“Amazonization” Driving Change Across the Board
In both the domestic and global front, the consolidation trend in the third-party logistics (3PL) industry remains a gathering storm - with record merger and acquisition activity being reported across all sectors.
In fact, many of the more notable deals took place late last year as more 3PLs aim to keep pace with the continued “Amazonization” of the global market.
For example, MNX acquired Network Global Logistics, creating a market leader in time-critical logistics, while Penske bought Old Dominion Truck Leasing, expanding its core leasing business.
The market also saw RoadOne buy First Coast Logistics, bolstering its drayage network as well as Transportation Insight acquiring Nolan Transportation Group in an effort to double down on its truck brokerage and freight management.
And finally, Lineage bought a string of cold storage companies including Service Cold Storage in a bid to challenge Americold.
According to Benjamin Gordon, managing partner at Cambridge Capital and BG Strategic Advisors (BGSA), there’s also the geographic 3PL expansion designed to speed up delivery times.
“Within the global context, it’s important to observe that DSC Logistics was sold to South Korea’s CJ Logistics,” he says. “We also witnessed CFI, formerly Con-Way Freight acquiring Optimal Freight, resulting in a truckload and asset-based 3PL expansion to improve cross-border trade in North America.”
In other global arenas, FedEx teamed up with Wirecard, providing payment processing and retail outlets in India and Germany.
Meanwhile, AIT bought ConneXion World Cargo, bringing the UK-based forwarder into their fold. Panalpina added Skyservices in South Africa, with a focus on perishables, while Kerry Logistics went to Italy to buy Saga Italia, a specialist in oil and gas freight forwarding. Meanwhile, Kuehne + Nagel purchased Panatlantic Logistics in Ecuador.
Gordon maintains that shippers should also consider the changes made in other ground-based 3PL service sectors.
“These came about as a consequence of some obvious synergies,” he says. “BNSF bought Unlimited Freight, adding flatbed capabilities. Pilot purchased Manna, gaining a last-mile foothold in furniture. Ryder bought MXD, becoming the No. 2 player in big and bulky e-commerce, while the Hub Group bought CaseStack, combining intermodal logistics with asset-light warehousing.”
Meanwhile, other global merger and acquisition deals were technology-driven, says Gordon, who points to Project44 acquiring GateHouse, a Denmark-based business with European visibility data. Meanwhile, Australia-based WiseTech bought a string of U.S.-based customs brokerage technology companies.
Finally, there are the deals involving “logistics plus technology” to consider, says Gordon. “Yusen Logistics added ILG, gaining an e-commerce warehousing platform with more than 700 clients worldwide,” he says, “and FedEx bought UK-based P2P Mailing, providing e-commerce transportation solutions, and expanding FedEx’s cross-border capabilities.”
Armstrong & Associates Top 50 U.S. Third-Party Logistics Providers (3PLs)
|
2018 Rank | Third-party Logistics Provider (3PL) | 2018 Gross Logistics Revenue (USD Millions)* |
01 | 16,631 | |
02 | 10,850 | |
03 | 9,814 | |
04 | 8,214 | |
05 | 8,138 | |
06 | 6,594 | |
07 | 4,178 | |
08 | 4,000 | |
09 | 3,731 | |
10 | 3,684 | |
11 | 3,643 | |
12 | 3,170 | |
13 | 3,025 | |
14 | 3,022 | |
15 | Transplace - Featured SC24/7 Sponsor | 2,886 |
16 | 2,711 | |
17 | 2,596 | |
18 | Landstar - Featured SC24/7 Sponsor | 2,542 |
19 | 2,440 | |
20 | 2,427 | |
21 | 2,358 | |
22 | 2,300 | |
23 | 2,290 | |
24 | 2,139 | |
25 | 2,000 | |
26 | 1,650 | |
27 | 1,595 | |
28 | 1,552 | |
29 | 1,550 | |
30 | 1,500 | |
31 | 1,465 | |
32 | 1,384 | |
33 | 1,373 | |
34 | 1,255 | |
35 | 1,165 | |
36 | 1,148 | |
37 | 1,110 | |
38 | 1,082 | |
39 | 1,075 | |
40 | 1,020 | |
41 | 1,018 | |
42 | 1,000 | |
43 | 957 | |
44 | 916 | |
45 | 886 | |
46 | 842 | |
47 | 811 | |
48 | 809 | |
49 | 805 | |
50 | 800 |
*Revenues are company reported or Armstrong & Associates, Inc. estimates and have been converted to US$ using the average annual exchange rate in order to make non-currency related growth comparisons.
Copyright © 2019 Armstrong & Associates, Inc.
Armstrong & Associates Top 50 Global Third-Party Logistics Providers (3PLs)
|
2018 Rank | Third-party Logistics Provider (3PL) | 2018 Gross Logistics Revenue (USD Millions)* |
01 | 28,120 | |
02 | 25,320 | |
03 | 19,968 | |
04 | 18,781 | |
05 | 16,631 | |
06 | 12,411 | |
07 | 10,850 | |
08 | 10,174 | |
09 | 9,814 | |
10 | 8,214 | |
11 | 8,138 | |
12 | 7,602 | |
13 | 7,356 | |
14 | 6,645 | |
15 | 6,283 | |
16 | 6,156 | |
17 | 6,082 | |
18 | 5,980 | |
19 | 5,618 | |
20 | 5,415 | |
21 | 5,035 | |
22 | 4,875 | |
23 | 4,820 | |
24 | 4,752 | |
25 | 4,400 | |
26 | 4,000 | |
27 | 3,852 | |
28 | 3,731 | |
29 | 3,684 | |
30 | 3,646 | |
31 | 3,643 | |
32 | 3,170 | |
33 | 3,022 | |
34 | Transplace - Featured SC24/7 Sponsor | 2,886 |
35 | 2,711 | |
36 | 2,639 | |
37 | Landstar - Featured SC24/7 Sponsor | 2,542 |
38 | 2,440 | |
39 | 2,300 | |
40 | 2,290 | |
41 | 2,110 | |
42 | 2,000 | |
43 | 1,990 | |
44 | 1,815 | |
45 | 1,730 | |
46 | 1,651 | |
47 | 1,650 | |
48 | 1,595 | |
49 | 1,552 | |
50 | 1,550 |
*Revenues are company reported or Armstrong & Associates, Inc. estimates and have been converted to US$ using the average annual exchange rate in order to make non-currency related growth comparisons.
Copyright © 2019 Armstrong & Associates, Inc.
The Amazon Conundrum
The phenomenon of “Amazonization” refers to the wholesale disruption occurring across logistics and e-commerce platforms that was similar to the “Walmartization” that occurred across North America in the 1990s and early 2000s. Over the past 19 years, Amazon has more than quintupled in value.
Analysts for SJ Consulting Group, a Pittsburgh based research, and consulting firm, reckons that even though Amazon does not call itself a 3PL, it’s driving unprecedented change within the industry. Like Armstrong, the analysts at SJ believe that Amazon’s revenue model stemming from logistics services is “opaque.”
Mark D’Amico, SJ Consulting’s senior analyst, says that Amazon’s one-day shipping announcement made in April may have “a counterintuitive consequence” for some 3PL competitors, as it could create opportunities for them to grow in a market that was long stagnant. “In short, Amazon’s innovation and the customer expectations it drives are making ultimate success a question of who adapts quickest,” he adds.
Like Armstrong, D’Amico believes that managing data and investing in fulfillment solutions is no longer an option for 3PLs. “It’s a ‘do or die’ situation now,” he says. “Digitization is for real.”
Trusting Truckers is Key, says the Transportation Intermediaries Association
According to a recent white paper produced by Transportation Intermediaries Association (TIA), being a “shipper of choice” remains one of the most tired clichés in the current third-party logistics (3PL) market vernacular.
While hardly dismissing the value of having a special shipper relationship, the authors of “Creating a Win-Win-Win Business Relationship” maintain that 3PLs must nurture better partnerships with their motor carrier providers as well.
The expectations of shippers, 3PLs and carriers have traditionally moved in just one direction, states the TIA study. Results show that, in 2018, directional changes - made by both shippers and carriers - were made due to an industry-wide driver shortage and compliance with the electronic logging device (ELDs) rule. Increasingly, these factors changed the dialogue for all parties to meet driver expectations and to make the most of the 660 minutes of driving availability, the authors add.
Chris Burroughs, senior director of government affairs for the TIA, makes many of the same observations. He’s especially adamant about ongoing collaboration in the U.S. “On the domestic front, TIA has seen a fundamental shift in the past 12 months, as 3PLs continue to strive to provide exemplary customer service not only for shippers, but for their motor carriers as well,” he says.
“The customer today is buying drivers’ hours,” says Jim Ward, president and chief executive of D.M. Bowman, a full-service trucking and logistics provider based in Williamsport, Md. “We need to work with customers to best utilize time for the driving associate.”
In TIA’s “Win-Win” study, logistics managers reiterated the importance of trust, communication, and loyalty by saying that those are the factors making it possible to solve today’s challenges - even more so than technology in many instances.
“You still need the human interface,” says J.J. Jones, chief supply chain officer of Monin Americas, a manufacturer of food and beverage flavorings with headquarters in Clearwater, Fla. “You need to talk to get things done.”
Download the White Paper: Creating a Win-Win-Win Business Relationship
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