Mergers Are Creating Global Logistics Superpowers the Scramble for Market Share Has Everyone Seeking More Global Capacity
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TT LOGISTICS 50 Mergers Are Creating Global Logistics Superpowers The Scramble for Market Share Has Everyone Seeking More Global Capacity By Daniel P. Bearth ucts — who are outsourcing manufactur- Senior Features Writer ing to lower-cost countries. “It is a global economy,” said Jack Gross, general manager of Schneider Logistics, a he recent wave of logistics mergers unit of truckload carrier Schneider and acquisitions represents both a National Inc. in Green Bay, Wis. “If you Tsign of the times and a sign of things are unable to mirror what the clients are to come, according to executives at logis- doing, you’re in trouble.” tics companies and industry analysts, as To enhance its ability to handle imported companies across the globe scramble to goods, for instance, Gross said that create logistics superpowers that can pro- Schneider purchased American Port Ser- vide door-to-door global transportation vices and plans to expand its warehousing management for shippers. and consolidation services to additional To gain share in a rapidly growing U.S. ports and inland rail terminals. market, logistics service “Ports are the crucial providers based in North place to be,” Gross said. America are bolstering “As fuel gets more the services they offer expensive, steamship and extending their busi- lines and railroads want ness into China and else- to keep containers near where, and European the port” where they can companies are looking to be easily reloaded with establish logistics operations in North export goods or returned empty, rather America and Asia, transportation execu- than being tied up for 20 or 30 days in dis- tives and industry analysts said. parate locations around the country. “You have to have global capability and To increase its size, Yellow Roadway pur- end-to-end solutions for clients in North chased the operations of GPS Logistics in America as well as in Europe and Asia,” Asia and set up a joint venture with Chi- UPS Inc. said Jim Ritchie, president of Meridian nese freight forwarder JHJ International Having operations in China has become critical for U.S. logistics companies IQ, a unit of Yellow Roadway Corp. Transportation Co. because shippers are demanding end-to-end solutions from logistics providers. That is one of the driving factors, analysts Yellow Roadway, Overland Park, Kan., is said, behind Germany’s Deutsche Post the nation’s largest less-than-truckload Dave Kulik, group managing director, The largest market for logistics services World Net’s planned $6.7 billion purchase general freight carrier and parent of logis- logistics, TNT NV, said he’s not surprised in 2004 was North America, with revenue of London-based Exel PLC, the world’s tics provider Meridian IQ. at the size and pace of logistics mergers of $117.4 billion, Armstrong said. U.S. largest logistics company (9-26, p. 1). Yellow also expanded its business in because of the need for broader coverage logistics revenue totaled $89.4 billion, a Benjamin Gordon, a logistics industry North America with the purchase of USF and more global services. jump of 16.3% from $76.9 billion in 2003 consultant in Boston who specializes in Corp. in May. The USF Logistics business “The world is colored,” he said, and nearly three times the 1996 level, mergers and acquisitions, said he expects of USF ranked No. 26 on the 2004 TRANS- “It’s brown for UPS, purple for FedEx, with automobile manufacturers the top merger activity to remain brisk — PORT TOPICS Logistics 50 list. yellow for DHL and orange for TNT. buyers of logistics services, Armstrong although the possible Deutsche Post/Exel In addition, parcel carrier and logistics These four integrators are putting togeth- reported. combination might put a damper on some services provider UPS Inc. was rumored er freight, logistics, rail, parcel and The initial appeal of outsourcing logistics deals, since “two of the most likely buyers to be interested in acquiring Dutch freight freight management — a complete suite was the ability of third-party logistics firms are doing something else in the next year.” forwarder and package carrier TNT NV, of services.” — 3PLs — to lower costs by consolidating Most merger activity will continue to which operates TNT Logistics North TNT is moving parts, for instance, out shipments, negotiating favorable rates with come from overseas as freight carriers and us- foreign-based compa- ing information technolo- nies seek to establish a gy to optimize routing, foothold in North Amer- Top 10 Buyers of Logistics Services said John Ficker, presi- ica, he said. “The ability dent of the National to offer a combination of (ranked by number of 3PLs they use) Industrial Transportation warehousing and for- Number Company League, Arlington, Va. warding services lends 43 General Motors “The low-hanging fruit itself to European for- is gone. That game is 32 DaimlerChrysler warders buying U.S. over,” said Ficker, whose firms,” Gordon said. 30 Ford Motor association is the largest The declining value of 30 Wal-Mart Stores organization represent- the dollar also makes it 28 Volkswagen ing shippers. “Capacity is cheaper for foreign 26 Hewlett-Packard all sucked up.” firms to buy U.S. firms, A new development, 24 Unilever he said. he said, is service pro- But North American 22 Procter & Gamble viders that help shippers companies do not in- 21 General Electric locate distribution and tend to get shut out, 19 Siemens manufacturing facilities, transportation execu- Source: Armstrong & Associates coordinate delivery of tives said. raw materials and parts, Vicki O’Meara, presi- and arrange for deliv- dent of U.S. Supply ery of finished goods to Chain Solutions for Ryder System in Miami, America in Jacksonville, Fla. of Belgium, Singapore, South Africa and customers. said Ryder is seeking permission from the Also, UPS plans to step up acquisitions Brazil for an automotive client in Michi- As a result, shippers now are looking at Chinese government to expand into main- in Europe in response to the announced gan, providing end-to-end transporta- what they are paying logistics manage- land China. Ryder’s Asian logistics opera- Deutsche Post/Exel deal, said Michael tion, warehousing and tracking, Kulik ment providers and making demands, he tions are currently based in Singapore. Eskew, chief executive officer, and Kurt said. said. “We’re seeing our customer base Kuehn, worldwide sales and marketing Worldwide spending on third-party For instance, Wal-Mart Stores, the demand . global capacity. Many interna- chief. logistics services — supply chain consult- nation’s largest retailer, requires its largest tional customers also want to reduce the “It’s no news that everybody is looking at ing and transportation management, vendors to use radio frequency identifica- total number of providers. Size does mat- everybody else,” said UPS spokesman warehousing, dedicated contract car- tion technology to help track shipments. ter,” she said. John Wheeler to reporters after the Ger- riage, air and ocean freight forwarding “Technology is playing a more important Ryder, Schneider Logistics, Penske man newspaper Die Welt published and rail and truck brokerage — totaled role, even down to the truck drivers,” said Logistics and Yellow Roadway are among Eskew’s and Kuehn’s comments. $339.4 billion in 2004, up from $303 bil- Bill Tomasi, senior logistics consultant for the U.S. companies expanding their logis- “The industry is definitely fractured at the lion in 2003, according to Richard Arm- Provia Software. The Grand Rapids, tics operations into China and Asia to moment and definitely is in a consolidation strong, publisher of Who’s Who in Logis- Mich.-based firm provides supply chain serve their key customers — especially in mode,” Wheeler said, as companies seek to tics: Armstrong’s Guide to Global Supply auto manufacturing and consumer prod- gain share in a rapidly growing market. Chain Management. (See LOGISTICS, p. 4) 2005 TRANSPORT TOPICS LOGISTICS 50 — 3 TT LOGISTICS 50 U.S. Transportation Cost Advantage Is Slipping Away By Daniel P. Bearth Other speakers at the Atlanta Keller, executive vice president Senior Features Writer conference voiced similar concerns of NYK Lines, Tokyo, which about the nation’s ability to handle operates more than 600 ships the rapidly growing volume of in- worldwide and delivers freight ithin 10 years, the United ternational trade. containers to nearly all major States could lose most of “A longer supply chain involves U.S. ports. Wthe competitive edge it more participants and more At the ports of Los Angeles and has in transportation costs because transportation modes,” said Long Beach, for example, work- trucking productivity has bottomed Clarence Gooden, executive vice ers unload an average of 25 con- out and because other nations, like president of CSX, Jacksonville, tainers per hour from cargo China, are investing heavily in Fla. That is, as manufacturing ships, compared to an average of transportation infrastructure to and suppliers move offshore, 40 per hour at foreign ports, said move freight more efficiently. moving supplies and goods is a Keller. The trend, if it is not reversed, more intricate and complex task Keller said the construction of could make it more difficult for that requires greater coordina- additional container ships should U.S. firms to compete against com- tion and precision to prevent hold down costs for ocean ship- panies in other parts of the world, costs from rising, he said. ping, but that the larger vessels some freight industry executives “These cost pressures have being built take more time to contend. forced the reduction of invento- unload, creating a shortage of At a conference on freight trans- BAX Global ries through the supply chain,” berths and increasing the time it portation productivity held this fall Infrastructure investments in China could erode the current U.S Gooden said.