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.
Reports surfacing last night that UPS Inc. is in talks to buy privately held freight broker Coyote Logistics LLC for at least $1.8 billion came as no surprise to some inside the brokerage and third-party logistics (3PL) communities. Private-equity firm Warburg Pincus LLC, Chicago-based Coyote's majority owner, has shopped the company for about a year, but with little success, as potential suitors have shied away from Coyote's lofty valuation—based on Warburg's reported asking price, which, according to industry sources, is at 18 times Coyote's roughly $100 million annual earnings before interest, taxes, depreciation, and amortization (EBITDA). Broker valuations have a wide range, but 18 times EBITDA is considered very high. Japanese firm Kintetsu World Express paid 15 times EBITDA when it acquired APL Logistics in February. Talks with Atlanta-based UPS have been underway for about three months.
As with any rumored deal, it could go nowhere. UPS is a cautious company, and it's possible that it will conclude that buying a truckload brokerage operation—which is Coyote's forte, but largely alien to UPS—is not a good fit at the price being proffered. Satish Jindel, head of transport consultancy SJ Consulting Group Inc., predicted that UPS will not pursue Coyote because of the cost of the proposed deal, the risks of buying into an unfamiliar industry, and post-acquisition concerns of losing Coyote's primary asset, namely its people, many of whom could decide they don't want to join a company whose conservative culture is antithetical to freewheeling Coyote's. UPS and Coyote declined comment.
What is certain is that a transaction of this size would be the largest in UPS' 108-year history, topping its $1.25-billion purchase of less-than-truckload (LTL) carrier Overnite Transportation Co. 10 years ago almost to the day. If the combined entity is folded into UPS Supply Chain Solutions, the company's supply chain arm, the division would become the world's eighth-largest 3PL based on gross revenue, which is revenue before the cost of purchased transportation, according to Armstrong & Associates, a consultancy. It would spell the end of Warburg Pincus' eight-year investment in Coyote, moot Warburg's purported plans to take Coyote public, and provide Jeff and Marianne Silver, the husband-and-wife team who founded Coyote in 2006 and built it into a brokerage powerhouse, with a roughly $200-million payday; they own about 13 percent of Coyote, according to industry sources.
For shippers, a UPS-Coyote deal would likely be a net negative. It would take a big player out of the market and reduce an already-narrow field of the top brokers in an otherwise fragmented market. Coyote is considered an aggressive competitor and generally offers shippers a reasonable price for its services. As part of a much larger company, there would be some question as to whether the fiery style that has been so instrumental in Coyote's success would remain sufficiently stoked.
For the brokerage industry, a UPS-Coyote deal would likely be a net positive for essentially the same reasons. In addition, other brokers could benefit from the customer churn that could ensue if Coyote's people chose not to stay with UPS. There is also a question as to whether the Silvers would remain with an owner like UPS, which has a very traditional way of doing things.
"Traditional" is a word not found in the Coyote lexicon. The company's culture is entrepreneurial and risk-taking. Jeff and Marianne Silver built a workforce around those traits, hiring younger people with an entrepreneurial mindset and encouraging them to work hard and play hard. It might resemble a frat house at times, but it's hard to argue with the results. Coyote grew its revenue at a compound average growth rate of 473 percent from 2007 to 2010, according to Armstrong data. It should exceed $2 billion in 2015 gross revenue, Armstrong projected. The 2007-to-2010 results include the 2008 acquisition of Integra Logistics Services LLC, a rail-intermodal management services firm, and the 2009 purchase of General Freight Services, a North American truck and intermodal services provider.
Evan Armstrong, Armstrong's president, said he would urge UPS not to disrupt Coyote's culture, which Armstrong called Coyote's "secret sauce." However, Jindel of SJ Consulting said it would be almost impossible for a company like UPS, with such deeply rooted internal controls and processes, to "just leave Coyote alone."
UPS' August 2005 acquisition of Overnite is an example of the latter philosophy. Soon after the deal closed, UPS executives descended on Overnite's Richmond, Va., headquarters to begin the transition. It overlaid "the UPS way" on Overnite's business, even though UPS had never run an LTL operation before. UPS struggled with integrating Overnite's Eastern operations with the trucker's Western unit, known as Motor Cargo. It has taken several years, but the operation, which was rebranded as UPS Freight, is finally on solid operational ground.
There are solid macro reasons to explain UPS' rumored interest in Coyote. The segment of 3PL known as "domestic transportation management"—traditional freight brokerage elevated by sophisticated IT systems, and Coyote's stock-in-trade—has grown by 11.5 percent on a compounded basis from 1995 to 2014, according to Armstrong data. The category is expected to experience strong growth in the years ahead as more shippers look to firms like Coyote to optimize transportation modes and routes. Coyote's transportation management system, known as "Bazooka," is considered one of the better broker-owned technologies in the market.
UPS may also want to gain access to a cluster of big accounts, expand its service offerings, and beef up its network scale. That's something other firms have done—for example, Memphis-based FedEx Corp., with its December 2014 acquisition of Pittsburgh-based Genco Supply Chain Solutions, and Greenwich, Conn.-based XPO Logistics, which in April acquired French logistics firm Norbert Dentressangle S.A. for $3.5 billion. So far this year, there have been seven deals valued at more than $100 million, and M&A activity is on track to surpass the record of nine set in 2007, according to Armstrong data. "We are on our way to having a banner year for large M&A deals," said Armstrong.
UPS could also be attracted to Coyote's unique model, which uses split sales and operations teams for domestic transportation management and brokerage. In the split model, Coyote's sales staff focuses on securing shipments, while the carrier-capacity staff focuses on securing carrier capacity to transport the shipments. In traditional operations, the person who secures a shipment from a customer is also responsible for finding a carrier to cover the load. Coyote believes that the split model allows it to arrange transportation for more shipments per employee versus the traditional brokerage operations.
Nearly one-third of American consumers have increased their secondhand purchases in the past year, revealing a jump in “recommerce” according to a buyer survey from ShipStation, a provider of web-based shipping and order fulfillment solutions.
The number comes from a survey of 500 U.S. consumers showing that nearly one in four (23%) Americans lack confidence in making purchases over $200 in the next six months. Due to economic uncertainty, savvy shoppers are looking for ways to save money without sacrificing quality or style, the research found.
Younger shoppers are leading the charge in that trend, with 59% of Gen Z and 48% of Millennials buying pre-owned items weekly or monthly. That rate makes Gen Z nearly twice as likely to buy second hand compared to older generations.
The primary reason that shoppers say they have increased their recommerce habits is lower prices (74%), followed by the thrill of finding unique or rare items (38%) and getting higher quality for a lower price (28%). Only 14% of Americans cite environmental concerns as a primary reason they shop second-hand.
Despite the challenge of adjusting to the new pattern, recommerce represents a strategic opportunity for businesses to capture today’s budget-minded shoppers and foster long-term loyalty, Austin, Texas-based ShipStation said.
For example, retailers don’t have to sell used goods to capitalize on the secondhand boom. Instead, they can offer trade-in programs swapping discounts or store credit for shoppers’ old items. And they can improve product discoverability to help customers—particularly older generations—find what they’re looking for.
Other ways for retailers to connect with recommerce shoppers are to improve shipping practices. According to ShipStation:
70% of shoppers won’t return to a brand if shipping is too expensive.
51% of consumers are turned off by late deliveries
40% of shoppers won’t return to a retailer again if the packaging is bad.
The “CMA CGM Startup Awards”—created in collaboration with BFM Business and La Tribune—will identify the best innovations to accelerate its transformation, the French company said.
Specifically, the company will select the best startup among the applicants, with clear industry transformation objectives focused on environmental performance, competitiveness, and quality of life at work in each of the three areas:
Shipping: Enabling safer, more efficient, and sustainable navigation through innovative technological solutions.
Logistics: Reinventing the global supply chain with smart and sustainable logistics solutions.
Media: Transform content creation, and customer engagement with innovative media technologies and strategies.
Three winners will be selected during a final event organized on November 15 at the Orange Vélodrome Stadium in Marseille, during the 2nd Artificial Intelligence Marseille (AIM) forum organized by La Tribune and BFM Business. The selection will be made by a jury chaired by Rodolphe Saadé, Chairman and CEO of the Group, and including members of the executive committee representing the various sectors of CMA CGM.
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.”