Mainfreight develops major logistics operation

By Graeme Kennedy

Friday 17th March 2000

CREATING SIZE AND NETWORK: Mainfreight chief executive Bruce Plested

Auckland-based Mainfreight becomes a major Australian freight company from April 1 with the $A9.4 million purchase of Australia's second-biggest door-to-door transport operator K and S Express.

The acquisition from parent K and S Corporation lifts Mainfreight's existing $A10 million Australian operation to almost $A80 million to make it one of the leading supply chain players in the Australasian market. Its domestic New Zealand turnover is around $300 million.

K and S Express will be re-branded as Mainfreight Australia, a company with almost 200 vehicles and eight distribution terminals across five states.

Mainfreight managing director Bruce Plested said the merger provided the size vital for success with the bigger customers in the larger Australian less-than-container-load (LCL) market.

"We have struggled to break into the business with those bigger customers since we moved into Australia with an interstate freight operation similar to our New Zealand model in 1989," Mr Plested said.

"The business has been difficult to grow and we haven't made the progress in the Australian domestic market we had hoped.

"You've got to have the size and network and employ Australians to get the respect of the bigger companies. Without the size and the volumes, the services you can offer are restricted with a smaller network. They want to see size and network to give them confidence in the operation.

"K and S Express gives us just that in the Australian LCL market."

Mr Plested said K and S Express was "a good company but a bit neglected" by its direct owner K and S Freighters whose core business was the full truck lot (FTL) market. Express, he said, grew from K and S Freighters' need to supply customers with an LCL service.

"They do FTL very well but LCL didn't suit them - they didn't understand that business the way we do and they neglected it because it wasn't their core.

"Selling Express was a strategic move to get benefits to their business from an association with Mainfreight and our international services including transtasman and a New Zealand link they didn't have before.

"Meanwhile we have established a strategic partnership with a very large Australian transport operator, giving us the ability and network to do door-to-door freight around Australia."

The K and S Express deal was Mainfreight's second international acquisition in the past 12 months after taking a shareholding in $US50 million freight company CaroTrans, its US agents since 1985, with management and European forwarder Zeigler.

The purchase gives Mainfreight access to the vast US market and branches in all major US cities while the Zeigler connection provides similar representation in Europe.

Mr Plested said Mainfreight's previous association with CaroTrans, a subsidiary of large US domestic trucking company Carolina Freight Carriers, had given the company access to the latest computer tracking and other systems which it introduced to New Zealand during the 1980s.

After forming its own international operation in 1983, Mainfreight in the late 1990s bought 75% of the Australasian division of LEP International, the worldwide air and sea freight forwarder with branches in 480 cities.

In New Zealand, Mainfreight's branded blue trucks pick up and deliver at 320 destinations every day - "and that's where we're headed in Australia," he said.

Mr Plested and partner Howard Smith started Mainfreight in 1978 as an inter-city freight company, mainly shifting cargoes between the North and South Islands on the Coastal Trader - shipping, outside the land transport regulations, was then exempt from restrictions limiting road freight carriage to just 150km to protect the railways, a practice which continued until 1985.

"But, as we have struggled in Australia due to lack of size, we struggled here until we bought Mogul from the Owens Group in 1987. That purchase doubled our size from $25 million to $50 million turnover and in 1994 we doubled again with the Freightways acquisition, from $54 million to $100 million," he said.

"Both those companies were in a distressed state, due mainly to a failure to adjust to the deregulated market, so we didn't pay much for them. They enabled us to twice double our size and both times successfully integrate the acquisitions into our own company."

Mr Plested said Freightways was the biggest LCL operation in New Zealand as well as being involved in wharf cartage, metropolitan delivery and international freight.

"We have taken Mainfreight to become a major supply chain player in Australasia with a beach-head in the US. We have grown the company into a more sophisticated transport and logistics business than our competitors have," he said.

"We are trying to get across that we are no longer just a trucking company but a logistics specialist providing services right along the supply chain - and will be even more so with the K and S Express purchase.

"We originally handled the manufacturing to warehouse section of the supply chain but now, with 800,000sq ft of warehouse space and sophisticated storage and tracking methods, we manage the lot - from raw materials, through manufacturing and distribution right to the retail shelf."

Mr Plested said the growing e-commerce phenomenon still needed the hardware of an efficient supply chain behind it and Mainfreight had developed systems to provide full support for business on the net.

"We will continue to tweak what we do and become even more valuable to the e.com world and with the supply chain hardware in place, we can take full advantage of these new opportunities," he said.

* Forbes Global magazine last year named Mainfreight as one of the world's best 300 small companies.

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