This morning I attended a great presentation and discussion led by Bindiya Vakil, President and Co-Founder of Resilinc, on supply chain crisis prevention and preparation. Obviously, this is a very timely topic considering everything going on in the aftermath of the Japan earthquake and the political unrest in the Middle East. I will share my key takeaways from the meeting in a future post.

As an added bonus, we were also given a tour of The Clarks Companies headquarters in Newton, MA, where the meeting was held. I walked away with a much deeper appreciation for all of the science and art (and supply chain challenges) involved in shoe making. A big thank you to the folks at Clarks for hosting the meeting and providing the tour, which was organized by the CSCMP New England Roundtable.

Now to this week’s news, which I’ll keep short due to time constraints.

As I mentioned in previous postings, M&A activity is heating up in the 3PL industry. Two deals were announced this week: Transplace acquires SCO Logistics and Hub Group acquires Exel Transportation Services.

Transplace’s tagline is “The 3PL & Technology Company,” which would have been a good tagline for SCO Logistics too. Both companies have their own, internally-developed transportation management systems that they offer to clients as a software-as-a-service solution. And at the other end of the services spectrum, both companies provide fully-outsourced transportation planning and execution services. Simply put, there’s a lot of alignment in their business models. A key difference is vertical focus. Transplace’s core verticals are consumer goods, retail, and manufacturing, while SCO Logistics has a good presence in chemical.

This is Transplace’s first acquisition since it was bought by CI Capital Partners in 2009. How will the two companies be integrated and organized? What impact will the acquisition have on their technology development plans? What does this acquisition mean for their respective clients? More on these questions next week.

Hub Group purchased Exel Transportation Services (ETS) for $83 million before post closing adjustments. ETS is now a wholly-owned subsidiary of Hub Group, operating independently under the name Mode Transportation. According to the press release:

Mode Transportation’s sales for the year ended December 31, 2010 were approximately $717 million. The largest components were: intermodal revenue of $294 million, truck brokerage revenue of $279 million, and LTL revenue of $85 million.

So, why the uptick in M&A activity in the 3PL industry? In many ways, the industry is just picking up where it left off in early 2008, before the financial crisis and recession hit. The key driving forces for M&A remain the same:

  • Expand globally. In the past, European 3PLs looked to North America for growth and vice versa. Today, many 3PLs have their sights on Asia and emerging economies.
  • Introduce new services. Warehousing firms have added transportation services; many freight forwarders now provide customs brokerage services, etc.
  • Target new industries. 3PLs  that started out serving a niche market now look to leverage their capabilities in other industries with similar customer requirements.
  • Penetrate the small and midsize business (SMB) market. The vast majority of companies that work with 3PLs are Tier 1 enterprises (over $1 billion in revenues).  But this market segment is almost saturated, so 3PLs need to penetrate the mid-market to sustain their growth.

Interestingly enough, I wrote a piece more than two years ago focused on the last bullet item above and Exel Transportation Services was one of the companies that I highlighted (see “TMS for Logistics Service Providers: A Key Enabler for Penetrating the SMB Market”).

Well, I’m out of time. It’s Opening Day for the Red Sox and they are playing the Yankees this afternoon. The Red Sox are 0-6 so far this season. In a word, awful. But like I wrote about earlier this week, relationships matter, and they matter the most when challenges arise. So, “Play ball!” and have a great weekend!

(Note: Transplace and MercuryGate are ARC clients)

Be Sociable, Share!