‘New Technologies Have Aided Courier Logistics Business’

12 Oct 2012

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Abimbola Akosile and Ebere Nwiro spoke with the Managing Director of Red Star Express, Alhaji Sule Umar Bichi, on the gains and challenges of courier logistics business in Nigeria and the firm’s 20th anniversary, among other things. Excerpts:

Can you give us a brief history of Red Star Express?
Red Star express started operation on Oct 12, 1992, and this year makes it 20 years. It started from a humble beginning with a share capital of d company with N3 million and made a revenue of N5 billion in the first year. It also changed from private to a public quoted company.

With less than 30 shareholders when we went public, we now have over 5,000 shareholders as of today. With a little above 100 customers in the first month, we now have over 5,000 customers apart from the ones that walk in. We have presence in every state and the Federal capital territory, Abuja and so many urban centres, not necessarily the capital cities. We offer services to more than 5,000 communities in the country.

What is your contribution so far to your environment and the society in terms of your CSR initiatives as you celebrate 20 years?
Initially, we donate to homes intermittently but in 2004 the company started a foundation called Red Star Foundation which is solely focused on rendering corporate social responsibilities on behalf of the company. The foundation offers scholarship to indigent students in secondary schools particularly where we operate.

Our headquarters is in Oshodi/Isolo Local Government, so we started our scholarship scheme from that area. The foundation has its own funding, from the staff and from the company. Apart from Oshodi/Isolo in Lagos state, we offer similar scholarship in Kano and Rivers states and some other places like the Bonny Island communities are beneficiaries of the scholarship.
We also have schemes where we take assistance to Motherless babies and Old People's homes in Lagos, Kano, Ibadan, Rivers. We identify these homes that we take periodically some donations. These are the kind of corporate social responsibilities we have established on the permanent basis.

Red Star recently announced 'Let's Make A Difference' as the theme for its annual charity initiative, what is the objective?
We have it on a permanent basis. It is a way of giving back to the society and it is not limited a one-off thing. We started it since the foundation began, but prior to that we do our charity work intermittently, because we gain a lot of benefits from the society.
So as a way of giving back to the society and being socially responsible we do all these things, and to that extent we urged the Board and shareholders to give a portion of their money into that cause.

Can you mention some notable achievements by Red Star Express in the last 20 years?
The company has come a long way, from the humble beginning, through thick and thin, the teething problems and to the level of stabilisation and growth. When we started, we started with a big difference; we came to the market with a big bang in a robust way, to offer services that hitherto people thought could only be made available by international organisations.

At the beginning we didn't have enough capital, we started with only N3 million, we borrowed a lot of money. Unfortunately we started at a time when the financial sector was also very turbulent. When we started we borrowed a lot of money, big money because we came with a big bang.

We bought more than 40 four-wheel drive vehicles, 40 two-wheel drive vehicles and rented all over the country, matching the spread the old established courier companies had. Because of the financial situation of that period, inflation went up, interest rated sky-rocketed at the time interest rate was well over 60 per cent. The interest charges became too heavy for the company to bear and it touched on the capability.
We had a lot of financial issues, at that time. For the first two to three years we didn't make any profit but we survived. After that the company was recapitalised and more resources were brought in, structures were made, and then the company stabilised and we started making profit. Since we started making profit far back in 1996, we have been posting profit consistently up till date.

We started paying dividend in 2007 and we have been paying dividend ever since. Red Star Express has had four Managing Directors, the founding Managing Director, Mazi Sunny Allison, he is still on our board, after him there was Tonye Ofuani; may his soul rest in peace. We had Isaac Orolugbagbe who became the Managing Director in 1997 and was there for 10 years.
He laid a lot of structures in place for the growth of the company. I became the Managing Director in 2007 and have been there ever since. We have diversified our services from just the courier services into logistics; that is heavy weight trucking, warehousing and inventory management.

We have established three other subsidiaries, i.e. Logistics, Freight and Support Services, Red Star freight handles clearing and forwarding for international shipments. We have the Support Service which handles internal mail management of organisations and offer some outsource services as well. So far, so good we have been making progress.

Looking back in retrospect over the last 20 years, will you say Red Star has achieved its target?
Visions keep changing and shifting. It is a journey not a destination the objective of Red Star Express. We want to be able to tell our grandchildren at old age that we worked in that company. When we started, the objective was we wanted to be a courier company, an innovative courier company with the objective of being number three in 3 years.

That was the objective of the forefathers who started the courier company and Red Star Express became number three in less than a year; that aspect was achieved. But over time we have looked back and looked at our services. We have had series of strategy session to articulate what the vision and mission of the company were.

We had one in 1997, we had another one in 2003 which we tagged "Vision 2008". In 2010 we had another strategy session to review our vision and mission. At present we want to be a logistics service of first choice known for global best practices. Logistics is very wide not just the courier, it involves so many others. That is why to have achieved that, we have started diversifying and bundling the company into subsidiaries and each segment of the subsidiaries is a wide segment, it is a journey and we are making progress.

Red Star is one of the few organisations that has a special programme to celebrate trade partners annually, in what way has the gesture impacted on the brand?
When we started as a brand we gave the public a choice, I remember at that time the companies that were prominent were the internationals, fortunately the founding fathers also came out of the multinationals to set up a Nigerian company.

Along the line we realised for us to go global we have to partner people, we partnered initially with one company RSE in London, but we didn't have long history with the company. We started late 1992 but by the mid-1993, the journey was already shaky, so we couldn't continue. We have partnered also with some other foreign companies but the most prominent one which our vision and mission become more compatible is FedEx, Federal Express.

FedEx is company that is headquartered in the United States but it is a global company, it is present in more than 200 companies. Some are directly serviced, some are done through licensee arrangement, of which Red Star Express is a licensee of that arrangement. We started our activities in December 1994 and that makes about 18 years or so relationship.
With that we are working with a global brand which is working with our company also, Red Star Express. Because of the long history we are known as FedEx in Nigeria, wherever you hear FedEx it is our company, but the local indigenous company is Red Star Express. We are working to service the customer together.

That working relationship gives the customer the best option we have today, because Red Star Express has most extensive domestic networks in Nigeria and FedEx has the most robust global network, which means the sum of the two gives the customer the best option.

Over the years, your company has maintained a working relationship with FedEx, a global brand, can you please review the gains and shortcomings of the alliance?

We have a lot of plus, in fact it is all plus, as a big brother FedEx that is present globally has tremendous capacity to service the customer with the highest quality services globally. It started in United States and entire North America, South America, Europe, Asia, Africa, Australia, all over the world.

FedEx is present in more than 200 countries and has the largest air fleet with over 750 aircraft, all dedicated to delivering services. They are not passenger aircraft, they are cargo; they are all carrying goods and shipments from one location to the other.
Our association with them gives us also access to global best practices, trainings that we go and see how it is done and we come back to Nigeria and deliver. So there is a symbiotic relationship that is beneficial to us, to FedEx and to the customers in Nigeria and customers of FedEx outside Nigeria. It is all plus.

Many believe the advent of new technologies, social media, cashless policy, and GSM will affect courier industry negatively. In the years ahead, how do you tend to manage this?
The advent of new technologies will aid our service; it is going to add to our business. Fax, GSM, Internet will no doubt take away some of the communications, for instance those days when young people send love letters to their love ones, all those ones can be taken care of by text messages, emails, and what have you.

But it opens another vista opportunity for courier logistic companies in the area of eCommerce. One can look at a gadget on the net, sample it and order for it in the United States, Europe or Asia and you will expect somebody to bring to you.
Technology has given the opportunity for people to cross barriers and then access global markets. The courier logistic companies are now the go-betweens, they are the ones that will pick it and deliver. If an order is placed on internet, the website is linked to the courier logistics service.

Once the order is placed the courier company is alerted where to pick and deliver the package, with this we see volumes coming in. We don't wait for letters now, letters have been taken over. But even then personal documents still move a lot, because there are some important documents that need to be passed across, sometimes financial instruments, legal instruments, and commercial documents, move a lot.

What is your comment on the bid for NIPOST?
When we talk about the public service provider, it is something that government is looking at, there have been efforts all over on how to reform and various terms to be used. We are still waiting to see how it will unfold.
I remember as far as back as 2004, there were efforts to have a Postal Act inaugurated, but we have not been to come up with a Postal Act up till now, despite a lot of inputs from the public, from the private sector, NIPOST, from every other consultant and what have you.
We have gone to the National Assembly. At a point, there was a public hearing on the Postal Act but up till now it has not been concluded. Society has been changing and business environment has been changing, opportunities have been coming up.

Till date, foreign companies are still the market leaders in the courier sub-sector of the economy, do you foresee a time when local organisations will be slugging it out with the so-called big operators?
FedEx is a global company and it is here in Nigeria through us. You find DHL, UPS, TNT, and so many others that are within Nigeria. But we also have Nigerian companies, so many of them; as at last count we have over 250 courier companies registered in Nigeria under the courier regulatory department of NIPOST, and all these apart from the few we just mentioned are all Nigerians.

They are indigenous companies and each one is working to grow like Red Star Express is working to grow. We have association with the global companies because we want to have global reach. Companies are making alliances all over the world, no company is single, even the global companies you find them having one association with other, the way FedEx is having association with Red Star to have Nigeria reach.

That is how also others are doing. Red Star Express within the FedEx network is already reaching out to other places, in West Africa you find FedEx servicing other countries like Ghana, Sierra Leone, Togo, Ivory Coast, Benin Republic along the West African coast with different licensees, we call them GSP - Global Service Participants and we work together with them.
We are working that gradually and through our network with FedEx and other associates we are reaching out, we are growing and the objective, as I keep emphasising, is to be a one-stop logistics service provider known for global best practices.

Bio Data of Sule Bichi
Sule Umar Bichi joined Red Star Express in 1998 as Head of Finance, Assistant General Manager, Finance, went through General Manager, to Executive Director, Finance and Planning, Deputy Managing Director, eventually became the Managing Director.

Prior to that, he had worked with Board of Internal Revenue, Kano State in 1988. He came to Lagos in 1988 and join UAC Nigeria, after that he worked with Icon Limited Merchant Bankers, and the Comet Merchant Bank, where he was the pioneer staff.

Bichi worked in the banking industry for about nine and a half years before coming to Red Star Express. He obtained a Bsc in Accounting and became a chartered accountant about 21 years ago. He is a fellow of the Institute of Chartered Accountants of Nigeria and also an Alumnus of Lagos Business School, Pan Africa University. He is a member of Institute of Directors.

Tags: Business, Nigeria, Courier, Dredging, Featured, Logistics, Technology

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