Market consolidation in the logistics market: What’s in it for shippers?

A tidal wave of M&A activity is sweeping the logistics industry, and many of the deals are taking place in Supply Vision’s backyard. According to supply chain consultants Armstrong & Associates, M&A activity is at its highest level since the recession, with nine major deals announced so far in 2015.

Some of the highest-profile deals are taking place right here in Chicago, which has always been a key hub for logistics technology. UPS announced this summer that it would acquire Chicago-based Coyote Logistics for $1.8 billion, the largest truckload brokerage acquisition in U.S. history, and Chicago-based Echo Global Logistics recently purchased Command Transportation for $420 million. Other notable deals across the globe include France-based GEODIS’ acquisition of OHL for a reported $800 million, XPO Logistics’ deal to buy Norbert Dentressangle SA for $3.53 billion, as well as the most recent Con-Way deal for $3 billion and FedEx’s purchase of GENCO for $1.4 billion.

These new logistic conglomerations cite cross-selling opportunities, diversifying service offerings and improved geographic coverage as key reasons for joining forces with fellow providers. While outsourced logistics has historically been a heavily fragmented industry, the consolidation trend is creating a new class of mega-providers. According to Armstrong, the five largest global 3PLs all earned more than $10 billion in gross revenue in 2014.

What does this mean for the shipper? There are now bigger preverbal “ponds” to be a fish in. XPO’s intended purchase of Con-Way for $3 billion will launch XPO into the top tier of 3PLs in the space. The question is, how will their shipper customers be effected?

The street is not confident the volume of these deals will be good for the companies acquiring, combining resources, technology, and cultures is not always an easy road. Even Moody’s is getting nervous about the speed of market consolidation.

A smart shipper will see the writing on the wall and find a smaller, more nimble and easy-to-work-with supplier. Partners that are working on new, innovative tools and are willing to take direction from customers versus being forced to fit into the new, bigger, box these logistics mega-providers will be offering. Logistics technology partners that combine agility, customer service and technology will help shippers be successful.

Supply Vision provides competitively priced SaaS-based TMS, WMS, Dispatch and Customer Portal platforms to shippers of all sizes. We’re focused on creating technologies that enable our customers to increase supply chain efficiency and productivity. As the market continues to consolidate, Supply Vision is the right fit for many small to medium sized shippers who don’t want to end up the smallest fish in the pond.