Nippon Express Company, Ltd.
Nippon Express Company, Ltd.
Sales: ¥1.25 trillion ($13.99 billion) (2003)
Stock Exchanges: Tokyo
Ticker Symbol: 9062
NAIC: 484121 General Freight Trucking, Long-Distance, Truckload; 484122 General Freight Trucking, Long-Distance, Less Than Truckload; 484230 Specialized Freight (Except Used Goods) Trucking, Long-Distance; 483111 Deep Sea Freight Transportation; 484110 General Freight Trucking, Local; 493110 General Warehousing and Storage; 541614 Process, Physical Distribution, and Logistics Consulting Services; 481112 Scheduled Freight Air Transportation; 492110 Couriers
Nippon Express Company, Ltd., is one of Japan's largest transportation companies, with nearly 1,170 service centers in Japan and 288 centers in 33 countries across the globe. Nittsu, as it is familiarly called, is involved in a wide variety of transportation-related services, including motor freight transport and forwarding, railway forwarding, marine transport, air freight forwarding, and warehousing. Nippon Express is also familiar to Japanese householders for the "Pelican" parcel delivery service. While the name "Nippon Express" was first used in 1937, the company's direct antecedents date from the 19th century, and it can trace the origins of its express courier business back centuries before that. Several other strands of business, such as tourism and marine transportation, figured in the company's distant past, then disappeared, only to reappear in the late 20th century.
Early History to World War II
Messenger services existed in Japan from the seventh century A.D. However, the service did not conspicuously evolve until the period when, for two and a half centuries (1600 to 1867), Japan was ruled by shoguns of the house of Tokugawa. The shogun, officially the emperor's deputy, effectively governed with the aid of a handful of counselors and a quasi-feudal network of samurai. After many centuries of civil war, the relative peace of the Tokugawa period encouraged a surge of economic growth. Because the country's ruling class was centered on the shogun's capital of Edo (now Tokyo), whereas the commercial center was Osaka, more than 200 miles away, the growth of commerce stimulated the rapid development of transportation systems.
The first Tokugawa shogun, Ieyasu, set up a system of staged or relay courier services: men and horses were kept on hand at staging posts, or occasionally requisitioned from convenient villages, for the use of members of the nobility and those carrying their property and mail. A number of commercial horseback express messenger services flourished. These services multiplied between about 1800 and 1867, the last years of the Tokugawa regime, which were, like its first years, associated with a resurgence of commercial growth.
The shoguns kept Japan isolated from the outside world, but the country was becoming irresistible to the West, both as a trading partner and as a port of call where ships could take on fuel and provisions. In 1854, Commodore Matthew Perry of the United States secured the first of a series of treaties which were to open up Japan to international commerce. Contact with the outside world contributed to the destabilization of the Tokugawa regime, which fell in 1868, when the Meiji Restoration assigned to the emperor the administrative power that the shoguns had once wielded.
The Meiji government undertook a radical modernization of the Japanese economy. The Postal Service Law of 1871 inaugurated a national mail system. The messenger services found themselves unable to compete with the government's 3,000 offices, which soon offered a telegraph service alongside the conventional post.
Sosuke Sasaki was the manager of Izumiya, the most powerful of the express messenger companies; he was also a trade representative. Aware of the nature of modern postal services, he bowed to the inevitable. After consultation between Sasaki and Hisoka Maejima, the minister for the postal service, it was agreed that the express messenger services would cede their business to the official mail and would switch instead to bulk freight transportation. They would be rewarded with an exclusive contract for the government's own haulage requirements.
Accordingly, in 1872 the former courier suppliers joined to form the Riku-un Moto Kaisha, or General Land Transportation Company, under the presidency of former Izumiya head Jinbei Yoshimura and the vice-presidency of Sosuke Sasaki. The new enterprise, launched with capital of ¥50,000, was Japan's first joint-stock transportation company and was to form the backbone of the company later known as Nippon Express. Riku-un Moto Kaisha operated through a number of small Riku-un Kaisha ("land transportation") companies, each corresponding to one of the old relay stages. This organizational structure was overhauled in 1875, when the small Riku-un Kaisha companies were abolished and the parent company, with its 2,000 employees, was renamed Naikoku Tsu-un Kabushiki Kaisha, the Domestic Express Company.
As Riku-un Moto Kaisha, the company had started a horse-drawn freight carting service between Tokyo and Odawara in 1874. Shortly afterwards, the route was extended to Kyoto and Atsuta. At the end of the 1870s, the service started to carry passengers as well as freight. Although the road service was temporarily supplanted by the coming of railways in the late 19th century, in the late 20th century road freight was once again the most important component of Nippon Express's business.
The year of the company's inauguration, 1872, had also seen the opening of Japan's first railway service. In 1873, the trains began to accept freight, and by 1875 Naikoku Tsu-un Kaisha was handling rail freight, transporting it between sender and station at one end and between station and recipient at the other. With the expansion of the railway network over the following two decades, railway cargo became a major source of revenue.
As Naikoku Tsu-un Kaisha, the company began to operate river freight transport services in 1876. The following year, a paddle steamer was acquired, the first to be used for civil purposes in Japan. River transportation declined in importance with the appearance of motorized road transport and the expansion of the railways. Once again, however, the wheel came full circle: in 1990, containerized shipping and other marine transport earned Nippon Express almost ¥120 billion.
Naikoku Tsu-un Kaisha entered the motorized road transport business in 1911 with the purchase of four trucks for the carriage of imperial mail. Their white-liveried drivers confined their activities to the driving of the trucks; loading and unloading them was too menial a task.
The spread of railways and motor vehicles at a time of rapid industrialization and trade attracted new entrants into the express transportation business. By 1910, there were 5,000 competitors; by 1919, the number had almost doubled. This made for an overcrowded market at a time when Japan, in common with most of the developed world, was suffering from the severe economic slump that followed World War I. In 1923, an earthquake devastated Tokyo, after which scarce funds had to go into reconstruction, with further adverse economic effects. The Japanese economy's response to the doldrums of the 1920s was to rationalize. In harmony with this tendency, the government decided to reduce the number of competitors in the transportation business. In 1928, Naikoku Tsu-un Kaisha merged with its two main competitors, Nihon Un-so Kaisha and Meiji Un-so Kaisha.
The resulting joint-stock company, named Kokusai Tsu-un, or International Express, engaged in both domestic and international freighting and was the immediate predecessor of Nippon Express. At war with China during the late 1930s, the Japanese government was actively managing the economy in the national interest; under the new Express Business Law and the Nippon Express Co. Ltd. Law, Kokusai Tsu-un was dissolved and its business taken over by Nippon Express, which came into being on October 1, 1937, and was 53 percent government-owned.
After World War II, the Allied forces occupying Japan considered that too much of the country's economic power was concentrated in too few hands. Among other initiatives, they threatened to break up Nippon Express, whose market strength was contrary to the provisions of the Law for Decentralization of Excessive Economic Power. In the end, however, the company was not abolished but, beginning in February 1950, became a private enterprise.
During the postwar years, Nippon Express embarked on a series of measures that equipped it to share in and to contribute to Japan's economic boom. These measures changed both the way the company was run and the nature of its business. Nippon Express was among the earliest companies to adopt a decentralized management structure, delegating a high degree of financial autonomy to its divisions. It also gradually reduced its focus on the handling of rail freight, hitherto its most important activity, and diversified into other forms of transport and into completely new business areas.
Nippon Express strives to satisfy shareholders by providing increased profitability; to satisfy our customers by offering high quality services; to act as a good corporate citizen by tackling environmental conservation and reacting to provide essential services in times of need; and to contribute to and reward the continued professional development of our employees.
One of the earliest diversifications came in 1949, when the company began to engage in international air freight forwarding, acting as cargo sales agent for various international airlines. This new enterprise received the stamp of International Air Transport Association approval in 1953. Air transportation proved a profitable area. In 1990, the magazine Business Japan interviewed Nippon Express's vice-president Kiyosumi Hosokawa, who was also chairman of the International Air Express Association of Japan and the International Airfreight Forwarders' Association of Japan. He stated that the air freight business could look back on three decades of steady growth, interrupted only by the two oil crises. He added that "the air freight growth rate is far higher than Japan's economic growth rate."
Another landmark year was 1955, when Nippon Express became an authorized travel agent. In doing so, it was returning to a business in which it had dabbled 80 years before, as a sideline to its horse-drawn haulage service. Sosuke Sasaki had founded an association of inns approved for use by his messengers. Soon the company had begun to act as a travel agency, offering a room-booking service to the public, a side of the business that had atrophied with the coming of the railways. This time, however, the emphasis was on arranging package tours of Japan and on assisting the Japanese with foreign travel. In the two decades from their launch in 1968, more than three million people would buy the "Look" packages catering to Japanese tourists abroad.
Expansion and Diversification: 1950s–80s
The late 1950s and the 1960s were a time of phenomenal expansion for the Japanese economy. Between 1960 and 1970, a year-on-year growth rate of about 13 percent was sustained. Foreign trade, too, was increasing dramatically: during the same years, imports multiplied in value by a factor of four and exports by a factor of five. In order to be able to play its part in the internationalization of Japanese industry, Nippon Express embarked on the construction of a network of overseas offices that eventually spanned five continents. The process began in 1958 with the inauguration of a representative office in New York. The year 1962 saw the establishment of a New York subsidiary, which by 1991 had a chain of 97 U.S. offices with 1,808 employees.
During the 1960s, the marine transportation industry was revolutionized by the advent of containerization. Since the early years of the 20th century, road and rail freight had been packed in large, tough boxes, which rendered loading and unloading more efficient and reduced the risk of loss or damage. In the 1960s, container ships that were able to use the same type of box began to be built. The adoption of standard-size containers, which could be loaded on ship, truck, or train, facilitated inter-modal transport, allowing the forwarder to combine different modes of transport to get the most cost-effective package. For example, in shipping to Brazil from Japan, Nippon Express sent containers by sea to Seattle, then trucked the containers to Miami before transferring the goods to airplanes for the last stage of the journey.
Nippon Express was quick to see the advantages of containerization. As well as using the scheduled services of other shipping companies to carry its containers around the coasts of Japan, Nippon Express acquired ships of its own. In 1973, it bought its first container vessel, the Acacia Maru, and launched a cargo service between Tokyo and Tomakomai.
International container services, too, became an important source of business for Nippon Express, attracting both Japanese and overseas customers. Germany was one of the most important markets for Far Eastern container traffic; in 1991, Nippon Express (Deutschland) reported that it obtained half its revenue from Japanese companies and half from German companies buying from and selling into Japan. In the 1990s, sea transportation by container vessel became one of Nippon Express's most rapidly growing services.
During the 1970s, Nippon Express became a highly diversified business. Plant transportation and installation was one new venture. As early as 1966, the company had become involved with the transportation and installation of petrochemical equipment, which had begun in 1966 with its participation in the construction of a Peru oil refinery. The year 1977 marked the start of Nippon Express's involvement in a major petrochemical construction project in Iran. This project was cut short by Iran's internal upheavals a few years later.
The 1970s and 1980s were a period of continued expansion for Nippon Express's overseas activities. Subsidiaries opened in Singapore in 1973, the Netherlands in 1977, Hong Kong and Brazil in 1979, the United Kingdom and West Germany in 1981, Saudi Arabia, Belgium, and Canada in 1983, Malaysia in 1984, Australia and France in 1985, and Italy in 1986.
Also during the 1970s and 1980s, a new market known as takuhaibin —parcel delivery service—was opening up in Japan. Domestic or international door-to-door delivery of documents and small packages was provided, with a guaranteed delivery deadline. This service was originally a U.S. import, introduced by DHL Corporation, which established DHL Japan in 1979. Once launched in Japan, it was a runaway success, both with consumers and with the business community that needed to exchange items such as contracts and product samples with minimal delay. The profile of Japan's industrial output was changing to include less heavy industry and more high-technology products; for carrying such fragile, relatively low-volume loads, the express parcel service was ideal.
- Riku-un Moto Kaisha (General Land Transportation Co.) is created.
- The company is renamed Naikoku Tsu-un Kabushiki Kaisha (Domestic Express Co.).
- The firm merges with its two main competitors to form Kokusai Tsu-un Kabushiki Kaisha (International Express Co.).
- Kokusai Tsu-un is dissolved, and its business is taken over by Nippon Express Co. Ltd.
- The company is privatized.
- A U.S.-based subsidiary is created.
- The company buys its first container vessel.
- Nippon Express groups its businesses under three regional supervisory bodies in order to streamline operations.
- The firm launches a major restructuring in response to Japan's economic climate.
- Nippon Express becomes the first major transportation concern to win a governmental license to launch a special mail deliveries service in Japan.
Nippon Express was soon a leader in the parcel delivery market, with its Pelican services aimed at deliveries to the private individual and Arrow services for company-to-company deliveries. In 1990, Nippon Express was second only to Yamato in the Japanese parcel delivery market, and whereas this was 41 percent of Yamato's business, it represented only 28 percent of Nippon Express's.
Success Continues in the Early 1990s
Nippon Express had one outstanding advantage both in parcel deliveries and other types of international transportation. Whereas other carriers set up links with foreign companies, Nippon Express had its own overseas representation. This consisted in 1990 of 31 overseas affiliates and 16 representative offices. It had 366,000 square meters of overseas warehouse space in addition to its two million square meters inside Japan.
To manage this vast network in the most efficient way possible, and speed the decision-making process, in 1990 the company grouped its overseas branches and affiliates under three regional supervisory bodies. Nippon Express U.S.A., Inc. was responsible for North and South America, Nippon Express (U.K.) Ltd. took charge of Europe, and Nippon Express (H.K.) Co., Ltd. covered Southeast Asia and Oceania.
Nippon Express appeared to be set to maintain the competitive edge that its extensive international network afforded it. September 1990 saw it entering the Mexican freight market ahead of its Japanese competitors with the launch of Nippon Express de Mexico. In April 1991, it opened a new trucking service between Singapore and Malaysia.
A key component of Nippon Express's integration was the efficient communication of information. Through the late 1980s, the company was engaged in establishing an online data network to connect all its offices, enabling it to track individual cargo items across the world. Its communications expertise enabled it to engage in several new specializations such as just-in-time (JIT) deliveries. JIT is a manufacturing method whereby parts are brought to the shop floor from a remote warehouse at the moment they are needed in order to minimize on-site stock holding. In 1989, Nippon Express's U.S. information networks enabled it to start NEX Transport Inc. to supply JIT services to Japanese automobile manufacturers operating in Ohio.
The company continued to invest in new ventures at home and overseas. In December 1990, it announced that it would set up an air cargo company, the Japan Universal System Transport Co. Ltd., as a joint venture with Japan Airlines Co. Ltd. and the Yamato Transport Co. Ltd. In March 1991, Nippon Express made public another new venture, the Dalian Nittsu Container Manufacturing Company, which would manufacture shipping containers in Dalian, China.
In an economy that was a byword for dynamism, Nippon Express was one of the most successful and fastest growing companies of all. In June 1991, Tokyo Business Today ranked it Japan's 127th most profitable company, a position to which it had climbed from 164th the year before, with a 50 percent growth in declared income. The Japanese economy had its difficulties, however. A labor shortage was pushing up costs, and in August 1990 Nippon Express and other leaders of the transportation industry applied to the Japanese Ministry of Transport for permission to raise tariffs for regular delivery routes for the first time in five years. At the same time, chartered delivery prices were raised. Such price adjustments enabled the company to sustain its profitability despite the rising costs.
Automation was one response to a labor shortage, and in March 1991 the company announced that it was about to install a new information network to manage its two million railway containers. Also in 1991, it announced plans to invest ¥540 million in modernizing its international telecommunications network.
In June 1991, Shoichiro Hamanaka succeeded Takeshi Nagaoka as president. Hamanaka, who had been with the company since 1954, had previously been in charge of the Sendai branch and of the general affairs and labor management divisions.
Looking to the future, Nippon Express now saw that it faced the threat of increased competition in its domestic distribution business, which the Japanese government was taking steps to deregulate. To deal with this competition, it planned to rely on accurate market research and an ever-improving quality of service to its customers. Overseas, it prepared for the coming unification of the European market and the opening up of Eastern Europe by developing its European trucking network and improving its warehousing facilities. By increasing its representation in China and building a Chinese transport network, Nippon Express readied itself for the expansion in trade that was expected to ensue from the reversion of Hong Kong to Chinese rule in 1997.
Mid-1990s and Beyond
By the mid-1990s, Japan's economy had bottomed out, forcing Nippon Express to revamp its strategy in order to shore up profits. The firm immediately began to cut costs and streamline operations, but the slowdown in sales as a result of Japan's financial crisis took its toll on the company's bottom line. The Kobe earthquake in 1995 made matters worse, affecting Nippon Express's revenues by an estimated ¥8 billion.
During 1998, the company launched a major business restructuring. In order to gain a larger share of the home-delivery service market, the firm converted 125 of its cargo collection centers to handle home-delivery requests. Over 20 branch offices were also refurbished to allow for home-delivery. Nippon Express created several new divisions as part of the restructuring, including a unit to focus on offering logistics services to handle customers' outsourcing needs and a new business designed to market the company's inventory-management system. Despite the company's efforts, sales and profits fell for the second straight year in 1999.
Masahiko Okabe, named company president in 1999, commented on industry conditions in a November 1999 Nikkei Weekly interview. He pointed to a major problem transportation companies were contending with—competitive pricing. "Transportation charges have fallen sharply since the end of the boom economy in the early 1990s. Over the past decade, trucking charges for raw materials and heavy goods have declined around 10 percent and charges for international air and sea shipments around 25 percent. They are continuing to fall under pressure from customers for lower charges." As Japan's economy remained stagnant, Nippon Express and its competitors were forced to remain sensitive to rising consumer demands. As such, Nippon Express looked for ways to add value to its transportation services in order to keep its customer's distribution expenses at a minimum.
During the early years of the new century, a changing distribution industry and heightened competition forced the company to focus on new distribution services including third-party logistics (3PL), e-commerce distribution, and transportation for the recycling industry. Nippon Express also worked to strengthen its international businesses. A new 3PL subsidiary, NEX Global Logistics, was launched in the United States in 2000, and the firm also began offering domestic air and truck service in certain U.S. cities in 2003. In addition, Nippon Express secured a new Chinese license that enabled it to provide seamless mixed cargo transportation, both by land and sea, between Japan and China. The license enabled the company to deliver cargo faster than many of its competitors by allowing it to avoid certain customs restrictions.
Japan allowed private firms to begin handling mail delivery in 2003. By early 2004, Nippon Express had become the first major transportation concern to win a license from the Ministry of Public Management, Home Affairs, Posts and Telecommunications. The license gave the firm rights to launch a special mail deliveries service in Japan.
A turnaround in Japan's economy appeared unlikely in the immediate future. With that fact in mind, Nippon Express understood that it had its work cut out for it. Nevertheless, management remained optimistic. The company was dedicated to providing a wide range of logistics services in a cost-friendly fashion, as well as expanding its information systems and bolstering its international and small package business. While only time would tell if the company's restructuring efforts would pay off, Nippon Express appeared to be on track to remain a leading name in transportation for years to come.
Nittsu Shoji Co., Ltd.; Nittsu Real Estate Co., Ltd.; Nippon Shipping Co., Ltd.; Nippon Truck Co., Ltd.; Bingo Express Co., Ltd.; Nippon Express U.S.A., Inc.; Nippon Express (Deutschland) GmbH; Nippon Express H.K. Co., Ltd.
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—update: Christina M. Stansell