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.
A couple of years ago, XPO Logistics Inc. pursued a buy-out of Menlo Worldwide Logistics, the global contract
logistics arm of Con-way Inc., but it couldn't make a deal work. In the months to follow, Bradley S. Jacobs, XPO's
founder, chairman, and CEO, spoke to hundreds of customers who told him that if XPO wanted a "seat at the adult table"
it would, to a large degree, need to control its assets.
Yesterday, Jacobs took his seat, agreeing to spend $3 billion in cash and assumption of debt to buy Ann Arbor,
Mich.-based Con-way Inc. Con-way is the parent of one of the nation's largest less-than-truckload (LTL) carriers,
a moderately-sized truckload unit with operations in the U.S.-Mexico trade lane, the Menlo contract logistics arm, and
its Con-way Multimodal managed transportation division. Combined the company generates about $5.5 billion in annual revenue.
The deal, announced after the markets closed yesterday, works out to a price of $47.60 a share, a sizable premium over
Con-way's closing price yesterday of $35.53 a share. No counteroffers from other bidders are expected.
Jacobs said the acquisition makes Greenwich, Conn.-based XPO the second-largest LTL operator in the U.S., behind only
FedEx Freight, the LTL unit of Memphis-based FedEx Corp. The deal puts XPO squarely in the asset-based arena and represents
a dramatic pivot from the company's strategy of building a multibillion-dollar enterprise from the acquisition and integration
of nonasset-based providers as well as launching nonasset-based operations. In North America, XPO said, it will own approximately
11,000 tractors and 33,000 trailers, will have 6,000 trucks contracted through independent owner-operators, and will have
access to more than 38,000 independent carriers. Globally, XPO will own approximately 19,000 tractors and 46,000 trailers, have
10,000 trucks contracted through independent owner-operators, and gain access to more than 50,000 independent carriers.
In a conference call with analysts and the trade press this morning, Jacobs responded to questions about his apparent shift
from a largely nonasset-based strategy to one that incorporates a significant amount of assets, saying that XPO is seeking a
"more blended model of brokered, owned, and contracted capacity." One major reason for that change—which he termed an
"evolution"—is that by controlling assets, XPO will be able to reliably serve customers during periods of tight capacity.
Jacobs also said that his experience with Norbert Dentressangle, the French 3PL bought in April for US $3.5 billion, had led
him to take a fresh look at XPO's long-term strategy. After speaking with many of Dentressangle's customers, he said, he gained
a greater appreciation of the benefits of being able to offer a broader array of services to existing customers.
"If you have assets, you can do more business with those customers," he said. Otherwise, "you're only going to get 2, 3, or 4
percent of those customers' transportation spend." By adding Con-way and Menlo, XPO can sell its existing services to their
customers, and vice-versa, he said.
END OF ONE ERA, START OF ANOTHER
The deal marks the end of Con-way's 86-year life as an independent entity; during most of that time, the company was known as
Consolidated Freightways (CF). In the mid-1980s, CF was split into various nonunion regional trucking firms that later assumed
the Con-way Freight name, while the old company remained in long-haul trucking. That would prove to be the beginning of CF's end,
as strategic mishaps, reduced demand for long-haul services, and noncompetitive labor costs forced it out of business in 2002.
The XPO-Con-way deal isn't expected to close until the end of October, and Jacobs, in a phone interview today, declined to
comment on how he expects Con-way's operations to fully evolve. For now, the LTL unit will operate on the roads as it currently
does, with XPO's truckload system cross-selling its products and services, Jacobs said. Con-way's contract logistics business
and small $200 million truck-brokerage operation will be folded into XPO's existing service lines, he added. Jacobs said he has
not yet met with the executives running Con-way Multimodal, a $1.3 billion-a-year managed transportation operation. When the
deal closes, the combination of XPO's existing managed transportation business and Con-Way Multimodal will have about $2.7 billion in freight under management, Jacobs said. All of Con-way's units
will be rebranded as XPO Logistics.
XPO said in a statement yesterday that it expects to boost Con-way's annual operating profits by $170 million to $210 million
over the next two years through what it calls "synergies and operational improvements." Con-way President and CEO Douglas W.
Stotlar, who in recent years has been criticized by analysts for failing to maximize the value of the company's assets, will
serve in a limited role as an independent advisor through the first quarter of next year. Because there are few trucking
executives available to step in and run an LTL operation the size of Con-way Freight, it is expected that most of the
projected profit increases will come from enhanced operational and information technology efficiencies, rather than
through significant growth sparked by the cachet of a powerhouse trucking executive at the helm.
Jacobs said in the conference call, however, that he would run Con-way's LTL business himself for the time being, and
that XPO would seek a new leader soon. The eventual choice would not necessarily come from within the trucking industry,
although that would be preferable, he added.
One theory making the rounds is that Jacobs will eventually sell off the trucking operations because only Menlo and Con-way
Multimodal blend well with XPO's existing businesses. Con-way's asset-based units have been considered underperformers for years.
The LTL business, while stable, has not been able to return to the stellar operating ratios—the ratio of revenues to expenses
that is a benchmark of efficiency and profitability—that some of its better-run peers have achieved in recent years. Con-Way
Truckload, which operated as Contract Freighters Inc. (CFI) before it was acquired by Con-way in 2007 for $750 million, has
generally been viewed as a disastrous acquisition. In a note this morning, Kevin Sterling, transport analyst for BB&T Capital
Markets, an investment firm, pegged Con-way Truckload's 2015 market value at $540 million, which includes $108 million in
earnings before interest, taxes, depreciation, and amortization (EBITDA) and $425 million in debt, roughly the same amount
of debt Con-way assumed when it bought the old CFI.
Although Con-way Truckload is smaller and considered less of a core business than Con-way Freight, its strong U.S.-Mexico
presence would appear to mesh somewhat effectively with the former Pacer International, an intermodal marketing company bought
by XPO in January 2014 that at the time generated about 40 percent of its revenue in the U.S.-Mexico intermodal corridor.
Once it closes, the Con-way deal will increase XPO's third-party logistics (3PL) revenues (not including the Con-way trucking
operations) to approximately $10 billion, making it the sixth-largest global 3PL, according to data from Armstrong & Associates,
a consultancy. The deal would make 2015 the largest year for 3PL deals of more than $100 million in value since Armstrong began
tracking activity in 1999, it said.
Menlo may end up being the jewel in the crown—a term Jacobs himself used in today's conference call. It had 2014 gross
revenues of $1.7 billion and net revenue (revenue minus costs) of $748 million and manages 138 warehouses totaling 21 million
square feet, Armstrong said. The combination will expand XPO's global contract logistics platform by 22 million square feet to
151 million square feet, XPO said.
In a note yesterday, Armstrong said Menlo has significantly grown its China and Southeast Asia networks, which will be a
strong addition for XPO. Menlo has also expanded in Europe, which will serve XPO well as it continues to integrate the newly
acquired Norbert Dentressangle into its global network, Armstrong said.
Senior editor Toby Gooley contributed to this article.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
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.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.