Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
Those waiting for the consolidation needle to be moved in the deeply fragmented U.S. truck brokerage field
need not wait any longer.
On March 18, Chicago-based Coyote Logistics LLC acquired rival Access America Transport (AAT) in what is viewed
as a significant first step towards concentrating the $50 billion-a-year brokerage industry into the hands of fewer players.
Terms of the transaction were not publicly disclosed. However, an industry source said Coyote bought AAT for $125 million, of
which $98 million was cash.
The move blends companies with complementary service lines and operating strategies, which would appear to be a plus so
long as the integration is properly implemented. But it also combines disparate corporate cultures, which, if not handled
correctly, could cause heartburn for Coyote Founder and CEO Jeff Silver and his team. Though both firms have entrepreneurial
bents, Coyote functions in a more aggressive, flashy atmosphere with younger staffers whose drive mirrors Chicago's
rough-and-tumble mindset, according to a top industry executive familiar with both companies. AAT, by contrast, brings less
sizzle to the table and has a more blue-collar attitude that stems from its smaller-town Chattanooga, Tenn., roots, the executive
said.
It will be up to Silver, the hard-charging executive who co-founded Coyote in 2006 after taking a five-year sabbatical
from transportation to pursue advanced degrees, including a Masters of Engineering in Logistics from the Massachusetts Institute
of Technology, to meld the two cultures without alienating AAT employees. The integrations of Coyote's two prior acquisitions,
Memphis-based Integra Logistics in 2008 and Atlanta-based General Freight Services in early 2009, did not go well in part because
employees of the acquired firms resisted Coyote's corporate approach, the executive said.
Chris Pickett, Coyote's chief strategy officer, however, said that despite the geographic differences, the Coyote and AAT
cultures are more alike than they may seem. Pickett said that the cultural similarities were a key reason for doing the deal,
and that Coyote put a lot of forethought into the issue. The previous deals were five and six years ago, and "we've learned a
lot along the way," he said.
The deal spells big paydays for AAT's three founders, Ted Alling, Barry Large, and Allen Davis, Chattanooga-based venture
capitalists in their mid-30s who launched AAT in 2002. In recent years, the three have drifted away from AAT to focus on other
holdings of the Lamp Post Group, their venture capital firm. AAT President Chad Eichelberger, who has been handling the day-to-day
business, will stay on to run the new company's brokerage operations.
The Coyote-AAT combination will have annual gross revenues (revenues before the cost of purchased transportation) of $2
billion, 17 North American locations, and a partner base of 40,000 carriers. Coyote generated slightly more than $1 billion
in gross revenue in 2013, but its first quarter gross revenue was 35 percent higher than in the prior quarter, according to
Pickett. AAT generated $400 million in gross revenue in 2012, the last year information was available.
Coyote's fortes are in dry van—the most commonly used form of truck transport—refrigerated trucking, and to a
lesser extent, intermodal. AAT's strengths lie in flatbed transport and in moving outsized commodities requiring special handling.
It also has a stronger presence in the less-than-truckload arena, a fertile market for brokers. Coyote's information technology
(IT) system, which goes by the internal name "Bazooka," will serve as the platform for the new entity. Bazooka is considered one
of the better broker IT networks in a world of largely mediocre systems.
The two companies also have different operating models, according to Evan Armstrong, president of Armstrong & Associates,
a West Allis, Wis.-based third-party logistics (3PL) consultancy. AAT works in teams that handle both sales and carrier operations,
Armstrong said. By contrast, Coyote uses what Armstrong calls a "split buy/sell operational model," where different groups focus
on securing loads and procuring trucks. Armstrong said the Coyote model is more efficient because employees can focus on one task
instead of juggling two roles.
Pickett said Coyote is "keeping an open mind" about what it can learn from AAT. However, he added that two elements of Coyote's
model will remain untouched: its philosophy of providing a single point of contact for the company's shipper and carrier base
and its centralized capacity management structure. The centralized structure has proven to be effective in leveraging Coyote's
network to build lane density, the holy grail for brokers. The brokerage model in general is easily scalable because it is
sales-driven and operates with significant variable costs, meaning a company can get to critical mass of network capacity
without a massive fixed investment.
"MEGABROKER"
Armstrong said the deal creates a "megabroker" to rival a select group of firms that preside over a marketplace of
thousands of mom-and-pop-like brokers. The market leader is C.H. Robinson Worldwide Inc. with more than $13 billion in
total 2013 gross revenue. Of that, $8.6 billion came from the "domestic transportation management/freight brokerage" category,
according to Armstrong data. The other major players are Greenwich, Conn.-based XPO Logistics Inc. (which is on a fast-growth
track of its own); Cincinnati-based Total Quality Logistics (TQL), and Chicago-based Echo Global Logistics Inc. The biggest
potential threat to this tight-knit group could come from traditional truckload carriers, which are muscling in on the action
to round out their product offerings and to diversify away from no-growth, over-the-road transport services.
Although there are approximately 10,000 licensed brokers in the United States, only about 28 have annual gross revenue
of more than $200 million, according to Armstrong data. Robinson reported net revenue (revenue after transportation costs) of
more than $1.3 billion from the domestic brokerage segment last year. The next 29 largest had combined net revenues of $2.2
billion, Armstrong data show.
Kerry R. Byrne, executive vice president of TQL, said he's unsure the Coyote-AAT deal will dramatically alter the
brokerage landscape because of the industry's size and continued fragmentation. Byrne said in an e-mail that he wasn't
surprised by the announcement because there has been much talk about merger and acquisition activity. (Echo, for its part,
in late February snapped up Comcar Logistics, a small Jacksonville, Fla.-based broker primarily serving the Southeast and Rocky
Mountain regions.) Although TQL plans to follow an organic expansion path, "growth through acquisition has been, and will continue
to be, a popular strategy for many others going forward," Byrne said.
Armstrong takes a different view, saying the transaction will spur "further consolidation within the small freight broker
ranks" as larger, better-capitalized brokers seek to beef up their service offerings, geographic reach, and lane density. The
industry executive said the broker/3PL market will shrink into a oligopoly of sorts. Under this model, only two or three big
vendors will have the necessary physical, technological, and capital resources to reorganize a traditionally inefficient business
and to offer large and small shippers the end-to-end solutions they increasingly demand. At the same time, the business itself
could easily double in revenue as more small to mid-sized shippers migrate to brokers and larger shippers use more of their
brokers' portfolio, the executive said.
Pickett of Coyote said the jury is out as to whether the AAT purchase will be the first big salvo in the consolidation wars.
But he is hardly oblivious to the wind's direction. "We hear from more than a few shippers that they're looking to rationalize
their vendor network," he said.
Online merchants should consider seven key factors about American consumers in order to optimize their sales and operations this holiday season, according to a report from DHL eCommerce.
First, many of the most powerful sales platforms are marketplaces. With nearly universal appeal, 99% of U.S. shoppers buy from marketplaces, ranked in popularity from Amazon (92%) to Walmart (68%), eBay (47%), Temu (32%), Etsy (28%), and Shein (21%).
Second, they use them often, with 61% of American shoppers buying online at least once a week. Among the most popular items are online clothing and footwear (63%), followed by consumer electronics (33%) and health supplements (30%).
Third, delivery is a crucial aspect of making the sale. Fully 94% of U.S. shoppers say delivery options influence where they shop online, and 45% of consumers abandon their baskets if their preferred delivery option is not offered.
That finding meshes with another report released this week, as a white paper from FedEx Corp. and Morning Consult said that 75% of consumers prioritize free shipping over fast shipping. Over half of those surveyed (57%) prioritize free shipping when making an online purchase, even more than finding the best prices (54%). In fact, 81% of shoppers are willing to increase their spending to meet a retailer’s free shipping threshold, FedEx said.
In additional findings from DHL, the Weston, Florida-based company found:
43% of Americans have an online shopping subscription, with pet food subscriptions being particularly popular (44% compared to 25% globally). Social Media Influence:
61% of shoppers use social media for shopping inspiration, and 26% have made a purchase directly on a social platform.
37% of Americans buy from online retailers in other countries, with 70% doing so at least once a month. Of the 49% of Americans who buy from abroad, most shop from China (64%), followed by the U.K. (29%), France (23%), Canada (15%), and Germany (13%).
While 58% of shoppers say sustainability is important, they are not necessarily willing to pay more for sustainable delivery options.
Schneider says its FreightPower platform now offers owner-operators significantly more access to Schneider’s range of freight options. That can help drivers to generate revenue and strengthen their business through: increased access to freight, high drop and hook rates of over 95% of loads, and a trip planning feature that calculates road miles.
“Collaborating with owner-operators is an important component in the success of our business and the reliable service we can provide customers, which is why the network has grown tremendously in the last 25 years,” Schneider Senior Vice President and General Manager of Truckload and Mexico John Bozec said in a release. "We want to invest in tools that support owner-operators in running and growing their businesses. With Schneider FreightPower, they gain access to better load management, increasing their productivity and revenue potential.”
Economic activity in the logistics industry continued its expansion streak in October, growing for the 11th straight month and reaching its highest level in two years, according to the most recent Logistics Managers’ Index report (LMI), released this week.
The LMI registered 58.9, up from 58.6 in September, and continued a run of moderate growth that began late in 2023. The LMI is a monthly measure of business activity across warehousing and transportation markets. A reading above 50 indicates expansion, and a reading below 50 indicates contraction.
October’s reading showed the fastest rate of expansion in the overall index since September of 2022, when the index hit 61.4. The results show that the industry is continuing its steady recovery from the volatility and sluggish freight market conditions that plagued the sector just after the Covid-19 pandemic, according to the LMI researchers.
“The big takeaway is that we’re continuing the slow, steady recovery,” said LMI researcher Zac Rogers, associate professor of supply chain management at Colorado State University. “I think, ultimately, it’s better to have the slow and steady recovery because it is more sustainable.”
All eight of the LMI’s indices grew during the month, with the Transportation Prices index showing the most growth, at nearly 6 points higher than September, reflecting increased activity across transportation markets. Transportation capacity expanded slightly during the month, remaining just above the 50-point threshold. Rogers said more capacity will enter the market if prices continue to rise, citing idle capacity across the market due to overbuilding during the pandemic years.
“Normally we don’t have this much slack in the market,” he said. “We overbuilt in 2021, so there’s more slack available to soak up this additional demand.”
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
The port worker strike that began yesterday on Canada’s west coast could cost that country $765 million a day in lost trade, according to the ALPS Marine analysis by Russell Group, a British data and analytics company.
Specifically, the labor strike at the ports of Vancouver, Prince Rupert, and Fraser-Surrey will hurt the commodities of furniture, metal products, meat products, aluminum, and clothing. But since the strike action is focused on stopping containers and general cargo, it will not slow operations in grain vessels or cruise ships, the firm said.
“The Canadian port strike is a microcosm of many of the issues that are impacting Western economies today; protection against automation, better work-life balance, and a cost-of-living crisis,” Russell Group Managing Director Suki Basi said in a release. “Taken together, these pressures are creating a cocktail of connected risk for countries, business, individuals and entire sectors such as marine insurance, which help to mitigate cargo exposures.”
The strike is also sending ripples through neighboring U.S. ports, which are hustling to absorb the diverted cargo, according to David Kamran, assistant vice president for Moody’s Ratings.
“The recurrence of strikes at Canadian seaports is positive for U.S. ports that may gain cargo throughput, depending on the strike duration,” Kamran said in a statement. “The current dispute at Vancouver is another example of the resistance of port unions to automation and the social risk involved with implementing these technologies. Persistent disruption in Canadian port access would strengthen the competitive position of US West Coast ports over the medium-term, as shippers seek to diversify cargo away from unreliable gateways.”
The strike is also affected rail movements, according to ocean cargo carrier Maersk. CN has stopped all international intermodal shipments bound for the west coast ports of Prince Rupert, Robbank, Centerm, Vanterm, and Fraser Surrey Docks. And CPKC has stopped acceptance of all export loads and pre-billed empties destined for Vancouver ports.
Connected with the turmoil, Maersk has suspended its import and export carrier demurrage and detention clock for most affected operations. The ultimate duration of the strike is unknown, but the situation is “rapidly evolving” as talks continue between the Longshore Workers Union (ILWU 514) and the British Columbia Maritime Employers Association (BCMEA), Maersk said.
Terms of the acquisition were not disclosed, but Mode Global said it will now assume Jillamy's comprehensive logistics and freight management solutions, while Jillamy's warehousing, packaging and fulfillment services remain unchanged. Under the agreement, Mode Global will gain more than 200 employees and add facilities in Pennsylvania, Arizona, Florida, Texas, Illinois, South Carolina, Maryland, and Ontario to its existing national footprint.
Chalfont, Pennsylvania-based Jillamy calls itself a 3PL provider with expertise in international freight, intermodal, less than truckload (LTL), consolidation, over the road truckload, partials, expedited, and air freight.
"We are excited to welcome the Jillamy freight team into the Mode Global family," Lance Malesh, Mode’s president and CEO, said in a release. "This acquisition represents a significant step forward in our growth strategy and aligns perfectly with Mode's strategic vision to expand our footprint, ensuring we remain at the forefront of the logistics industry. Joining forces with Jillamy enhances our service portfolio and provides our clients with more comprehensive and efficient logistics solutions."