Kewill Inc. said today it will buy rival transportation management systems (TMS) provider LeanLogistics Inc. from its Australian parent Brambles Ltd. for a reported $118 million, a global combination of two major players in the increasingly busy hosted TMS segment.
The acquisition creates a combined TMS platform with more than 14,000 carrier partners that make up the largest network of any North American provider, the companies said. The combined firms manage more than $10 billion in annual freight spend, they said.
The combination brings Lean heavily into the TMS segment that supports parcel operations, which has long been a Kewill strength. Chelmsford, Mass.-based Kewill gains access to Lean's "LeanDex" software, which compares truckload rates across North America by aggregating shipper-carrier transactions for dry van and refrigerated shipments. Kewill said in a statement that many of its 7,500 customers worldwide will find the application useful.
The deal integrates Lean's U.S. and European presence with Kewill's European and Asian network, according to the companies. The compact will also strengthen services that support yard management and rail shipment-tracking and settlement operations, the firms said. Lean has relied on the deep pockets of its parent to finance its geographic and portfolio expansion.
Under the deal, Lean will remain in Holland, Mich., and become Kewill's largest office, the firms said. In the statement, Kewill CEO Doug Braun said the company "intends to build around this office and leadership team in the coming months." The companies did not state the transaction's value in their statement. Brambles, whose portfolio includes the CHEP pallet business, acquired Lean in March 2008 for $45 million in cash.
The announcement is one of the biggest moves yet by focused TMS providers to amass share in an active and growing segment of the supply chain. Increasingly, technology is viewed as the differentiator in a commoditized business like physical distribution. Third-party logistics providers (3PLs) add value by leveraging TMS functionality to support a broad and growing range of customer functions that fall into the supply chain business. Firms like Chicago-based Coyote Logistics LLC. and Command Transportation, and Kansas City, Mo.-based Freightquote.com Inc., brought powerful systems to the table when larger firms looking to add proven technology from the outside purchased them.
"Acquiring firms are gaining not just strong books of business, but relatively young technology platforms designed to profitably support agile logistics services," said Monica Truelsch, marketing director for TMW Systems Inc., a TMS provider in Mayfield Heights, Ohio, said in an e-mail today. Independent TMS providers will need to build critical mass to counter the encroachment of 3PLs that are bringing proprietary software solutions to the broader market, Truelsch said. Much of the 3PL-driven TMS technology is already in widespread use, she added.
Fabrizio Brasca, vice president of global solution strategy for intelligent fulfillment at JDA Software Group Inc., another TMS provider, said a consolidation phase is inevitable as the many smaller "Software-as-a-Service" (SaaS) providers that have entered the market during the past decade now see the need to become part of larger organizations.
The combination benefits LeanLogistics by allowing it to further expand its global reach, according to Brasca. "It is very difficult for a smaller solution provider to grow internationally, because the experience required to grow in a market outside North America is a challenge in cost and effort," Brasca said today at his company's user conference in Nashville. The international TMS market remains dominated by a small number of major players, including Redwood City, Calif.-based Oracle Corp.; German firm SAP SE; and Scottsdale, Ariz.-based JDA, he added.
Truelsch said the firms best positioned for any consolidation would be those whose systems can integrate asset and non-asset-based operations. "They best reflect the 'hybrid' operations we increasingly see as trucking, brokerage, and third-party logistics services continue to converge," she said. "Best-of-breed but silo applications will tend to lose out to networked and hybridized planning and execution platforms."
Ben Ames contributed to this report from Nashville.
Editor's note: An earlier version of this story incorrectly identified Brambles Ltd. as a U.K. Company. DC Velocity regrets the error.