Susan Lacefield has been working for supply chain publications since 1999. Before joining DC VELOCITY, she was an associate editor for Supply Chain Management Review and wrote for Logistics Management magazine. She holds a master's degree in English.
It's a familiar story: An enterprising party with a truck or some extra storage space starts a local business. Over time, the company extends its service menu and broadens its reach, becoming more of a full-service provider than simply a warehousing or trucking firm. Eventually, the business is passed down to the next generation of family members, who may further expand the operation.
That story's been repeated countless times throughout the industry's history, and today, companies bearing family names still stand side by side with the giant global third-party logistics service providers (3PLs). Indeed, some of the largest 3PLs, like C.H. Robinson, started out as family-owned businesses.
But times have changed. Higher barriers to entry and tighter margins have made the industry less appealing to entrepreneurs. At the same time, more customers are looking for a one-stop shop solution that can provide global reach at a low cost. Under the circumstances, it seems appropriate to ask: Is there still a future for the family-owned 3PL?
Size matters
There's no getting around the fact that there are competitive disadvantages to being small. Few family-owned 3PLs can offer the same geographic reach or end-to-end solutions that a global 3PL can.
"The biggest [challenge facing family-owned 3PLs] is they don't have the asset base," says Tom Speh, professor of distribution at Miami University in Oxford, Ohio. "When you're talking about IT systems, advanced handling systems, or [the capacity for] rapid expansion should a major client want that, they're really constrained in terms of their ability to do that because of the capital requirements."
Similarly, the smaller players are at a disadvantage when it comes to leveraging economies of scale. "We don't have the buying power to compete in a large-volume, low-cost scenario," admits Nicholas Carretta, president of Ultra Logistics, a family-owned 3PL based in Fairlawn, N.J.
But just as there are disadvantages to being a small player, there are also advantages, these 3PLs say. For one thing, they don't have to worry about pleasing Wall Street. "I've heard a lot of stories [suggesting that] multinational 3PLs can lose sight of who pays the bills," says John Ness, president of ODW Logistics, headquartered in Columbus, Ohio. "Consolidation in the industry has brought a lot of private equity players into our market, and I wonder how many CEOs spend their time and energy working to please boards versus their customers. That's a tough battle. But that's not an issue for us; we know who our customer is."
That kind of freedom can translate to service advantages for customers, these smaller 3PLs say. For one thing, there's the small players' agility and responsiveness to clients' requests. "Family-owned companies typically can make quick decisions," says Bill Butler, CEO of fourth-generation family-owned Weber Logistics, which is headquartered in Santa Fe Springs, Calif. "When the managers are also the shareholders, you don't have a lot of processes or bureaucracy that you have to deal with. You don't have to call someone back at the corporate office before you can make a decision."
For another, there's management stability. Carretta notes that in the wider world, career advancement often comes through hopping from one competitor to another. In a family-owned business, there's a greater likelihood that senior managers will be at the company for the long haul. "When you're working on a project with a family-run business and you know the stakeholders, you don't have to worry about a changing of the guard or a major reorganization," he says.
But most important of all, perhaps, is the culture and attitude that infuses these smaller operations. "When it's your name on the side of the truck or the building, you treat customers just as if you were ... welcoming someone into your home," explains Mark Richards, who took over Orange, Calif.-based Associated Warehouses Inc. from his father. "You're going take care of them, treat them as a guest. The big national companies can try to have that feeling and at some locations they do, but having that across the board is pretty rare."
Perception problem
Given all the advantages they cite, you might think these 3PLs would be eager to promote their status as family-owned businesses. But that's not necessarily the case. Some downplay the fact out of concern that potential customers will hear "family owned" and think "mom and pop."
There are times when being a family-owned business works to your advantage, says Carretta of Ultra Logistics, particularly if the potential customer is itself a family-owned business. "But other times, a family business is seen in a different light and may create a negative perception," he says. "Some potential customers may think you're not as capable or you don't have the abilities of some of the larger companies."
That concern is not unfounded, says Speh. "I think sometimes shippers have this assumption that bigger is better, that to get sophistication and so forth, you need to go to the big global players," he says. "I think they'd really be surprised if they took a close look at some of the family-owned fairly sizeable 3PLs."
Carving out a niche
To survive in the modern marketplace, family-owned businesses cannot rely solely on a folksy culture, say those at some of the leading entities. They must supplement their traditional customer focus with the kind of business discipline, technology, and information services typically associated with corporate enterprises. For example, Ultra Logistics has developed proprietary technology solutions, including a transportation management system, a spot bidding tool, and carrier monitoring programs, that it makes available to customers.
But developing and maintaining these types of systems does not come cheap. Not only are the solutions themselves expensive, says Speh, but companies also have to hire specialists to operate and maintain the software. The high price tag may keep some of the smaller family-owned 3PLs from truly competing on technology, he says.
Some of the smaller players have found success through the specialized services route. This might include focusing on a specific product category or providing regional expertise or highly customized solutions. For example, Weber Logistics, which counts a number of Fortune 500 companies among its clients, has also carved out a niche serving small yet growing companies that tend to be overlooked by the mega-3PLs.
The next generation
Ultimately, however, the future of family-owned 3PLs rests with the next generation—specifically, those in line to take over today's operations. Speh, who has been consulting for family-owned 3PLs for more than 30 years, says he sees fewer entrepreneurs entering the business. That means as family-owned businesses exit the market, they're less likely to be replaced.
And as much as heads of family-owned enterprises like to brag about the business's being in their blood, that's no guarantee their descendants will prove equally enthusiastic. After all, only 15 percent of family-owned businesses make it to the third generation, says Butler of Weber Logistics.
Butler adds that increasing consolidation in the marketplace, driven by factors like international competition and an infusion of private equity dollars, will likely further diminish the role of family-owned businesses. "I don't see family businesses as a dying breed, but the increasing consolidation in the industry will mean that you see fewer of them," he says.
Others remain more optimistic. Ness believes that there will always be a place for family-owned businesses in the 3PL industry. "I am an advocate of family business," he says. "I believe it represents some of the best business stories in our country. I'm regularly encouraging my peers to fight the good fight and stay private, but I recognize that selling the business makes sense for some people. For me, a better path is building a business that sustains the values of the family and flourishes for multiple generations."
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
Chief supply chain officers (CSCOs) must proactively embrace a geopolitically elastic supply chain strategy to support their organizations’ growth objectives, according to a report from analyst group Gartner Inc.
An elastic supply chain capability, which can expand or contract supply in response to geopolitical risks, provides supply chain organizations with greater flexibility and efficacy than operating from a single geopolitical bloc, the report said.
"The natural response to recent geopolitical tensions has been to operate within ‘trust boundaries,’ which are geographical areas deemed comfortable for business operations,” Pierfrancesco Manenti, VP analyst in Gartner’s Supply Chain practice, said in a release.
“However, there is a risk that these strategies are taken too far, as maintaining access to global markets and their growth opportunities cannot be fulfilled by operating within just one geopolitical bloc. Instead, CSCOs should embrace a more flexible approach that reflects the fluid nature of geopolitical risks and positions the supply chain for new opportunities to support growth,” Manenti said.
Accordingly, Gartner recommends that CSCOs consider a strategy that is flexible enough to pursue growth amid current and future geopolitical challenges, rather than attempting to permanently shield their supply chains from these risks.
To reach that goal, Gartner outlined three key categories of action that define an elastic supply chain capability: understand trust boundaries and define operational limits; assess the elastic supply chain opportunity; and use targeted, market-specific scenario planning.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”