Susan Lacefield has been working for supply chain publications since 1999. Before joining DC VELOCITY, she was an associate editor for Supply Chain Management Review and wrote for Logistics Management magazine. She holds a master's degree in English.
It's a familiar story: An enterprising party with a truck or some extra storage space starts a local business. Over time, the company extends its service menu and broadens its reach, becoming more of a full-service provider than simply a warehousing or trucking firm. Eventually, the business is passed down to the next generation of family members, who may further expand the operation.
That story's been repeated countless times throughout the industry's history, and today, companies bearing family names still stand side by side with the giant global third-party logistics service providers (3PLs). Indeed, some of the largest 3PLs, like C.H. Robinson, started out as family-owned businesses.
But times have changed. Higher barriers to entry and tighter margins have made the industry less appealing to entrepreneurs. At the same time, more customers are looking for a one-stop shop solution that can provide global reach at a low cost. Under the circumstances, it seems appropriate to ask: Is there still a future for the family-owned 3PL?
Size matters
There's no getting around the fact that there are competitive disadvantages to being small. Few family-owned 3PLs can offer the same geographic reach or end-to-end solutions that a global 3PL can.
"The biggest [challenge facing family-owned 3PLs] is they don't have the asset base," says Tom Speh, professor of distribution at Miami University in Oxford, Ohio. "When you're talking about IT systems, advanced handling systems, or [the capacity for] rapid expansion should a major client want that, they're really constrained in terms of their ability to do that because of the capital requirements."
Similarly, the smaller players are at a disadvantage when it comes to leveraging economies of scale. "We don't have the buying power to compete in a large-volume, low-cost scenario," admits Nicholas Carretta, president of Ultra Logistics, a family-owned 3PL based in Fairlawn, N.J.
But just as there are disadvantages to being a small player, there are also advantages, these 3PLs say. For one thing, they don't have to worry about pleasing Wall Street. "I've heard a lot of stories [suggesting that] multinational 3PLs can lose sight of who pays the bills," says John Ness, president of ODW Logistics, headquartered in Columbus, Ohio. "Consolidation in the industry has brought a lot of private equity players into our market, and I wonder how many CEOs spend their time and energy working to please boards versus their customers. That's a tough battle. But that's not an issue for us; we know who our customer is."
That kind of freedom can translate to service advantages for customers, these smaller 3PLs say. For one thing, there's the small players' agility and responsiveness to clients' requests. "Family-owned companies typically can make quick decisions," says Bill Butler, CEO of fourth-generation family-owned Weber Logistics, which is headquartered in Santa Fe Springs, Calif. "When the managers are also the shareholders, you don't have a lot of processes or bureaucracy that you have to deal with. You don't have to call someone back at the corporate office before you can make a decision."
For another, there's management stability. Carretta notes that in the wider world, career advancement often comes through hopping from one competitor to another. In a family-owned business, there's a greater likelihood that senior managers will be at the company for the long haul. "When you're working on a project with a family-run business and you know the stakeholders, you don't have to worry about a changing of the guard or a major reorganization," he says.
But most important of all, perhaps, is the culture and attitude that infuses these smaller operations. "When it's your name on the side of the truck or the building, you treat customers just as if you were ... welcoming someone into your home," explains Mark Richards, who took over Orange, Calif.-based Associated Warehouses Inc. from his father. "You're going take care of them, treat them as a guest. The big national companies can try to have that feeling and at some locations they do, but having that across the board is pretty rare."
Perception problem
Given all the advantages they cite, you might think these 3PLs would be eager to promote their status as family-owned businesses. But that's not necessarily the case. Some downplay the fact out of concern that potential customers will hear "family owned" and think "mom and pop."
There are times when being a family-owned business works to your advantage, says Carretta of Ultra Logistics, particularly if the potential customer is itself a family-owned business. "But other times, a family business is seen in a different light and may create a negative perception," he says. "Some potential customers may think you're not as capable or you don't have the abilities of some of the larger companies."
That concern is not unfounded, says Speh. "I think sometimes shippers have this assumption that bigger is better, that to get sophistication and so forth, you need to go to the big global players," he says. "I think they'd really be surprised if they took a close look at some of the family-owned fairly sizeable 3PLs."
Carving out a niche
To survive in the modern marketplace, family-owned businesses cannot rely solely on a folksy culture, say those at some of the leading entities. They must supplement their traditional customer focus with the kind of business discipline, technology, and information services typically associated with corporate enterprises. For example, Ultra Logistics has developed proprietary technology solutions, including a transportation management system, a spot bidding tool, and carrier monitoring programs, that it makes available to customers.
But developing and maintaining these types of systems does not come cheap. Not only are the solutions themselves expensive, says Speh, but companies also have to hire specialists to operate and maintain the software. The high price tag may keep some of the smaller family-owned 3PLs from truly competing on technology, he says.
Some of the smaller players have found success through the specialized services route. This might include focusing on a specific product category or providing regional expertise or highly customized solutions. For example, Weber Logistics, which counts a number of Fortune 500 companies among its clients, has also carved out a niche serving small yet growing companies that tend to be overlooked by the mega-3PLs.
The next generation
Ultimately, however, the future of family-owned 3PLs rests with the next generation—specifically, those in line to take over today's operations. Speh, who has been consulting for family-owned 3PLs for more than 30 years, says he sees fewer entrepreneurs entering the business. That means as family-owned businesses exit the market, they're less likely to be replaced.
And as much as heads of family-owned enterprises like to brag about the business's being in their blood, that's no guarantee their descendants will prove equally enthusiastic. After all, only 15 percent of family-owned businesses make it to the third generation, says Butler of Weber Logistics.
Butler adds that increasing consolidation in the marketplace, driven by factors like international competition and an infusion of private equity dollars, will likely further diminish the role of family-owned businesses. "I don't see family businesses as a dying breed, but the increasing consolidation in the industry will mean that you see fewer of them," he says.
Others remain more optimistic. Ness believes that there will always be a place for family-owned businesses in the 3PL industry. "I am an advocate of family business," he says. "I believe it represents some of the best business stories in our country. I'm regularly encouraging my peers to fight the good fight and stay private, but I recognize that selling the business makes sense for some people. For me, a better path is building a business that sustains the values of the family and flourishes for multiple generations."
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.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.