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.
FedEx Corp., making its boldest foray ever into the third-party logistics (3PL) field, said late yesterday it acquired
Genco Supply Chain Solutions, a Pittsburgh-based contract logistics provider, for an undisclosed sum.
The deal, scheduled to close sometime in 2015, affirms FedEx's strategy of expanding into areas beyond its core transportation
offerings. It also narrows the gap between the company and its rivals, UPS Inc. and DHL Corp., for market share in the global
supply chain management segment, an area where, until now, FedEx has not been a relevant player.
Genco will operate as an independent company until the transaction closes, Memphis, Tenn.-based FedEx said in a statement last
night. Genco CEO Todd Peters will continue in his position after the deal is done, FedEx said.
It is unclear how Genco will be integrated into FedEx; FedEx currently has a small supply chain group, and there appears
to be little, if any, overlap between FedEx and Genco. Also unclear is how much FedEx paid for Genco. According to Benjamin J.
Hartford, transportation analyst at investment firm Baird, other high-quality 3PLs have fetched a multiple of between 7 and 9
times earnings before interest, taxes, depreciation, and amortization (EBITDA), a marker of cash flow. For example,
XPO Logistics Inc., a fast-growing 3PL, paid a multiple of around 8 in July when it acquired New Breed Logistics,
also considered a top-tier contract logistics provider, according to Hartford.
Benjamin Gordon, CEO of BG Strategic Advisors, a mergers and acquisitions firm specializing in the transportation and logistics
sector, said Genco should be assigned a multiple of 10 times EBITDA. Based on an estimate by SJ Consulting, a consultancy, that
Genco generates about $208 million in annual EBITDA, FedEx would then have paid more than $2 billion.
Genco, founded in 1898 and privately held, is one of the largest North American companies in the contract logistics segment,
where providers offer warehousing and distribution services to companies on a contractual basis and deliver transportation
management solutions under that umbrella. Genco generates $1.6 billion in annual revenue and manages 35 million square feet of
North American warehouse space from more than 130 locations. Only Exel/DHL Supply Chain, a unit of DHL, has a larger North
American warehouse footprint among what are known as value-added, warehouse and distribution 3PLs, according to Evan Armstrong,
president of Armstrong & Associates Inc., a consultancy that tracks the 3PL business.
Reverse logistics accounts for about 40 percent of Genco's revenue, according to Armstrong, who called the company the dominant
player in the fast-growing segment. Genco gained a strong position in high-tech reverse logistics after its mid-2010 acquisition of ATC Technology. Besides technology, Genco's most active vertical
segments are health care, retail, and consumer/industrial.
Like many leading 3PLs, Genco offers an array of traditional forward and reverse logistics services. It has also built what
Armstrong said is an impressive suite of IT solutions to support its product lifecycle services. Armstrong called Genco a
"technological generation ahead of most value-added warehousing and distribution 3PLs."
For FedEx, the acquisition is likely to trigger a sizable increase in package business from product returns. In turn, Genco,
whose operations are North American-centric, will have access to FedEx's global transportation and logistics network.
Neither company commented beyond a press release issued last night under the FedEx logo. FedEx executives are sure to be
quizzed on the transaction when the company releases its fiscal second quarter 2015 results tomorrow.
FEDEX'S HISTORY OF ACQUISITIONS
The acquisition is FedEx's first in the U.S. since May 2006, when it bought Watkins Motor Lines, a Lakeland, Fla.-based less-than-truckload
(LTL) carrier for $780 million. FedEx has had a fleeting but unsuccessful history with contract logistics companies. In 1998, it
acquired Caliber Logistics, Caliber Systems Inc.'s contract logistics unit, in the same transaction that included Roadway Package
System Inc. (RPS), Caliber's parcel-delivery operation.
FedEx transformed RPS into what is now known as "FedEx Ground," which has become a highly successful ground parcel delivery
operation. However, Caliber Logistics, considered at the time to be a solid operator, would effectively drop off FedEx's radar
screen, and eventually out of sight.
If FedEx ignored Caliber Logistics, it could have been because it never saw much value in the contract logistics business, believing it
to be a low-margin endeavor requiring more effort than it was worth. But through the years, UPS and DHL have built sizable global
supply chain operations to augment their transportation services, leaving FedEx to wonder if it should rethink logistics.
FedEx took a major step in that direction two years ago, when it announced
a revamp designed to add $1.6 billion annually to its bottom line by 2016 through a mix of cost cuts, productivity
enhancements, and yield improvements. The centerpiece of the strategy has been a heavier focus on the ground parcel segment and a
lessening of the role traditionally played by FedEx's air express business, which is still its largest revenue producer. However,
FedEx made clear it would play a more active role in nontraditional segments like supply chain management, freight forwarding,
customs brokerage, and rail intermodal, and that it would aggressively court vertical industries with custom solutions similar to those offered by UPS and DHL.
The Genco acquisition, according to Armstrong, takes that strategy to an entirely new dimension. "This is a gargantuan deal and
ramps up FedEx's supply chain competitiveness with UPS...for retail, high tech, and health care customers," he said.
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.