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.
The transportation and logistics industries have been in perpetual consolidation for decades. Companies come and go. Some are acquired. Others fade away. Inevitably, new entrants take their place, especially in non-asset-based sectors like third-party logistics (3PL), where the barriers to entry are relatively low.
Though nary a year goes by without a thinning of the ranks, 2015 was an extraordinary time for large-scale shrinkage. According to consultancy Armstrong & Associates Inc., there were 11 $100 million-plus transactions in 2015 that involved third-party logistics providers, the most in one year since Armstrong began tracking deals in 1999. By contrast, there were just three and five such transactions in 2013 and 2014, respectively, according to Armstrong data.
FedEx Corp. and UPS Inc., two of the world's most high-profile transport and logistics firms, made the largest acquisitions in their histories in 2015. Memphis-based FedEx acquired Dutch-based rival TNT Express for US$4.8 billion. Atlanta-based UPS, which tried unsuccessfully to buy TNT Express in 2013 for US$6.8 billion, acquired Chicago-based freight broker Coyote Logistics LLC for $1.8 billion. FedEx also closed on its purchase of Pittsburgh-based contract logistics specialist Genco Supply Chain Solutions for an undisclosed sum—one analyst pegged it at about $2 billion—a deal that represented FedEx's biggest commitment ever to a firm in the non-transport segment.
The 2015 activity, which in some cases bore the fruit of the seeds planted as far back as early 2014, stands in stark contrast to the M&A torpor that existed between 2008 and 2014. That period included the financial crisis and so-called Great Recession, a time when many companies were focused on survival rather than growth. Yet industry CEOs stayed out of the M&A game even as U.S. and world economies recovered, albeit tortuously.
Robert C. Lieb, professor of supply chain management at Boston's Northeastern University, who conducts an annual survey of 3PL CEOs, said respondents to his 2014 survey believed that post-acquisition integration challenges were too daunting and potential acquisitions insufficiently accretive to justify an aggressive buying strategy.
That attitude seemed to change in 2015. Perhaps it was the slowdown in demand for virtually all transportation services—while 3PL demand continued apace—that pressured some CEOs into achieving top-line growth through acquisition instead of through organic measures. If that is the case, then M&A activity may be extended well into 2016. For example, sluggish demand and ample truck capacity have forced many truckload carriers to ratchet down forecasts for increases in base prices to 1 to 2 percent (from 3 to 5 percent). Rate compression, combined with rising costs for drivers, power units, and trailers, could put further pressure on organic revenue growth.
"Capacity remains loose and pricing for carriers is weak," said Ben Cubitt, senior vice president of consulting and engineering for Transplace LLC, a large Frisco, Texas-based 3PL. Cubitt said earlier this week that he finished three bid reviews before Christmas and that "all showed strong savings."
Evan Armstrong, Armstrong & Associates' president, said M&A volume would stay strong during 2016, though there will likely not be as many megadeals. He also noted that XPO, whose four-year buying spree has made it the talk of the industry, would be off the acquisition grid next year as it digests the Con-way acquisition.Brad Jacobs, XPO's chairman and CEO, said as much at an industry conference this past fall.
Armstrong also delivered some words of caution for prospective acquirers: A recent survey of 3PL customers found that large providers with $10 billion or more in annual gross revenues—revenues before the costs of purchased transportation—rate lower in customer service, value/pricing competitiveness, and process improvement capabilities than do providers with less than $1 billion in gross revenues. "There is a feeling that very large 3PLs need higher pricing to support their vast organizations and tend to be less proactive in identifying customer process improvements," Armstrong said in an e-mail. He added that service disruptions that often plague post-merger integrations could be a factor in the perception gap between small and large providers.
Armstrong noted that 56 percent of the respondents are trying to shrink their provider universe. "However, reductions due to acquisitions are not an optimal way of selecting your core 3PL group," he said. Armstrong said the continued consolidation among large players will "put more pressure on organizations to properly evaluate and select 3PLs which meet their needs."
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.