Merger and acquisition activity among North American third-party logistics (3PL) providers will likely continue as acquiring firms look to defend their market share in an ongoing climate of consolidation, according to Northeastern University's 22nd annual survey of top 3PL executives.
The survey, which polled 30 CEOs of multinational 3PLs, found that several North American executives expected their companies to become acquisition targets. The executives weren't identified in keeping with the longstanding tradition of maintaining strict confidentiality. Of the 30 executives, 15 were from North America, 10 from Europe, and five from the Asia-Pacific region. Given the sizes of the companies they lead, the executives polled have their collective pulse on billions of dollars of transport and logistics spending.
Only three of the 10 European executives said M&A activity has affected their business. However, several said that Greenwich, Conn.-based XPO Logistics Inc.'s US$3.5 billion acquisition in April of French transport and logistics firm Norbert Dentressangle S.A., will likely have a profound impact on the continent's 3PL landscape.
This was the first time in the survey's history that M&A made the short list of European 3PL executives' main concerns, according to Dr. Robert C. Lieb, professor of supply chain management at Boston-based Northeastern. Lieb conducted the research for the survey, which was sponsored by 3PL Penske Logistics.
The respondents said the merger wave is being driven by providers' desire to increase scale and broaden global service offerings. It is also being aided by the availability of inexpensive capital, as interest rates remain historically low and liquidity reasonably abundant. "More customers are asking for 'one-stop' service beginning from design and production to delivery and reverse logistics," said Joseph Carlier, senior vice president of global sales for Penske Logistics, in a recent interview with CSCMP's Supply Chain Quarterly, DC Velocity's sister publication. "This is not just a matter of scale. The question for us is: How do we extend our product offerings on a strategic level?"/
The study's primary goal is to query 3PL CEOs about industry challenges, opportunities, and market dynamics, as well as profitability and revenue growth for individual 3PLs and for the regional industry. The key issues cited by executives are often specific to their regions. For example, North American executives cite issues such as the shortage of qualified commercial truck drivers, productivity concerns at U.S. West Coast ports, and the trend toward nearshoring of manufacturing. European executives are most concerned about Russian economic sanctions, more emphasis on 3PL alliances in developing countries, and an inflexible workforce. Asia-Pacific executives emphasized the steady growth of intra-Asia trade, infrastructure problems in developing countries, and economic developments in China.
However, three stood out as near-universal concerns: The impact of M&A, e-commerce, and new sources of competition. In North America, e-commerce accounts for about 12 percent of 3PL revenues on average, and respondents forecast that will grow to 21 percent in three years. European respondents generate some 5 percent of their revenues from e-commerce clients, which they expect to grow to 9 percent in three years. In the Asia-Pacific, e-commerce revenues now account for 10 percent of the 3PL revenue base, and the CEOs forecast that will more than double to about 24 percent in three years.
Accordingly, the 3PLs are taking steps to boost their ability to serve e-commerce clients. Respondents in all regions said they are upgrading their information technology to support this business segment. Many are investing in physical infrastructure, such as heavily automated distribution centers. North American respondents also mentioned that they are developing dedicated e-commerce operations and linked technology as well as expanded e-commerce consulting. Europeans are establishing new locations for consumers to pick up packages and are expanding international operations and value-added warehousing for e-commerce clients. Those in Asia-Pacific also are focusing on integrating domestic and international warehousing services and adding rapid delivery, parcel, and high-volume returns services to their portfolios.
E-commerce is bringing 3PLs into direct competition with the likes of Seattle-based Amazon.com, Chinese e-commerce firm Alibaba, and the San Francisco-based car service Uber. Six North American CEOs and four of the Europeans cited Uber, which is in talks with major retailers to provide delivery services, as a potential threat in the "last mile" delivery segment, Lieb said. A key question is whether Uber would be subject to the regulatory requirements that currently apply to 3PLs, parcel companies, and motor carriers, according to Carlier of Penske Logistics.
Respondents also identified Amazon as a competitive threat. When asked about Amazon's impact on the e-commerce marketplace, North American respondents mentioned an increased focus on same-day delivery, its expansion into multiple distribution channels, domination of small last-mile competitors, and the e-tailing and fulfillment giant generating so much volume in peak season that it can be difficult for others to get the services they need. European respondents said that Amazon is increasingly emphasizing same-day delivery, driving down transportation costs, and pressuring carriers to reduce cross-border premiums. At the same time, Amazon is developing more relationships with European 3PLs for last-mile delivery.
In Asia-Pacific, Alibaba is the big concern. Asked to identify Alibaba's impact on supply chain management in the region, respondents said the e-commerce behemoth provides customers with alternative methods of distribution for their products, offers consolidation services for small and medium-size businesses, and uses its market power to get lower rates from carriers, 3PLs, and government-owned warehouses. On the plus side, its last-mile delivery services have facilitated the rapid growth of e-commerce in the region, they said. None of the 3PLs involved in the survey provides services to Alibaba.
Overall, respondents were optimistic about the future, although not quite as bullish as they were last year, Lieb said. North American CEOs said the most important opportunities for 3PLs in their region are supporting the growth of nearshoring, expanding services for e-commerce businesses, retaining truck drivers, becoming more selective about markets served, going upstream in supply chains, and placing greater focus on intermodal services. In Europe, respondents said that 3PLs could bundle services for existing customers, support e-commerce sales, expand their global reach, focus on expanding into more profitable markets and trade lanes, provide data-management services to customers, and offer more services to small/medium customers. In Asia-Pacific, respondents mentioned the expansion of services in emerging markets, opportunities in health care, the provision of "lead logistics provider" services, assisting customers with network design, and bundling services for existing customers.
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.