Con-way Inc.'s announcement last month that it would acquire privately held Contract Freighters Inc. (CFI) for $750 million caught analysts, competitors, and even CFI's employees by surprise. But it didn't take long for them to see that the deal makes good business sense on several levels. Con-way's acquisition of CFI, a North American truckload carrier based in Joplin, Mo., will create the sixthlargest truck transportation company in North America.
In a conference call with financial analysts, Con-way President and CEO Douglas W. Stotlar and Herb Schmidt, CFI's president and CEO, repeatedly referred to the synergies they expect to achieve by aligning CFI with Con-way Freight, Con-way Truckload, and Menlo Logistics. Administrative and purchasing savings would be "very modest," Stotlar said; the big benefits will come in these areas:
Diversified revenue, customer, and service mix. The combined truckload operations will generate about $500 million in annual revenue, further diversifying Con-way's revenues among less-thantruckload (LTL), truckload, and logistics. CFI's customer base in retail and consumer products complements Con-way Freight's focus on the industrial and manufacturing sector and Menlo Logistics' principal industry verticals. All three will be able to offer existing customers a broader range of services.
Improved truckload operations. Con-way Truckload and CFI will merge and will be headquartered in Joplin, Mo. Schmidt and his management team will run the truckload business. Stotlar said he did not anticipate any rationalization of staff or facilities. Both men declined to say how the combined organization would be branded.
Con-way gains CFI's extensive office and operations complex, with its high-tech "war room" for dispatching, tracking, and managing equipment across North America. It will acquire 300 new, emissions-compliant tractors that are replacing CFI's older equipment. CFI, which currently has six facilities outside of Joplin, will be able to use some of Conway Freight's terminals as secure drop and hook locations.
A greater presence in Mexico. CFI earns about 40 percent of its revenues from cross-border business with Mexico. Stotlar noted that CFI's capabilities complement those of Con-Way Freight and Menlo, which could lead to expanded Mexican service offerings.
Synergies with Menlo Logistics. Menlo manages about $600 million in domestic truckload services for its customers, some of which already is handled by CFI. But Menlo has some costly head-haul problems that will largely be resolved when CFI and Menlo can use each other's freight to balance lanes, Stotlar said. In fact, that was a major consideration in the buyout decision. "Empty miles are a much greater problem now because of the cost of fuel," he said. "Carriers don't capture a fuel surcharge on those empty miles, so the benefits of reducing empty miles are much greater today, proportionally speaking."
"We were amazed by all the synergies we identified as this has unfolded," said Schmidt. There are more to come, though: As soon as the deal was announced internally, Stotlar said, employees began suggesting even more ways the two carriers could benefit from the acquisition.
The number of container ships waiting outside U.S. East and Gulf Coast ports has swelled from just three vessels on Sunday to 54 on Thursday as a dockworker strike has swiftly halted bustling container traffic at some of the nation’s business facilities, according to analysis by Everstream Analytics.
As of Thursday morning, the two ports with the biggest traffic jams are Savannah (15 ships) and New York (14), followed by single-digit numbers at Mobile, Charleston, Houston, Philadelphia, Norfolk, Baltimore, and Miami, Everstream said.
The impact of that clogged flow of goods will depend on how long the strike lasts, analysts with Moody’s said. The firm’s Moody’s Analytics division estimates the strike will cause a daily hit to the U.S. economy of at least $500 million in the coming days. But that impact will jump to $2 billion per day if the strike persists for several weeks.
The immediate cost of the strike can be seen in rising surcharges and rerouting delays, which can be absorbed by most enterprise-scale companies but hit small and medium-sized businesses particularly hard, a report from Container xChange says.
“The timing of this strike is especially challenging as we are in our traditional peak season. While many pulled forward shipments earlier this year to mitigate risks, stockpiled inventories will only cushion businesses for so long. If the strike continues for an extended period, we could see significant strain on container availability and shipping schedules,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release.
“For small and medium-sized container traders, this could result in skyrocketing logistics costs and delays, making it harder to secure containers. The longer the disruption lasts, the more difficult it will be for these businesses to keep pace with market demands,” Roeloffs said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.