Harper Group Inc. History

Address:

260 Townsend Street
San Francisco, California 94107-0933
U.S.A.

Telephone: (415) 978-0600
Fax: (415) 978-0699

Public Company
Incorporated: 1898 as F.F.G. Harper Co.
Employees: 3,150
Sales: $346.6 million (1995)
Stock Exchanges: NASDAQ
SICs: 4731 Freight Transportation Arrangement

Company Perspectives:

We will provide integrated door-to-door transportation and logistic solutions on a time-definite basis. We will be an essential part of our client's supply chain from sourcing to delivery of product to the ultimate customer.

Company History:

Harper Group Inc. is an international provider of freight forwarding, customs brokerage, and logistics management services. Harper's primary operating subsidiary, Circle International, Inc., operates essentially as a travel agent for goods--managing the door-to-door delivery process including booking ground transport, air cargo and ocean cargo services, consolidating cargo from various shippers, clearing customs, warehousing, and tracking products as they travel to their destination. Indeed, Circle International is the second largest customs broker in the United States and the top air freight and logistics provider to Latin America; among its major corporate customers are Levi Strauss, Polaroid, and Ford, as well as the 1996 Atlanta Olympic Committee. The company has offices and agents in 356 locations in 96 countries. Following a period of financial challenge in the early 1990s, Harper came under new management in 1996 and looked forward to continued strengthening of its position as an industry leader.

19th Century Origins

Harper Group traces its history to San Francisco in 1889, when the F.F.G. Harper Co. was established to serve as a customs broker for San Francisco's burgeoning trade industry. At that time, the goods flowing through San Francisco's ports were primarily food items and art objects brought in via clipper ships from such places as Shanghai, Hong Kong, and Japan. From a one-room office, F.F.G. Harper Co. processed entries using a wooden abacus; entry fees were paid in gold, which messenger boys carried in sacks from the bank to the U.S. customs house.

In 1906 an earthquake devastated San Francisco and destroyed Harper Co.'s original office. Undaunted, the small organization moved to a new office at 510 Battery Street. Also during this time, a 12-year-old named Ray C. Robinson joined the staff as a messenger boy, hauling gold from bank to customs house. As the company grew steadily (and was considered one of the leading customs brokers on the West Coast by 1921), the young messenger boy, Robinson, gradually assumed greater duties at the company. By 1940 he had taken over the role of company president from F.F.G. Harper, who had retired.

The Growth of Harper, Robinson & Co. in the 1940s

Around this time, Harper passed away, and Robinson bought the customs brokerage from the founder's heirs for $15,000. Robinson changed the company's name to Harper, Robinson & Co. and oversaw operations, with a reduced staff of three, during the war years. When the war ended, Robinson's two sons, John H. and Ray C., Jr., returned home and joined the company, where they began developing the strategy that would carry the company into the 20th century. At this time, Harper, Robinson & Company's work force numbered 12.

According to company documents, the Robinson family determined that flexibility would be essential to the success of the company. In order to "satisfy the logistics and transportation needs of individual companies in very different industries," according to John H. Robinson, "we decided that if it had tires, wings or floated, we wouldn't own it." The organization, therefore, positioned itself as a "freight forwarder," purchasing cargo space on airplanes, ships, and trucks, and then selling that space to its customers. As part of their vision for growth, Harper Robinson & Co. applied for the IATA freight forwarding license in 1949 and became one of four San Francisco companies to win the honors.

Postwar Expansion

In the early 1950s, Harper Robinson & Co. entered an era of tremendous national and international expansion. Internationally, the customs broker and freight forwarding company grew its business through establishing alliances with freight forwarders native to specific countries. At home, the company continued to open local offices and by 1969 had 40 offices across the United States. To accommodate such expansion, the company created four new subsidiaries to handle the various processes involved in buying space with carriers, consolidating shipments, and moving them internationally. Harper Robinson & Co. maintained its customs brokerage business and also took on the duties of ocean forwarding; Circle Air Freight was created to handle air freight forwarding transactions; Western Navigation handled ocean cargo consolidation; and Harper Shipping Co. and Pacific Intermodal Corp. handled affairs such as Spanish documentation, marine insurance, and international banking.

This growth strategy had reportedly been set into motion in 1951, when John H. Robinson flew on Pan American Airlines' inaugural flight from California to Japan. During his stay in Japan, the young Robinson made contacts with several Japanese businessmen who would become instrumental in the company growth, among them Shoshi Idemitsu (who later became chairman of the board of Idemitsu Oil Company) and a man who would become chairman of Nippon Express. These Japanese companies would purchase American goods which Harper, Robinson & Co. would then transport from the Midwest to Japan via San Francisco. "Through my Japanese contacts we eventually built our business representing Japanese companies purchasing American goods," said Robinson. In fact, the company built its first satellite office in Los Angeles the following year. Robinson's flight to Japan proved lucrative in several ways; in the mid-1950s, when Pan Am began air cargo service to Japan, Harper Robinson & Co. was appointed its first freight forwarding agent in San Francisco, and in 1956 the company became an official freight forwarded handling shipments of oil refinery to Japan.

Early Computerization and Expansion Efforts

When the elder Robinson retired in 1963, his son John took the helm as president and CEO and began a series of computerization efforts which would prove fundamental in the company's market leadership position of the 1990s. "Robinson watched his accounting team pull on the long arm of an old IBM computer," company documents noted, adding "As the machine groaned, it dawned on him how important information systems would be to the forwarder of tomorrow." Under John Robinson's direction, Harper, Robinson & Co. began establishing an extensive information technology system that evolved as the company grew and eventually placed the firm among the few freight forwarders that offered "100 percent true information control of in transit cargo."

If the 1950s was a decade for expansion into Asia, the 1960s was the time for expansion into Europe. Harper, Robinson & Co. set the groundwork for this expansion "by riding the tails of Fortune 500 expansion," according to company literature. As these growing American companies expanded their markets into Europe, Harper, Robinson & Co. grew through providing customs brokerage, ocean forwarding, air freight forwarding, ocean cargo consolidation, marine insurance, and international banking.

Formation of the Harper Group

In 1970, the Harper Group was created to serve as a parent company uniting the financial operations and statements for Circle Airfreight Corp., Harper, Robinson & Co., Robinson Shipping Co., Western Navigation Corp., and Pacific Intermodal Corp. Also that year, Harper opened its first international office in Japan. The company's Circle subsidiary had grown to become the third largest international freight forwarder. "Going overseas was unbelievably tough," said Marty Collins who joined in 1970 as Harper's new controller. "Every country was different. You had to cross cultures, and were operating in a different environment while managing it long distance. To support this expansion we discovered how important it was to have--in place--an integrated communications network," he observed. Harper's office in Japan was successful, and soon it had expanded its network of offices to Hong Kong, Singapore, Taiwan, the Philippines, and Korea. In 1972 the company acquired a freight forwarding subsidiary, J.R. Michaels, and inaugurated an internal computer system, HARPRCON, that proved instrumental in supporting its overseas expansion. In 1974, Harper opened offices in Sao Paolo, Brazil; Johannesburg, South Africa; and Beirut, Lebanon. As it expanded across international borders, the company significantly strengthened its foothold in the ocean, air, and intermodal transport industries.

Going Public in the 1970s

In 1977, Harper Group made an initial public offering on the NASDAQ exchange. Annual revenues that year were $63 million; net profit was $43 million. Harper had grown to be one of the world's largest buyer of airfreight space and the sole international freight forwarding company with strong groups in ocean, air, and intermodal transport.

Shortly after Harper went public, deregulation hit the transportation industry and completely altered the company's business environment. "It changed from a fixed environment to an entrepreneurial environment," said a Harper official, adding "We had to negotiate for everything--truck, ocean, air." By the 1980s deregulation was having its effect on Harper's business in another way: tough competition.

1980s: Boom Years

Harper retained its competitive edge by standardizing and streamlining its information processing systems. It was one of the first companies to use personal computers and electronic mail systems. Harper also responded by opening branch offices around the globe, and by 1988 had opened offices in Egypt, Scotland, Spain, Germany, Portugal, Peru, Colombia, Malaysia, the United Kingdom, France, India, Mexico, Panama, Colombia, Haiti, Trinidad, and Puerto Rico. From 1986 to 1991, the company experienced compound annual growth of 22 percent.

Some of this growth was realized through the opening of branch offices, but much also was obtained through a lengthy series of acquisitions that began around 1985 and ended in 1992. Harper's purchased over 40 companies during that time, including Bowater Freight Services group in the United Kingdom (subsequently renamed Baxter Gruenhut Management Ltd.), Challenge Freight Services in New Zealand, Darrell J. Sekin Transport Co. in Texas, and a 70 percent stake in S.W. Air Freight, an airfreight forwarder based in Paris.

Dubbed an industry pioneer by some and a "bit kooky" by others, John Robinson's unusual management style gained attention in the transportation industry. Credited with training some of the top managers in the field and with building Harper from "one San Francisco office into an international powerhouse," Robinson realized early on that the future of freight forwarding rested not solely in the movement of goods around the world, but in information about the goods as they moved from the supplier to the customer. What truly set Robinson apart form his peers, however, was his practice of using positive imagery as "a means of overcoming obstacles and effectively reaching goals." Robinson became interested in the technique in 1971 in an effort to understand his son's learning difficulties and slowly began incorporating the practices into his business. Robinson also invested heavily in education, building a company training center in 1984 in the wine region of California, and sending senior management to attend graduate programs at Northwestern University and the University of California at Berkeley.

Analysts generally gave Robinson credit for his pioneering vision. However, in 1992, when Harper was forced to take a $48.3 million writedown, some accused him of overly optimistic accounting practices. "Mr. Robinson was out to reestablish Harper as the largest and most successful of the forwarders before retiring," one reporter noted, adding "it was simply a case of damn the torpedoes, full speed ahead and pickup the pieces once the war is over." Others called such accusations ludicrous. Nonetheless, the company completed a financial reorganization in 1993, and liquidated its real estate holdings, primarily warehouses, valued at $80 million total. In addition, Peter Gilbert, Harper's president, assumed Robinson's duties of chief executive officer, while Robinson remained chairman of the board.

Having essentially learned the business under Robinson's tutelage, Gilbert was well suited to fill some of Robinson's duties. A native of Barcelona, Spain, Gilbert moved to the United States in 1965 to play in the U.S. professional soccer league. He began working at Harper as a messenger at age 22 and rose from messenger to truck driver to mailroom clerk before he transferred to the company's ocean freight forwarding department, where he eventually worked his way up to the position of manager. In 1981, he was appointed senior vice-president, but left the company three years later to purchase and run Darrell J. Sekin Transport Co., a bankrupt trucking firm in Texas. Gilbert returned that company to profitability, and in 1991, when Harper bought Sekin for $21 million, Gilbert took on a senior management position with the firm.

Reorganization in the early 1990s

Gilbert was given a mandate to consolidate the company's sprawling network of offices and subsidiaries. In 1992, the company reduced its U.S. work force to improve efficiency and began offering "value added" services such as transport management, purchase-ordering, freight insurance, and temporary warehousing. The company continued to focus on trimming operating costs and improving profitability. In 1994, the company underwent a major reorganization plan, divesting its 20 percent stake in Intercargo, a cargo insurance underwriter, and consolidated Circle Airfreight Corp. and Harper Robinson & Co. into Circle International, its primary operating subsidiary. In the process, Harper integrated the marketing efforts of the two companies so that sales people were better able to sell all company offerings, from air freight space to overall logistics management.

During this time a trend emerged among international traders to contract out logistics management responsibilities, and Harper began marketing itself as a provider of such integrated services. To realize its goals, the company began recruiting from outside in an effort to bring the industry's "best and brightest" to Harper. In March 1996, Steven D. Leonard, a former airline executive, was named president and chief operating officer of Circle International. In June 1996 James A. McKinney, former Navy fighter pilot and president of Fed Ex Logistics Services, was appointed president of Harper Group. Commenting on the addition of McKinney, Chairperson Gilbert explained that the company sought "new dimensions in logistics knowledge, best practices, and user-driven technology development to help fuel our growth as a full service global logistics provider and trace facilitator." Given the trend toward outsourcing warehouse, distribution, trade finance, and customs brokerage services, Harper Group seemed assured of doing increased and brisk business in that industry into the next century.

Principal Subsidiaries: Circle International, Inc.; Circle Freight International; Con-Carriers; Max Gruenhut International; Sekin Transport International; United Intermodal Lines.

Harper Group Inc. History

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