestic and international trucking, customs clearance and a fully bonded warehouse,” said Oleksy Cherepanov, head of the ocean‑freight department. “Major multinational corporations as well as some Ukrainian customers have started outsourcing new elements of the supply chain, such as warehouse management, preparation and handling, production stock control and domestic distribution,” he said. “To be successful, the freight forwarder should be able to meet the growing demand for new services.”
Olesandr Chudochkin, transport manager at FM Logistics, said that growing competition coupled with a relatively thin customer base is responsible for the industry’s drive toward diversification and specialized services.
For FM Logistics, the trend has meant developing services like packaging and security. The services came in addition to the company’s focus on storage and freight forwarding. The firm has its own global network of warehouses and is involved in all aspects of product distribution, but does not maintain its own trucking fleet. The company uses leased vehicles to provide the packaging, documentation, distribution and security services it offers.
Offering more services means trying to please more‑demanding customers, according to Natalia Shcheglova of Ukrainian Logistics Systems.
“Today, clients are more demanding; and not simply interested in costs or express delivery but also in the reputation of the transport company and its reliability,” she said. “Each client has his own demands, which need to be taken into account when creating a specific work‑plan for each of them.”
Another freight‑forwarder trying to make a go in the volatile market is Ukrainian Distribution Logistics. Launched in 2000 as part of a two‑year project sponsored by the Dutch government, UDL is now on its own. It continues to maintain ties with two Netherlands‑based partners but is relying on the experience and contacts gained during the project phase of its development.
That can be a tall order, according to UDL representative Andry Balanyuk. On the subject of customs clearance, for instance, he said that government‑dictated procedures have become more arduous rather than more streamlined over the past several years.
“[The government] was going to introduce a new customs code in December 2002 but decided to delay it until summer,” Balanyuk said. “Meanwhile, different departments within State Customs appear to be competing with one another, and it can take twice the time to process documents than it used to.”
UDL is nevertheless pushing ahead to help introduce a novel service: part‑load trucking service from Europe. Known in the industry as combined‑cargo consolidation, the service allows clients to purchase part‑load spaces on trucks when their shipments aren’t large enough to merit renting an entire truck of their own.
“A lot of smaller companies that previously used to rent their own trucks are now looking to our services,” he said. “I can’t say the market for such services is well developed, but it is on the rise.”
Balanyuk said UDL also tries, when possible, to fill up those trucks with Ukrainian goods for the return trip to Western Europe. And that’s all the more reason, he added, for UDL’s continued exploration and development of the freight‑forwarding industry in Ukraine.
