BUSINESSWEEK ONLINE:   Business Week ebiz
Q&A with Masatoshi Tsuru December 6, 1999 How Japan's Biggest Courier Delivers for E-Commerce Masatoshi Tsuru, logistics strategist and e-business pioneer at Yamato Transport, talks about how the Net is affecting his company Masatoshi Tsuru, general manager in charge of logistics and e-business strategy at Yamato Transport Co., Japan's largest courier firm, realized early on the importance of the Internet. He is credited with setting up Yamato's logistics outsourcing business for Japanese virtual retailers and backing e-commerce projects. Recently, he spoke about his work with Irene M. Kunii, a Business Week correspondent based in Tokyo. BW: How did you get started in logistics services? Tsuru: Four years ago, I started our logistics business. Until then, all we did was handle delivery for customers. But we were getting more and more requests for help with logistics, so we decided to set up a business. We've seen sales triple in four years, and we now have 900 clients. Many are direct-marketing firms and Internet retailers, as well as companies like Toshiba and Honda, for whom we manage the distribution of parts. Most of our Internet clients are food and drink vendors who are registered on our Web shopping site. There are 2,400 such online shops, and we provide services such as warehousing, stock inventory, packing, and delivery. BW: Don't you have competition? What do you have to offer that the others don't? Tsuru: Yes, it's becoming competitive. The other delivery companies in Japan, like Nippon Express, Sagawa Kyubin, and Seino, have started to offer similar services. Also, outsourcing companies like Hitachi Logistics are targeting the market. But there's no other company like Yamato that can offer a delivery network covering 100% of Japan. When it comes to handling small packages, we are the most comprehensive. It costs customers a bit more, and in that respect we are the price leaders setting the standard for others. BW: Please tell me more about your logistics outsourcing business. Tsuru: The logistics planning department here at headquarters consists of three people -- myself, an assistant manager, and one staff member. I have access to 20 people depending on the project. Most of the staff members are based in 36 offices in Tokyo and around Japan. They number about 10 to the office and oversee inventory and the computer logistics system. We have part-time staff who do the picking and packing and other simple tasks. One of our advantages is that we can set up our warehouses on the second and third floors of the same buildings that serve as distribution hubs for Yamato. There are 70 such hubs around Japan, and my plan is to expand operations to 60 of these hubs. It's an efficient system. Say if we get an order from one of our clients for a shipment by 7 or 8 p.m., we can start preparing packages that night and have them delivered to the door the following day. We input the data about the shipment into our computer system, so the client can check on the status at any time. Also, if one of their customers wants to inquire about delivery, they can call our customer service or access our Internet tracking service to inquire about the status of the goods they've ordered. We offer cash on delivery and collect payment on behalf of our client firms. When our staff deliver a package, the information is recorded on a handy terminal that is linked to our central computer system. So all the information about proof of delivery and payment goes into the system where it is processed. It's then sent to our clients either in the form of paper or over the Internet, whatever they prefer. BW: Can you name some of your e-commerce clients? Tsuru: We service companies like Softbank, convenience-store chains like 7-Eleven and Lawson, and Pandasic, a joint venture between Intel and SAP. There are many small, regional food establishments as well. BW: Do you have any plans to go into e-commerce yourself? Tsuru: We're selling computer and office supplies through direct marketing, but we're not going to expand much beyond this. That's because we don't want our clients regarding us as competitors. BW: How big is Japan's consumer e-commerce market? Tsuru: It's very small. This is still the early adoption period in Japan, and most of the e-business is handled by large companies. Venture businesses are at the center of the online shopping boom in the U.S., but it's not the case here. Companies like Sony, Japan Victor, Matsushita Electric, Lawson, 7-Eleven, and Softbank dominate the market in Japan. BW: Why is Japan lagging behind? Tsuru: Japanese consumers are concerned about doing business with small retailers. They've read stories in newspapers and magazines about fraud and security leaks on the Internet. So they're very reluctant to part with credit-card information over the Net. They think the fax and the phone are much safer. But customers are beginning to realize how convenient the Internet is, and I think in the next year or two, the business will begin to grow quickly. The cost of telephone calls is coming down, and that will change everything. BW: How much will the Net contribute to Yamato's business? Tsuru: We have no idea. We're all ready to go, but we don't have a huge customer base yet. The company's revenue and profits are growing, so we're investing this money to prepare Internet services. Once the Net economy gets going, Yamato will be there to offer the distribution services that online firms are going to need. BW: What does an online venture have to do to hook up with Yamato's network? Tsuru: We've set up a series of data formats, the details of which we provide to our customers. All they need is a generic software program, and after inputting the data we provide them with, they will be able to link up to our logistics system. We could develop our own packaged software, but we figure that would slow us down. Everything gets outdated quickly, so we'd rather use applications that can be easily updated. BW: Yamato is known for its close attention to customer needs. But your competitors are now talking about offering 24-hour service to target cybershoppers who keep late hours. How will you respond? Tsuru: We have tie-ups with the leading convenience stores that are open 24 hours a day. So if customers would rather we leave packages at a local shop, that can be arranged. We offer delivery to the door up to between 8 a.m. and 9 p.m., within a two-hour slot that can be designated. If we extend our services, it'll add a lot to our operating costs. We have more than 2,000 offices around the country, and if all of them operated on a 24-hour basis, it would add substantially to our costs. Our main hubs are already 24 hours, but we're not sure if we want to extend that to local service centers as well. Already, about 50% of the $7 it costs to deliver a small packet in the Tokyo region goes to cost. BW: Do you have plans to expand in China, which many regard as the next big market in the region? Tsuru: We've just announced a tie-up with a Taiwanese company to create a national courier service in that country. But we don't know about China. When you cross regional boundaries in China, you're required to do a lot of paperwork. That's the legacy of the communist system. Today, each region is like a separate country. To overcome this barrier, one needs to do a joint venture with the Chinese army, the only entity that can move between regions without having to do the paperwork. They can delivery anytime, anyplace. Yamato was invited to form a joint venture with the Chinese army, and our senior executives went to China to discuss arrangements. But they haven't made any decision yet. It'll depend on how well we do in Taiwan. BW: You operate an international courier service with United Parcel Service of the U.S. How is that going? Tsuru: Thirteen years ago, I was a member of the team that negotiated with UPS to set up an international courier business. Unfortunately, the negotiations were only one way, and Yamato was unable to make many contributions. We're very good at managing and delivering small packages, but our network skills in those days were still weak. So UPS insisted that its system be adopted. Overall, though, the business has been successful, and we gained a lot of knowledge in how to handle small packets for international delivery. Most of the customers are Japanese trading houses. For consumers, it's much easier to use the postal service. There are so many rules to follow and forms to fill out for international delivery. It's very inconvenient, but it'll soon change. The Japanese government is considering easing its import law and that will mean fewer import regulations. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS BW e.biz Nov. 13, 1999: "A Trucker for the Information Highway"