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.
It took three years and a $2 billion cheaper price tag than UPS' subsequently failed proposal to convince Smith to change
his mind. But today the 70-year-old legend of the transportation world pulled the trigger on something he had said he wouldn't do:
acquire TNT Express.
The $4.8 billion all-cash acquisition of the Dutch firm is the largest in FedEx's 44-year history as a public enterprise. It
also restores the Memphis, Tenn.-based company's European footprint to a size not seen since 1992, when it ended an ambitious
European expansion program and withdrew from all but the continent's major commerce centers. Over the subsequent two-plus decades,
FedEx gradually rebuilt its European network through internal growth and a series of smaller acquisitions in the U.K., Hungary,
France, and Poland, the latter two announced shortly after UPS announced its offer in early 2012 to buy TNT. But nothing up to now
compares with the impact of today's announcement.
In a joint statement, the companies said the transaction would meld TNT Express' strong European road platform and its air hub
in Liege, Belgium, with FedEx's global capabilities that feed largely off of its North American and Asia-Pacific networks. Tex Gunning, TNT Express' CEO, said the company
did not solicit a buyout offer and was prepared to execute a five-year operational turnaround, called "Outlook," which launched
last year.
Gunning said TNT Express' customers would benefit from working with one provider with broader geographic reach and a more
robust product portfolio. He added that TNT Express shareholders will reap benefits today that "otherwise would only have ben
available in the long run." The deal, which based on the current value of the U.S. dollar to the euro works out to be about
$8.70 a share, represents a 33-percent premium over TNT Express' April 2 closing price. The deal is expected to close in the
first half of 2016.
Smith's comments implied that, despite the gains that have been made through internal growth and so-called tuck-in acquisitions,
FedEx needed to go large to keep pace with the rapid changes in global business and shipping. "This transaction allows us to
quickly broaden our portfolio of international transportation solutions—especially the continuing growth of global
e-commerce—and positions FedEx for greater long-term profitable growth," he said.
It may also be a reflection of Smith not wanting to be on the outside looking in as Europe moves towards a fitful recovery on
the heels of quantitative easing measures recently implemented by the European Central Bank (ECB). FedEx brings up the rear in
market share among the four major parcel carriers in Europe. About 30 percent of its international revenue comes from Europe,
compared to 50 percent for UPS, according to investment firm Morgan Stanley & Co. Several analysts surmised back in 2012 that UPS
wanted TNT in part to keep FedEx locked in last place with no chance of nailing a "homerun"-type acquisition to send its Euro
market share soaring.
EUROPEAN APPROVAL
The FedEx-TNT Express deal was approved by the boards of both companies but still must pass muster with European regulators. The
European Commission (EC), the European Union's antitrust arm, scotched UPS' offer in January 2013. But FedEx stands a better
chance of having its deal approved because its intra-European market share is significantly lower than that of UPS', according to
Jerry Hempstead, a former top U.S. official at DHL Express and now an industry consultant.
Share estimates of the European parcel market have historically been all over the lot. One estimate from DHL Express, Europe's
largest delivery concern, showed that DHL has 41 percent of the cross-border delivery market, UPS has 25 percent of the market,
TNT has 12 percent, and FedEx has 10 percent. The breakdown does not include intra-country and intercontinental airfreight
services.
By contrast, data compiled by the U.S. consulting company Shipware LLC found that DHL has 19 percent of the market, followed by
UPS with 16 percent, TNT with about 12 percent, and FedEx with less than 5 percent. The one common thread among these and other
estimates is that the combined FedEx-TNT entity now becomes the second-largest European parcel company.
Hempstead said he doesn't think UPS, which was the only prospective buyer for TNT Express in 2012, will counter the FedEx
proposal because of the EC's prior ruling. EU antitrust officials rejected the UPS-TNT deal because of market dominance and
anticompetitiveness concerns, though UPS and TNT proposed several divestiture steps to try to assuage antitrust issues. UPS even
approached FedEx about buying some of TNT Express' assets, but the discussions were very preliminary and went nowhere.
Susan L. Rosenberg, a UPS spokeswoman, said the company will study the FedEx-TNT deal but declined further comment. Claus
Korfmacher, a DHL spokesman, also would not comment on DHL's plans. However, it issued a statement saying a FedEx-TNT Express
combination would provide "additional business opportunities" for DHL because large-scale integrations often cause disruptions
for the combined company's customers, supplies, and staff, a scenario under which DHL could benefit.
DHL said the combination will "undoubtedly result in significant competitive changes in the express and logistics industry in
Europe as well as in various other regions worldwide."
One of those regions could be Latin America. In 2012 FedEx acquired Rapidao Cometa Logistica e Transportes SA, a move that
enabled FedEx to expand into the Brazilian domestic express market. Three years earlier, TNT Express acquired Brazilian-based
Aracatuba, which has a nationwide network and connects Brazil with Argentina, Uruguay, Paraguay, Chile, Bolivia, and Peru. That
year, TNT Express also acquired LIT, a Chilean domestic express provider. The new combined network will be integrated to make
FedEx a stronger presence throughout South America, according to Cathy Roberson, a U.S.-based analyst for Transport Intelligence,
a U.K. consultancy.
IMMEDIATE GAINS
Rob Martinez, Shipware's CEO, said the move immediately vaults FedEx into European prominence by adding TNT Express' sizable
continental ground network to FedEx's freighter fleet serving the region. FedEx will benefit most notably in France and the U.K.,
where it doesn't have a strong road-haulage presence, Martinez said. TNT Express, meanwhile, can leverage FedEx's system to expand
into North America, where its market share is virtually negligible.
The dollar's appreciating value versus the euro was a key reason FedEx was able to buy TNT Express for about $2 billion less
than the UPS offer. On March 19, 2012 when UPS revised its initial offer for TNT Express upward by $400 million to $6.8 billion,
the U.S. dollar was trading at .7142 to the euro. Today, the U.S. dollar is trading 28.9 percent higher at .9211. A strong dollar
elevates the purchasing power of U.S. companies looking to expand in markets like Europe via acquisition.
But currency fluctuations may have been just one factor. During the 10-month period that the UPS offer was on the table, TNT
Express was adrift. It was piling up losses in Europe, Brazil, and Asia; confronting declining customer service metrics; and
facing turmoil in its upper management ranks. In September 2012, its CEO abruptly resigned, adding to the theory that TNT Express
was in limbo, waiting either for a suitor to snap it up or to just fade into irrelevance against the likes of FedEx, UPS, and DHL
Express.
Left on its own after UPS abandoned its bid, TNT Express has continued to struggle financially over the past two years.
Revenues have declined year-over-year. It posted a 2014 operating loss after a significant drop in operating income in 2013 over
2012 results. Losses widened to 190 million euros in 2014 from 122 million euros in 2013 and 84 million euros in 2012. The
company's market capitalization had eroded, giving FedEx an entry at a much lower price point than UPS enjoyed.
During the first half of 2014, however, TNT Express revamped its management team with turnaround experts. It sold off expensive
aircraft assets in favor of leasing arrangements, modernized its road network, and continued work on improving its Liege hub,
which should be complete din 2016.
Hempstead, who had given TNT Express up for dead after UPS walked away, said he was impressed by the steps the company has
taken since then. "TNT Express is a very different company than it was in 2012," he said.
States across the Southeast woke up today to find that the immediate weather impacts from Hurricane Helene are done, but the impacts to people, businesses, and the supply chain continue to be a major headache, according to Everstream Analytics.
The primary problem is the collection of massive power outages caused by the storm’s punishing winds and rainfall, now affecting some 2 million customers across the Southeast region of the U.S.
One organization working to rush help to affected regions since the storm hit Florida’s western coast on Thursday night is the American Logistics Aid Network (ALAN). As it does after most serious storms, the group continues to marshal donated resources from supply chain service providers in order to store, stage, and deliver help where it’s needed.
Support for recovery efforts is coming from a massive injection of federal aid, since the White House declared states of emergency last week for Alabama, Florida, Georgia, North Carolina, and South Carolina. Affected states are also supporting the rush of materials to needed zones by suspending transportation requirement such as certain licensing agreements, fuel taxes, weight restrictions, and hours of service caps, ALAN said.
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.
Krish Nathan is the Americas CEO for SDI Element Logic, a provider of turnkey automation solutions and sortation systems. Nathan joined SDI Industries in 2000 and honed his project management and engineering expertise in developing and delivering complex material handling solutions. In 2014, he was appointed CEO, and in 2022, he led the search for a strategic partner that could expand SDI’s capabilities. This culminated in the acquisition of SDI by Element Logic, with SDI becoming the Americas branch of the company.
A native of the U.K., Nathan received his bachelor’s degree in manufacturing engineering from Coventry University and has studied executive leadership at Cranfield University.
Q: How would you describe the current state of the supply chain industry?
A: We see the supply chain industry as very dynamic and exciting, both from a growth perspective and from an innovation perspective. The pandemic hangover is still impacting decisions to nearshore, and that has resulted in a spike in business for us in both the USA and Mexico. Adding new technology to our portfolio has been a significant contributor to our continued expansion.
Q: Distributors were making huge tech investments during the pandemic simply to keep up with soaring consumer demand. How have things changed since then?
A: The consumer demand for e-commerce certainly appears to have cooled since the pandemic high, but our clients continue to see steady growth. Growth, combined with low unemployment and high labor costs, continues to make automation a good investment for many companies.
Q: Robotics are still in high demand for material handling applications. What are some of the benefits of these systems?
A: As an organization, we are investing heavily in software that will allow Element Logic to offer solutions for robotic picking that are hardware-agnostic. We have had success deploying unit picking for order fulfillment solutions and unit placing of items onto tray-based sorters.
From a benefit point of view, we’ve seen the consistency of a given operation improve. For example, the placement accuracy of a product onto a tray is far higher from a robotic arm than from a person. In order fulfillment applications, two of the biggest benefits are reliability and hours of operation. The robots don't call in sick, and they are happy to work 22 hours a day!
Q: SDI Element Logic offers a wide range of automated solutions, including automated storage and sortation equipment. What criteria should distributors use to determine what type of system is right for them?
A: There are a significant number of factors to consider when thinking about automation. In my experience, automation pays for itself in three key ways: It saves space, it increases the efficiency of labor, and it improves accuracy. So evaluating which of these will be [most] beneficial and quantifying the associated savings will lead to a “right sized” investment in technology.
Another important factor to consider is product mix. With a small SKU (stock-keeping unit) base, often automation doesn’t make sense. And with a huge SKU base, there will be products that don’t lend themselves to automation.
With any significant investment, you need to partner with an organization that has deep experience with the technologies that are being considered and … in-depth knowledge of the process that is being automated.
Q: How can a goods-to-person system reduce the amount of labor needed to fill orders?
A: In most order picking operations, there is a considerable amount of walking between pick faces to find the SKUs associated with a given order or set of orders. Goods-to-person eliminates the walking and allows the operator to just pick. I have seen studies that [show] that 75% of the time [required] to assemble an order in a manual picking environment is walking or “non-picking” time. So eliminating walking will reduce the amount of labor needed.
The goods-to-person approach also fits perfectly with robotic picking, so even the actual picking aspect of order assembly can be automated in some instances. For these reasons, [automation offers] a significant opportunity to reduce the labor needed to fulfill a customer order.
Q: If you could pick one thing a company should do to improve its distribution center operations, what would it be?
A: Evaluate. Evaluate the opportunities for improving by considering automation. In my experience, the challenge most companies have is recognizing that automation is an alternative. The barrier to entry is far lower than most people think!
Toyota Material Handling and its nationwide network of dealers showcased their commitment to improving their local communities during the company’s annual “Lift the Community Day.” Since 2021, Toyota associates have participated in an annual day-long philanthropic event held near Toyota’s Columbus, Indiana, headquarters. This year, the initiative expanded to include participation from Toyota’s dealers, increasing the impact on communities throughout the U.S. A total of 324 Toyota associates completed 2,300 hours of community service during this year’s event.
The PMMI Foundation, the charitable arm of PMMI, The Association for Packaging and Processing Technologies, awarded nearly $200,000 in scholarships to students pursuing careers in the packaging and processing industry. Each year, the PMMI Foundation provides academic scholarships to students studying packaging, food processing, and engineering to underscore its commitment to the future of the packaging and processing industry.
Truck leasing and fleet management services provider Fleet Advantage hosted its “Kids Around the Corner Foundation” back-to-school backpack drive in July. During the event, company associates assembled 200 backpacks filled with essential school supplies for high school-age students. The backpacks were then delivered to Henderson Behavioral Health’s Youth & Family Services location in Tamarac, Florida.
For the past seven years, third-party logistics service specialist ODW Logistics has provided logistics support for the Pelotonia Ride Weekend, a campaign to raise funds for cancer research at The Ohio State University’s Comprehensive Cancer Center–Arthur G. James Cancer Hospital and Richard J. Solove Research Institute. As in the past, ODW provided inventory management services and transportation for the riders’ bicycles at this year’s event. In all, some 7,000 riders and 3,000 volunteers participated in the ride weekend.