GLOBAL FORWARDERS\\\


The market share of the top global forwarding and logistics companies – has it been changing significantly or is likely to do so in future? Will the big forwarders’ share of the global market increase or decrease? “Overall


the contribution to


the entire world’s GDP produced by the outsourcing of logistics activities (that is, by global 3PLs) accounted for 11.6% in 2013, according to Armstrong & Associates in 2014. In terms of trends in the global 3PL market, several studies (including Armstrong & Associates, Capgemini, 2014, Eye for Transport, 2014) give a positive outlook: global revenues up 9.9% in 2011/12 and 4% in 2012/13. “The geographical breakout


indicates stronger increases in revenues for the market of Global 3PLs in Asia-Pacific and in Latin America, while Europe suffered a certain stagnation with a decrease of -2.6 % in 2011/12 and a recovery of 1.2% in 2012/13. “The US saw a constant


increase. According to the 21st Annual Survey of World 3PL CEOs presented at the last Council of Supply Chain Management Professionals (CSCMP) Annual Conference in San Antonio (US), the average three-year revenue projections among 3PLs in North America are +10.39% (down from +11.5% in 2013), +7.7% for Europe (up from +6.4% in 2013) and +15% for Asia-Pacific (up from +9% in 2013). “Factors contributing to the


strong positive estimate include growth in near shoring activities especially for the American market (re-shoring from China to Mexico) and a constant expansion of the import/export flows in the whole Asia-Pacific region. Europe still presents a slower growth due to the above mentioned stagnation (especially caused


by


countries). “Taking


southern into Europe account the


market share of the top global companies, trends indicate that the “usual suspects” dominated the scene in the last few years and they will be still contuinue to do so in the near future. Data from Armstrong & Associates (2014) indicate that DHL Supply Chain & Global Forwarding leads the


market (with a market share equal to 12% according to the gross revenues indicator), followed by Kuehne + Nagel with 8.7% of the market. No variations in the last couple of years were recorded for the top two. The considerable gap (as far as gross revenues are concerned) between the leader and the runner up (US$9 billion approximately – almost constant in the last three years) leads us to think that no particular surprises should be expected for the near future at least. The situation at the lowest position of the podium is different, in 2013 DB Schenker Logistics (7.6% of the market) overtook Nippon Express (6.6% of the market). The top 10 (with 55% of the market) looks quite stable and likewise do the gaps among competitors in the list. The only remarkable variation is in the gross revenues - the reduction of UPS Supply Chain Solution (market share down from 3.7% in 2012 to 2.1% in 2013). Perhaps this could be seen as the effect of the unaccomplished expansion through the acquisition of TNT Express Europe at the beginning of 2013, stopped by the anti- competition authority.” Some forwarders speak of


the importance of breaking into developing world markets – for example, intra-Asia or South America/Asia. How easy and profitable is it for them to do this, though – rather than stick to their knitting in Asia/Europe, Asia/ North America? “Breaking into a new market


can be a giant leap or a leap of faith. There is never a unique answer to this question. However, a range of ‘indicators’ are available to strategic logistics decision makers to help them draw up a big picture of the ease and profitability of breaking into a developing market. These indicators provide a view on what to expect when a new market is explored with specific reference to logistics. “Two main indicators are the


Logistics Performance Index (LPI) by the World Bank and the Global Service Location Index (GSLI) by AT Kearney. The LPI gives a score to 160 countries all over the world in terms of logistics performance, specifically focusing on the efficiency of customs and border clearance, on


the quality of trade and transport infrastructure, on the ease of arranging competitively priced shipments, on the competence and quality of logistics services (trucking, forwarding, and customs brokerage), on the ability to track and trace consignments, or the frequency with which shipments reach consignees within scheduled or expected delivery times. “The GSLI complements the


LPI’s view by focusing on the financial attractiveness, on the availability of skilled workforce and on the business environment of countries all over the world. By matching these views, Global 3PL directors can (get an) idea of the feasibility or the challenges that breaking into a new developing market could bring. “For example, if we take into


account Africa, one of the most promising areas, and looked at new markets for logistics, and we pick up Ghana as a sample country, the LPI ranks this country in 100th place and GSLI ranks it 29th. What to expect then? It seems that, that from a logistics performance/ infrastructural viewpoint, Ghana is a laggard while its overall financial attractiveness, availability of skilled workforce and business environment could grow the appetite to break into this market. To further complement these views, other sources (for example, Capgemini 2014 Third-Party Logistics Study) showcase Africa as a fast-growing economy, with a prolific low-cost semi-skilled workforce, a growing middle class and assurances by local governments that they will improve infrastructure and reduce or eliminate trade tariffs and duties. “On the other hand, risks and


uncertainties still dominate the scene in Africa. This means for Ghana and other African countries that they will have to deal with inefficient customs clearance processes, questionable logistics systems and significant deficits in the physical transport infrastructure (as it appears also from the LPI score).” Will the various anti-competition investigations continue to be a drag on the top global forwarders


Issue 7 2014 - Freight Business Journal


31 Growth-hungry logisticans must boldly go


Hull University Business School Logistics Institute lecturer in logistics and supply chain management, Dr Alessandro Creazza, discusses trends in the global 3PL and freight forwarding market.


or do you think this is played out now? Are the big players still seeking to acquire companies – there was a flurry of M&A activity a few years ago – or has this largely faded? Can big global forwarders work together with smaller companies – where the latter have a sector or geographical specialisation? “Investigations by anti-


competition bodies continue to be a reoccurring obstacle for the expansion of top global forwarders’ market share. This especially affects merger and acquisition activities. Recent examples of investigations


support this view. For instance, in 2013 UPS was stopped from acquiring the European division of TNT Express - and so was the company’s interest in extending its reach in South America through the acquisition of the South American branches of TNT Express. “The race for acquisitions by


big players has not completely faded yet, but it has evolved. Nowadays, big players tend to try and acquire other big players rather than


seeking


expansion only by acquiring small businesses. The


usually have a local coverage – latter


today ‘local reach’ is more oſten pursued through agreements and partnerships rather than direct acquisitions, which reduces the risks associated with direct investments in these uncertain times. “Among the other reasons


underpinning the progressive fade of M&A activities, besides investigations, include, according to the 21st Annual Survey of World 3PL CEOs, the lack of attractive targets, overpriced companies, negative experiences with previous acquisitions, and risks related to economic uncertainties.”


Big isn’t always better, says Hellmann Worldwide


The top global forwarding and logistics companies’ market share will stagnate or grow more slowly than the medium sized companies, in the opinion of Hellmann Worldwide Logistics to Hellmann UK commercial director, Matthew Marriott. Although on some counts the German family-owned company is a top ten player – for example, in airfreight tonnage, according to the latest Ti report – it


is


generally considered a second- level player in most respects. However, this is no disadvantage, Marriott


argues. “There is a trend in the market sectors of logistics to work with medium sized specialists due to the advantages that these companies have in niche areas of the world,” he states. The industry may talk a lot about added-value


services but, in reality, forwarders generally have very little unique advantages over their rivals; hence most companies end up discussing prices, Marriott says. Despite its relatively modest size compared


with some of the big global fish, Hellmann sits within the top 15 global transport businesses and operates in 50 countries on an exclusive level. “This is proof that you do not need to be in every market, instead you can work with niche specialists which in many respects enhance your offering to the end user client.” Rather than the traditional predator and prey


relationship with companies that are smaller than itself, Hellmann tries to and partner and work with our smaller network members rather than continually grow through acquisitions. However, mergers and acquisitions continue to happen in the market due to the nature of the business. Meanwhile, at German-based forwarder and


logistics company Dachser, director of corporate development, Dr Andreas Froschmayer, points out that market share depends on the particular market and, according to the most recent ‘Top 100 study it leads the market not only in the German but also in the European groupage market segment which is its core business. There is a concentration on the big players in this segment, it adds. Whatever your size, you neglect customer


care at your peril. Speaking the language of the customer can be main differentiator in certain industries like DIY or chemicals. Froschmayer states: “Customers expect that one cares about them, where they do their business. Therefore, one should tighten your network at least in those regions nationwide where your own customers are active. Dachser is represented all over Europe with its own logistics network and intercontinental present in all major business locations.” In general, Dachser´s market strategy is not


centered on mergers and acquisitions but on customer benefits In Europe. It is building its own network of branch offices as considerable customer advantage derives from the companies´streamlined processes and deeply- integrated, self-developed IT systems.


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