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Saturday, 2 January 2016

Competing in a crowded market?

Competing in a crowded market isn't all bad. A crowded market shows that demand for your product or service exists and it is a viable market to be in.

So how do you not only compete but lead?

Differentiation is the key. What is greatest form of differentiation? Simple... BE THE BEST! Be so good the market can't ignore you.

Relentlessly generate fresh ideas and urgently pursue excellence in every aspect of your business. I tell my team "We get the clients we deserve". Like attracts like so if we want the best clients we have to be the best to compete.

How do you know when you are in the lead?

Having the biggest revenue, profit or market share doesn't always denote industry leadership. As companies get bigger they usually get worse.

One way you know you are leading is when competitors start copying you. I have had competitors blatantly duplicate our service offering, use unique titles we developed for roles of our team and rip off wording from our website and brochures. Our buy lines...slightly adapted... appear in their promotional material.

While on one level it frustrates my exec team and I, on another we smile as that is when we know we are leading. When competitors start reacting to us and less to their clients needs in an attempt to stay relevant and say to the market "Us too!" we know we are winning. 

They say imitation is the sincerest form of flattery but imagine the competitive benefits to clients if they developed some original ideas and instead of playing catch up, actually took their business and industry to the next level.

In one instance, company "F", has even used my name personally, my company's name and our buy line in the meta tags and URL's of pages in their website in an effort to attract internet traffic away from us. I guess desperate people do desperate things and I was pleased our lawyers swiftly dealt with that one.

Companies exist to do one thing. Serve their clients. Be the best and your market will not seem that crowded at all.

All for now,
+Brad Skelton 

Sunday, 25 October 2015

UberCargo and UberRush - The end of local courier companies?

Uber, best known for its alternative and industry disruptive taxi service, is now making waves in the road transport industry with its recent expansion into logistical services. It doesn't stop there with an "Uber Everything" project running to explore even more possibilities.

UberRush is now operational in New York, Chicago and San Francisco and will be progressively rolled out globally. UberCargo has been launched in Hong Kong which takes their road logistics one step further with an Uber-Van Delivery for quick parcel moves of odd sizes and shapes, at all hours of the day. This expansion of services cleverly utilises Ubers existing technology and crowd sourcing opportunities. These developments are brilliant for SME's as it enables them to leverage cost effective, on demand delivery to distribute their products. Learn more from this YouTube clip.

As yet large companies are not really embracing these new Uber services. Their concern is the lack of insurance and guarantees the cargo will arrive safely, or even at all. I am certain these issues can be overcome though. Even Amazon has discussed launching a service similar to UberCargo called “On My Way”, for the last leg of their shipping transport needs.
Uber's investors are excited about the potential for growth from this segment on top of current growth of 300% per annum. With revenues now exceeding USD10 billion, the current valuation of the business is approaching USD50 billion. To put Uber's revenue into perspective DHL's revenue last year was EUR14.8 or approximately USD 16.3 billion.
City by city Uber will rapidly become one the biggest local, real-time logistics providers in the current market. There’s no doubt Uber will play a fundamental role in the future of local logistics, to what extent though, we are yet to see.
One thing for sure though is that local courier transport business will soon come under as much pressure as traditional taxi companies have.
All for now,
+Brad Skelton 

Monday, 5 October 2015

Is Bigger Still Better?

In an ever growing and rapidly expanding society, where we have little room to spare in our yards at home or on the port, it seems in more recent times the saying “bigger is better” may no longer ring true.

However, whilst bigger may not always be better on shore, out to sea, this saying certainly strikes a very different chord.

Let me introduce you to Mærsk Mc-Kinney Møller, the world’s largest container ship.

Honouring the name of the late Mærsk Mc-Kinney Møller, this feat of danish design is just the first of twenty in the Triple-E Series, proving that bigger really is still better. Affectionately dubbed the blue giant of the sea, this mega vessel stands an impressive 400 metres in length, 73 metres in height and has the capacity to transport 18,000 containers (TEU). That’s no small feat. The secret to its ingenuity however is not in its dimensions, but in its design.

Although only four metres longer and three metres wider than its predecessor, the cavity of the Triple-E Series has seen a dramatic expansion. The extra space now accommodates for up to an additional 2,500 containers per haul. Not to be satisfied of just this, the new fleet of giants also emit 50% less CO2 per container moved, effectively halving its carbon footprint. This added environmental benefit is a result of “ the unique hull design, energy-efficient engine and system that uses exhaust gas to produce extra energy to help propel the ship, make the Triple-E unmatched in energy efficiency”.

It’s no surprise these giants are creating wakes at sea and in the office. Not only are they more environmentally friendly than their competitors, but they are also unmatched in their efficiency and size.

For shippers, you’d expect this would all be good news. Greater capacity ought to equate to lesser costs, right? The answer appears unclear for the present time.

As increased capacity drives down rates, shippers are paying less; although potentially not for long, warn Hackett Associates, an international expert and advisory company to the Maritime Industry. They predict that this could be especially true for the US where “some lines have (already) cancelled voyages to counteract the downward trend”.

Nonetheless, Hackett Associates report TEU freight in the US to have increased by 4.2 percent from last year, with the first half of 2015 already 6.5% higher than the same period from last year.

Therefore despite speculation to the contrary, the global shipping task is on the rise and carriers that lead the way in design and efficiency the future is bright.

For sea freight at least, it seems the saying is true; bigger is better.

All for now,

+Brad Skelton

Thanks to +Darcy Cooper for her contribution to this post.

Friday, 2 October 2015

If I ever needed more clarity...

Following on from my previous post, if ever I needed more clarity if I was on the right path this accident involving one of my Franna cranes in my own yard was it. Fortunately my crane driver was unhurt apart from a bruised ego. The crane was going to need some urgent expensive repairs though.

Coincidentally, or perhaps not, this was the day that I was to announce the plan to my team and sadly make about 75 people redundant Australia wide. I had senior members of my executive team travel to each of my interstate offices with instructions about who we had to let go and how the equipment in all branches outside of Brisbane was to be delivered to our Brisbane yard where it would be prepared for the auction.

Letting that many people go at the same time was one of the hardest things I have had to do in business. While, as I predicted, most of the team were into new employment virtually the next day some of them reacted emotionally to the news and didn't want to leave. In Brisbane I had one truck driver who wanted to lash out and fight me and I had the wife of another of my drivers in Sydney call me incessantly for weeks begging me to "give" the Mack Titan prime mover he drove to him. "It is just one truck out of your big fleet and my husband loves that truck!" she begged.  

News of this decision spread like wildfire throughout the industry and in good trucking and crane company style the rumour mill went into overdrive about my agenda and whether I was forced to do this. There was no hidden agenda at all and I was not financially compelled to take this step. It was a completely calculated and transparent strategy to exit my truck and crane business via auction that would then enable me to potentially reenter the business later if I chose too. Apart from that I wanted to profit from the scarcity I had created in the market and then radically reduce my debt ahead of the then looming GFC.

The team that remained with me worked hard with my father to prep all the equipment for auction and move it all into Ritchie Bros afterwards. It was a mammoth task which continued right into the evening on the day before the sale but we got it done. The fleet looked great and was gleaming by sale day.

While this was going on RBA's global marketing machine was working well. The local and international interest in the sale was huge as Warwick and I predicted. We thought for sure the cranes would be sold offshore and likely to Dubai where the appetite for cranes at that time was insatiable. I passed this news on to Westpac who were still not convinced about an unreserved auction. They were clearly still very nervous and indeed severely doubted our ability to deliver the required result of a $29m+ overall sale amount. Financiers aside, my personal target was to achieve more than $30m.

Day one of the sale rolled around. It was a highly emotional day for me in so many ways. There were so many mixed emotions from straight out fear of wondering if I had done the right thing to excitement at a potentially spectacular outcome. Even though I was confident my strategy would work and I was buoyed by the inquiries RBA had received prior to the sale, the tension and pressure I was feeling was immense. 

The prime movers were to be sold first at 8am followed by the cranes in the afternoon."Digger" was the main auctioneer. He was one of RBA's finest and I knew him well from sales in the early days in Subic Bay and of course Hong Kong and Singapore.

Westpac turned up in force. They had at least six of their senior guys there with some of them even flying up from Sydney. I reckon they were more nervous than me and I barely wanted to even acknowledge them with the negativity and hell they had put myself and also Warwick through. 

The crowds the auction pulled were massive both in the yard and online. All of my now former trucking and crane competitors were there. The strategy was perfectly on track.

The sale started and as the prices achieved for the prime movers came in mostly at or above what I had forecast with Warwick the tension I felt eased. Most of my fleet was Kenworth and Mack and they all held their value better than the other makes and I was impressed that their dealers were at the sale supporting prices.

The real test that day was the cranes though. When Digger kicked it in on them the Manitowoc crawler crane prices went sky high. The bids were pouring in from overseas via the internet and in the yard. What a relief! They achieved far more than new prices and surprisingly all stayed in Australia. The Groves were the same. I could barely keep the smile off my face and my Dad and I were enjoying this now.

Now for the Franna's including the one that flipped over. They went through the roof too. My 25T Franna set a world record price of $532k which was more than $100k over the new price. It was spectacular and it was at about that point that the Westpac guys seemed to disappear.

At the end of day one I phoned through the total amount achieved to my banking relationship manager as I agreed to do. Despite a good day the negativity persisted.

Day two. All the low loaders and ancillary equipment was to be sold today starting with my 16 line platform. Again the bidding was fierce and we were achieving better than new prices particularly on the Drake and Lusty trailers. No sign of Westpac today.

By about 2pm Warwick called me on my mobile and asked me to come to his office right away. The sale still had a few hours to run. When I got there he told me to sit down and got me a bottle of water. He was smiling and said "Do you want to call Westpac and tell them to ..... or can I?". "Why? Have we just gone past $30m?" He said "yes". I was ecstatic! 

We called my relationship manager together who was near emotionless and indifferent about the news. I think he knew I had proved them wrong and that they had destroyed an otherwise good customer relationship with their outrageous fees and antics to get this deal done. The surplus I would now have would barely touch their accounts and my successful freight forwarding business would soon be lost to HSBC. 

At the close of the sale my fleet achieved a total of $32.5m. It was a fantastic result and Ritchies, my Dad and I were thrilled. One of my crane competitors saw me toward the end of the day and congratulated me. He said that I had made more money selling the fleet than he did operating his own. That would have been true for me too had I kept operating. This auction also set a record for RBA at that time.

This was RBA's 50th Anniversary year as a company. Rob Mackay who was a good friend from their Vancouver office saw me at the end of the auction. He told me he, Dave Ritchie and the board considered that I was one of the top 50 people in the 50 year history of their company who had helped the business succeed. I was touched and very proud to be recognised for what I had done as a freight forwarder to them and their customers and also as a buyer and seller over many years. Rob gave me a special 50th Anniversary watch as a memento. 

All debt associated with the fleet was completely paid out ahead of the GFC and with the surplus I started acquiring other freight forwarding companies and invested in a motorcycle shop in Coffs Harbour. Stories and lessons learned on those deals are to come in the future.

When I next saw my Westpac relationship manager he was back in sales mode wanting to keep all of my banking business and offering term deposit deals to me. I told him if they refund the $100k fee and the interest I would stay. He said he would put it to credit. What do you think they said? 

All for now,

+Brad Skelton 

Monday, 29 June 2015

Timing is everything...

Seven years ago nearly to the day I sold my entire heavy haulage and crane fleet at an unreserved public auction with Ritchie Bros Auctioneers that set world record prices for the equipment and a new record for the largest industrial auction of heavy equipment in Australia. 

I am still asked regularly by people about the background and strategy behind this deal and why and how I did it. The huge risk, hard work, sleepless nights, ups and downs that went into pulling that sale off were all worth it in the end. Seven years on I want to share some aspects of the story that I hope others will find interesting and might learn from. 

I also want to dedicate this blog to my late father, Allan, who I was fortunate to closely share this particular journey with all the way to Stuart Island . I miss him very much and treasure this memory, among many others, of something great we did that brought us even closer together.

In November 2007 one of my best buddies and old MIT roommate, Rick Jameson, from Guelph, Ontario was visiting me in Brisbane. Back then there were increasing reports about an impending subprime loan problem in the USA. Rick told me about what he was starting to see unfold in North America and we hypothesized about how the debt binge there and elsewhere in the world might play out for the world economy. Neither of us are economists but I am fortunate that when we talk about business and compare what we are seeing from our respective circles we usually manage to call things fairly well. 

Rick, who is actually an accountant by profession, owns and runs a successful brake pad manufacturing company called ABS Friction.  Over the few days Rick was in town we discussed what was happening and the conclusion we came to was that if the subprime loan market collapsed in the US, and it looked almost certain it would, then this would send huge shock waves globally through the banking system and the world economy. Having any debt would be unwise.

By 2007 Skelton Trucking, by fleet size, had grown into the largest heavy haulage company in Australia with prime movers and low loaders operating nationally. At the same time in Brisbane, Skelton Vertical Transport, my crane hire company, was rapidly growing it's fleet of late model cranes. We were growing revenue at over 400% year on year and the company had made the BRW Fast 100 list again! The mining and resources investment boom was still gaining momentum and the pundits were proclaiming it will never end......yeah right.

Helicopter view of Ritchie Bros yard with the fleet in blue and white laid out

Although we were trading very profitably and things were good, I was uneasy. To grow the truck and crane fleet as fast as we did we were highly leveraged to our bank, Westpac, and some other finance companies. If half of what Rick and I thought could happen happened then conditions could quickly change. 

Top of mind for me were the jobs of my team around Australia and what it wouId mean for them and their families if I decided to exit the trucking and crane business. Some of those blokes would do anything for me and loved the company so I was incredibly torn about this. I had assembled the very best operators in the industry by treating them with respect and paying top salaries to top talent and then giving them top quality equipment to operate. Both in people and equipment we did nothing by halves and I knew the people were the key to the loyalty our clients gave us. As the mining boom was running hard I knew that most of them would be quickly into jobs elsewhere as there was a massive skills shortage but this didn't make it any easier.

On Rick's last day in Brisbane I woke up early that morning with absolute clarity. It hit me that the timing was perfect to execute an exit from my trucking and crane businesses and I told him my plan to sell everything in an unreserved auction with Ritchie Bros if I could get a deal done with them.

At that time there was a world wide shortage of cranes and I owned low houred and popular cranes. Similarly my low loader fleet was comprised mostly of +Drake Trailers . Crane manufacturers and Drake had long waiting lists for their equipment. You would have to wait anything from 8 to 18 months to get a new one so used equipment prices were at record highs and were actually appreciating in value.

For the auction to achieve big prices I knew I needed to create scarcity in the market. If I made the right moves I backed myself to make more money by selling the fleet than operating it.

I started buying every single Drake trailer, new or used, I could get my hands on. I would outbid everyone on price no matter what! My trucking competitors thought I had gone mad with what I was paying. At the same time I ordered 2 more new Grove 80T All Terrain cranes which at that time was the most popular crane in the world bar none. Manitowoc promised me delivery by May next year(2008). Perfect timing as I knew I could comfortably get them into the Ritchie Bros Brisbane sale they usually held in June. I just needed the world economy and mining to hang in there until then and Manitowoc not to find out these units were basically going straight into the auction on delivery to me. 

I told my father what I was up to and enlisted his help with the project in managing the operations of getting the equipment to Brisbane and ready for sale. He was instrumental in helping me and indeed I could not have done it without him. He worked so hard to make everything as perfect as possible. If we were going to pull off a successful sale by auction confidentiality was paramount so I only told people in my company what I was planning on a strict "need to know" basis.

My late father, Allan Skelton, at the end of day one of the sale
In January 2008 fresh from a Christmas break, I called Warwick Mackrell at Ritchies in Brisbane and asked to meet with him privately about selling my fleet. We had known each other since literally the first day he started at RBA in Brisbane and I also knew Dave Ritchie, Rob Mackay and other senior execs in Vancouver and around the world very well from travelling with them to their sales and being their preferred freight forwarder. Over the years I had bought and sold a little bit of truck and crane equipment with them too. 

As it was the tail end of the festive season Warwick invited me to his house to talk and I went the next day. I laid out the fleet I had amassed and the gear I still had on order. He was shocked at the size and quality of it. I told him I wanted to sell everything in a single auction. A complete dispersal and exit would mean all of my competitors would come to the auction and bid and drive the prices higher. Warwick agreed with my overall strategy and we set about negotiating a deal. For me, by selling at auction, it meant that I could also return to the business whenever I felt like it whereas a trade sale contract would have had me wrapped up in non-competes for 5 years at least.

To me Ritchie Bros(RBA) were the obvious choice of auctioneer. I had a number of reasons why I thought I would go with them. Not least of which I felt a debt of gratitude to Dave Ritchie himself that I believed I could repay if I awarded the deal to them. When I went out on my own with my freight forwarding business I was struggling like hell to get by financially until RBA's legendary Hong Kong airport sale early in 1996. At that sale Dave was incredible to me. He basically lead every single buyer to me telling them that I was the only man they should talk to about shipping their equipment out after the sale. This was an absolute game changer for me back then as not only did I have his personal endorsement but it allowed me to make enough money to get my new business properly on it's feet. I proudly still ship for most of the people who bought at that Hong Kong sale today.  

RBA could also draw a truly global audience of buyers and my cranes had serious international appeal. Another pivotal reason was that they could offer a "Purchase and Participation" deal. They were probably the only company in the world with pockets deep enough to handle a deal this size. Effectively RBA bought alot of the equipment off me but then shared in the upside at auction once certain prices were achieved. I also knew that if RBA had some upside they would market the auction hard and be extra motivated on sale day to get a great result.

To sell any equipment at an unreserved public auction it must be totally unencumbered with clear title.This meant I had to overcome one of my biggest hurdles which was to find a way to payout all the banks and finance companies for the huge debt I had on the equipment. This was a daunting task.

The final deal struck with RBA would manage to pay out all but about $2m of the debt that remained with Westpac. I needed to find a way to get that $2m paid out for the auction and my complete dispersal strategy to go ahead though. My freight forwarding business was separate to the trucking and crane business and also banked with Westpac and was trading very profitably and had no debt. Despite this with the backdrop of the subprime crisis in the USA getting worse imagine going and meeting with your banker and telling them you want to commit about $29m worth of fleet to an "unreserved" public auction. I asked them for bridging finance for $2m until I was to be paid by RBA after the auction who by the way also banked with them. It literally took their breath away. They didn't have the ticker for it and wouldn't do the deal. 

Panic stations! My whole plan which I was now months into executing could come undone due to Westpac's risk aversion. I reassured them that my strategy was sound and I knew my market but their credit guys wouldn't budge and basically told me in polite language I was mad and they wouldn't support an "unreserved" auction of my fleet. Not even with Ritchies.

I went back to Warwick and told him my predicament and how perhaps I might have to pull out of the entire sale. He was fantastic and went above and beyond the call for me. We immediately met at Otellos cafe in Oxford St and strategised about what we could do. He said RBA was at their limit with the Purchase and Participation as the size of my deal for them in those days was pushing the limits. All we could do was go back to Westpac and implore them to do the deal. While I appreciate it was a bit of an ask for Westpac they more than had their position secured by my other business, other personal assets and guarantees.

Warwick personally called his contacts at Westpac and pushed them to back the deal as he believed in it and most importantly the auction prices we thought we could achieve. They still wouldn't. By this stage I am literally not sleeping at night trying to work out how to solve this impasse as I knew a golden opportunity could be missed due to my bankers. Everything was up for grabs to get this deal done including telling my then partner I might have to sell the house we were living in. 

I kept pushing and leaning on Westpac to the point our relationship was well and truly strained. I opened bank accounts with HSBC and transferred my international accounts to them to try and show Westpac I was serious.

In the end Warwick and I set up a meeting with the bank and both went along to their Queen Street office. It was do or die for me with them. As the days went by Warwick and I were more and more sure that the strategy and timing of the auction we were planning would be perfect. We simply couldn't take no for answer from Westpac in this next meeting. Warwick forcefully put the case why they should back it based on his expected sale prices. He and I reckoned if we had a bad day about $28m would be the figure for my fleet and a good day would be $30m+. Even at slightly less than $28m the bank would be paid out and that's before you consider my other assets they held security over. At the end of the meeting Westpac told us they would talk to Sydney and get back to me soon.

A couple of days went by. The pressure on me was huge as we kept executing the plan despite not having the financial ducks in a row yet. This alone was costing me big money so I really desperately needed the deal to go ahead. I eventually got a call from my relationship manager. He said if I accepted a fee of $100k, that's not a typo, $100,000.00 plus various other establishment fees and interest they would do the deal on the $2m bridging finance. 

I had no choice. Reluctantly I had to cop their fees and get the deal done with RBA. From my side this was pretty much the finish for my relationship Westpac though. I felt they were being plain opportunistic with such a huge fee and with all things considered not that much risk for them anyway.

The challenges weren't over yet.....see you next week for another installment.

All for now,

+Brad Skelton 

Thursday, 11 June 2015

Together we can make a difference to the homeless.

On the 18 of June I am  joining some of Australia's top business and community leaders sleeping rough on one of the coldest nights of the year and would like your support.
Funds raised through the Vinnies CEO Sleepout will go towards helping the more than 100,000 Australian men, women and children who are experiencing homelessness to find the warmth, safety and dignity that they desperately deserve.
Vinnies supports people experiencing homelessness through a range of person centred and holistic support services including crisis accommodation, domestic violence support, access to budget counselling, life skills courses and legal advice, as well as assisting in planning for change and their return to independent living. Your kind donation enables this good work to continue and makes a real difference to people's lives.

It only takes a moment to help write a new chapter in the story of homelessness and help break the cycle. 
Please visit ceosleepout.org.au to find out more and see a full list of CEO's participating.
Thanks for your support!
All for now,

Friday, 22 May 2015

Common sense finally prevails for Australian Coastal Shipping reforms

On the 20th of May Warren Truss, the Minister of Infrastructure and Regional Development, announced that the former Labor government's industry stifling regulations on coastal shipping will be reformed.

I congratulate the government on their reforms which are sensible and practical in their operation. They will certainly lead to the restoration of the health of the coastal shipping industry in Australia and lower freight rates for my coastal shipping clients.

Now vessel owners whose ships operate in Australian waters for less than 183 days a year no longer have pay their foreign crews based on Australian awards.

The voyage permit regime has been changed to allow vessels to do an unlimited number of voyages over a 12 month period rather than apply for permits on a per voyage basis. Sensible!

These and many more practical changes I am certain will lead to carriers who exited the coastal trade under the previous governments regime return and therefore increase competition and sailing options for shippers.

Full details of the reforms can be viewed here.

All for now,

+Brad Skelton