UPS buys U.K.'s Freightex in first foray into European brokerage
UPS to leverage Coyote, Freightex networks in trans-Atlantic brokerage push.
UPS Inc., extending its freight brokerage presence across the Atlantic, said today it has acquired U.K.-based broker Freightex Ltd., which has operations across Europe, for an undisclosed sum.
Under the deal, which actually closed on Jan. 3, Dover-based Freightex will operate as a wholly owned subsidiary of Atlanta-based UPS. Freightex, which is privately held and doesn't disclose financial information, provides truckload, less-than-truckload (LTL), specialized, and refrigerated services. It uses an "asset-light" platform, where it controls how the fleet is used but generally doesn't own the equipment or employ company drivers. Freightex generates most of its revenue from cross-border haulage.
Freightex's operations are similar to that of Coyote Logistics LLC, a Chicago-based broker that UPS acquired in August 2015 for $1.8 billion, its largest purchase ever. Coyote, like Freightex, operates as a UPS wholly owned subsidiary, reflecting UPS' decision to allow the brokerage business, a segment where it is largely unfamiliar, to operate with an unusually wide amount of latitude for a UPS operation.
Acknowledging the common business models between Coyote and Freightex, UPS said in a statement that it would attempt to leverage the dual customer and carrier networks, IT systems, and business processes to improve cross-selling and generate efficiencies. Both brokers are known for having robust IT systems, a must-have given the nature of their work and the increasing demands being placed on brokers. Brokers traditionally match loads with carrier capacity, but their role has broadened in recent years to include services performed by third-party logistics (3PL) providers.
Freightex "has developed some interesting technologies and apps for managing trucking capacity, and for providing customers with an user-friendly interface," said Evan Armstrong, president of Armstrong & Associates Inc., a research consultancy that closely tracks 3PLs and brokers. "This acquisition should be a good match with UPS's overall transportation management strategy."
The value of the European 3PL market was expected to reach $174 billion as of the end of last year, according to Grand View Research Inc. However, the brokerage segment is growing faster than the total market, an expansion likely to continue as more shippers and carriers in the U.K. and Europe gravitate toward the brokerage model, UPS said. "Brokered shipping services often provide greater efficiency brought about by higher fleet utilization" when compared to in-house fleets, UPS said in the statement.
A key reason for buying Coyote was to help UPS reduce "network variability," where supply and demand are not always in proper alignment, through the use of a broker's expertise and technology. UPS' ground network would often be susceptible to unforeseen demand surges, where it would be forced to pay a premium to other carriers to haul the goods, or it would suffer from a lack of supply-demand of balance that would force trucks and drivers to operate empty miles. The Coyote acquisition was designed in part to improve UPS' asset utilization and to avoid those scenarios.
About the Author
Executive Editor - News
Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
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