Complete business turnaround in Israel

The Israeli business has been streamlined and today it is also making a profit.

Sigal Mannheim Katzowich DSV Israel

When Sigal Mannheim-Katzowich assumed her duties as Managing Director of UTi Israel 18 months ago, the business had been efficiently streamlined by the
previous manager, but was still not making a profit. Today, it is no longer enough to nurture the good customers: new ones need to be brought in every day.

This is not the first time that Sigal is leading efforts to reverse a trend for the better. This was also true of her previous managerial position, for Swissport Israel at Israel’s Ben-Gurion International Airport, where she turned a loss-giving business into a business with sizeable earnings in just two years.

And there is not one specific thing or special methodology she uses. Although she admits being fond of leading turnarounds ("you feel proud to be able to show that you have accomplished something big"), she does not regard turning a business upside down and doing everything differently than previously as an end in itself. But it turns out that this is exactly what the two companies she has most recently managed actually needed. The most recent is, of course, UTi Israel, which employs 790 people at eight different locations: 440 in the Air & Sea organisation (including a handful in road transport), and the rest (350) in Solutions.

"When I arrived, the UTi structure was good and the employees were skilled and professional, but there was a general lack of ambition and direction," she says, explaining that it is a matter of changing the corporate culture – and making the sales team hungrier. At UTi, they were more like farmers than hunters, according to Sigal.

Made them hungry again

"The biggest change took place in sales and marketing," she says. "Previously, sales reps were mostly interested in holding onto existing customers and cultivating these relations, to ensure that they didn’t leave the business. Today, these sales reps are hungry again because they have to add new customers every day, customers who are not familiar with UTi. There is a big market out there. This is how sales reps have to earn their money and I tell them to leave the day-to-day operations to me," Sigal says. She has invested in intensifying the focus on customer service so operational staff provide the best service possible and thus in practice serve as farmers who get customers to stay and increase their involvement in the business. And then there are the ten key account managers who also serve as farmers for the biggest global customers while at the same time growing medium-sized customers into some of the biggest.

Customs brokerage

UTi is relatively new to Israel. The company came here in 2007 through the respective acquisitions of Transcal and Newlog (built on 12 different and smaller companies). The primary source of income was customs brokerage, as the companies had a licence to serve as the auxiliary arm of the authorities in conjunction with customs brokerage of incoming goods, vehicles, etc. Up until 2011 – when Sigal’s predecessor laid the groundwork for the present corporate structure – the managers from the two bought-up companies were still running the business – i.e. business as usual. Today, customs brokerage continues to be an important source of income for the company (roughly 30% of turnover), but whereas previously it was the entire business, today it serves more as bait to lure customers into the Air & Sea organisation:

"We have informed our customers that if they want to use us as their customs broker, then we must also be their freight forwarder,” Sigal says, adding: “We want to give our customers this full service, because freight forwarding is where the money is."

Increased the rates

Whereas customs brokerage was previously a profitable business in itself, with fees typically amounting to 2% of the goods’ value, today it is a field with tough competition and significantly lower commissions. None the less, Sigal has succeeded in raising customs brokerage rates at the same time, and the vast majority of customers have had to accept them.

"A Toyota can’t be compared to a Mercedes. Therefore, we have trained our employees to believe that our customs brokerage service is a Mercedes. We create added value because we save lots of money for the customer," she says, explaining how efficient customs brokerage can release the goods much faster than otherwise. Adding that customers do not risk having to pay taxes on products that are tax-free solely because the company’s "classifiers" are the cleverest in the market. The department has a total of 160 employees, 8 of whom are formal agents licensed to handle brokerage for the state (in fact, having just one designated person in the company would have been enough, but seeing that it is a Mercedes...).

"We invest heavily in staff training, which helped us to become Israel’s biggest – and best – customs brokers," explains Haim Shimoni, Director Customs Brokerage.

Cutting to the bone

Most of Sigal’s initiatives involve increasing the profit on each consignment. But concurrent with this, she has launched a huge effort to cut costs and ensure that money is not spent needlessly.

"We have been in touch with all our suppliers to make sure that we pay the lowest prices possible for everything from fuel to telephony, computers, rent, etc.," she says, illustrating the story with an example: When the landlord of the present headquarters in Lod, roughly 15 km from Tel Aviv, did not want to lower the rent, Sigal set out to find alternative premises. She succeeded in finding a similar and less costly location in an attractive neighbourhood, and, with signed contract in hand, she went back to the landlord who now agreed to cut 25% off the rent. And, as this rent was then lower than the new premises, the headquarters are still located in Lod...

"You can’t get ahead of the game by being nice and friendly to everyone. You have to earn money, otherwise you will never survive in this environment," she says, disclosing a small trade secret: she shares this success with the employees.

"Employees are pleased to be able to see that things work and that the company earns money. Everyone wants to feel involved and that they are part of something bigger. Therefore, I show off the good results, such as that we increased our profits by 65% in just one year. Some managers prefer to grumble and complain, but no one wants to be part of a company that is in trouble," says Sigal.  She also places great emphasis on cooperation:

"We facilitate teamwork training to all. Our progress is based on cooperation between the executive team, the six directors and all managers and employees in the company," she says.

Pleased to becoming DSV

Sigal has looked forward to joining DSV and becoming part of a bigger network, with better buying power and a strong road network in Europe. And she is proud of last month's visit by Carsten Trolle, CEO, DSV Air & Sea, and Giuseppe Rossini,  Regional Director Italy and MENA (DSV Israel will operate under Air & Sea):

"This shows that we are an important part of the network," she says, emphasising that Israel is a highly developed, democratic and business-oriented country which could be the gateway to the Middle East.

"I have noted the intentions aired so far: that we will be given the freedom to run the business going forward at the same time that DSV is a financially sound owner who will be open to further investment and development. I’m looking forward to it," she says.

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