Category Archives: Industry players

Discussion and analysis of the position, strategy, news and performance of notable logistics, contract logistics, warehousing and distribution companies and businesses

Christmas delivery problems start early – again

The world descends further into a delusional madness of acquisition and consumption that once came at Christmas but now is promoted by such artifices as ‘Black Friday‘ and ‘Cyber Monday’.

Yodel, the UK’s second largest home delivery company (only Royal Mail is bigger) has told its customers’ customers that their deliveries are going to be late.  In an interesting piece of sophistry their web site tells us, reassuringly, that, contrary to reports, deliveries are not suspended.  It’s only collections from the supplier that are suspended.  Of course, if the product isn’t collected the delivery cannot be made, but I’m sure someone falls for that.

Of course this reflects a real challenge that delivery networks regularly face.  The networks are designed with finite capacity and flexibility comes from throwing additional resource at the problem.  But sizing the network is the challenge. and it has been around at least since commuter rail operations were designed.  Size for the peak and you’ll have lots of spare capacity sitting around doing nothing for extended periods of time; size for the average and when the peak comes you can’t handle it.

That is the reason that automation (of which there is surprisingly little in the logistics business and which has a poor reputation) works best in steady and predictable businesses.

The problem is exacerbated by social changes and retail developments.  We now want it all and we want it now.  Retailers like Amazon promise very high service levels but do little to educate consumers’ expectations.  And the blame, of course (and consequent bad press), is always laid at the feet of the logistics operator, not the retailer whose procurement people have driven the sourcing.

Royal Mail gets a great deal of stick, much of it deserved, but it does deserve credit for the service it provides – a universal service – at this time of year.

Advertising logistics services on television – when it might work

TNT tries to advertise itself out of trouble, tastefully
TNT tries to advertise itself out of trouble, tastefully

One does not see logistics advertising outside the trade press very often.  Logistics is mainly a business-to-business industry and a television audience is dominated by consumers, and it’s that audience for which one pays; that can’t be cost-effective, although perhaps specialist channels such as Bloomberg might make sense.

But I suppose in the express/parcels business it makes more sense because there is a much greater consumer component.

I thought of this after I saw what I think is a good advert for TNT.  The amusing part is at 0:26 when the TNT people run past a yellow lorry, stuck in traffic and with a less-than-svelte driver swigging his coffee and stunned at TNT’s performance.

Now who can this guy represent?
Now who can this guy represent?

Now who can that lorry represent?  The yellow is a little too pale, I suspect.  Hilarious.

I tried (but failed) to find an advert I saw in the US about ten years ago, which showed a van (Fedex or UPS, I can’t recall which) racing down a road only to be cut off at a level crossing by a long DHL cargo train.  But I did come across a different one.  The tag line?  There’s a new face in domestic shipping – DHL.  Well there was…

UPS of course had a campaign a few years ago (2011?) that actually mentioned the L-word.  That’s a little too twee for me.  I like the ones that have a pop at the opposition.  Much more interesting.

But all this advertising must be dwarfed by DHL’s sponsorship budget.  The mass of yellow-and-red at Formula 1 races is astonishing.

Is it possible that DHL sponsors Manchester United in some way?
Is it possible that DHL sponsors Manchester United in some way?

I am no marketing expert and I am sure DHL gets huge benefit, especially in Asia, from its sponsorship of Manchester United.  Moreover any publicity is good publicity, I understand, and I am sure that the saturated presence of the logo at matches outweighs any negative emotions that stir in supporters of other clubs, for many of whom ‘anyone but Man U’ is a veritable mantra.

The CEVA Story – Part One – Origins and Establishment

CEVA Logistics logoCeva is undoubtedly one of the world’s leading logistics businesses but its history is one of the more unusual and, perhaps, controversial.  It is the largest private equity-owned 3PL and in 2013 it had to pull its planned IPO.  Its story also illustrates some of the strategic challenges European mail businesses face on deregulation and privatisation, and the mistakes that followed.  In this first article we look at the origins of the business.  Subsequent pieces will discuss its performance and the consequences of the failed IPO.

Background

Towards the end of the last century, as free market capitalism took firm hold in the developed world, a couple of themes started to have significant impact on the logistics industry.  The ideological idea was the Thatcherite belief of the evil of public ownership of businesses.  The economic trend was globalisation, which fundamentally changed the supply chain flows that logistics companies were looking to satisfy.

This isn’t the time or place to discuss public ownership but the trend to privatisation had long-term effects on the logistics industry.  In the 1980s the major national postal services were parts of large, state-owned organisations, the scope of which encompassed physical distribution, telecommunications and sometimes even banking services.  As a prelude to privatisation these were broken up.  For example:

  • In the UK the telecommunications arm was split off from the Post Office (previously the GPO, or General Post Office) as British Telecommunications in 1981.
  • Deutsche Bundespost was broken up into Deutsche Post, Deutsche Telekom and Deutsche Postbank in 1995 (Deutsche Bundespost had earlier been restructured on similar divisional line is 1989).
  • In the Netherlands Koninklijke PTT Nederland (where PTT stands for Posterijen, Telegrafie en Telefonie) ultimately became the telecommunications company KPN after TPG was demerged in 1998. TPG eventually became PostNL in 2011.

It is with this last example, the Dutch postal service, that our interest lies, because if it hadn’t been for this environment, Ceva probably wouldn’t exist.

Response of the mail businesses to privatisation and globalisation

In the UK the Post Office and Royal Mail were considered such national treasures that they were retained in public ownership (alternative view: they were basket cases of inefficiency, poor management and union-encouraged poor practices) and while the banking business (Girobank) was sold in 1990, the Post Office remains entirely in state hands.  Royal Mail was part-privatised in 2014.

By contrast our two other examples embraced the challenges of the fast-changing world and sought to develop the scope and size of their core mail businesses to encompass parcels distribution and broader logistics activities.  That’s a strategy that is likely to take deep pockets, as Deutsche Post has shown.

The Dutch Post Office buys a business

I like to support my many assertions with evidence where I can, but my access to archives and time to research are limited.  I can’t find financial statements for TPG prior to 2005, but I did find the following undated quote on encyclopaedia.com:

TNT Post Group’s mission is to achieve a recognized world leadership position in its three business areas—mail, express, and logistics—based on a strong market position in Europe.
“TNT Post Group N.V.” International Directory of Company Histories. 1999. Encyclopedia.com. 25 Oct. 2014 <http://www.encyclopedia.com>.

(TPG changed its name to TNT in 2005, so it clearly predates that, but TPG’s actions in 2005 make that obvious (see below)).

That mission statement is clearly consistent with the acquisition by KPN of TNT for AUS$ 2 bn (at the time about € 1.3 bn) in 1996.  The Dutch Post Office had decided to build a logistics business.

TNTLogo

TNT had been founded in Australia in 1946. It was listed on the Sydney Stock Exchange in 1961.  In the 1980s its focus was on growth in Europe. Although it did have logistics activities it was known principally as a parcels business.

After its 1996 acquisition by KPN a number of further businesses were bought and its air and road networks were expanded. In 1998 the mail, express and logistics business was demerged as TNT Post Group (’TPG’), becoming TNT NV in 2005.

A change of tack

Having a professed strategy of building ‘a … world leadership position in … mail, express and logistics’ (my emphasis) in December 2005 TPG announced a volte face and that it was looking to dispose of its logistics business.  The explanation given was that TPG was ‘successful at designing, implementing and running delivery network businesses. This is our core competency, lies at the heart of our business going forward, and offers us a sustainable competitive advantage and very compelling growth opportunities’ and the company would ‘focus on networks’.  It is possible, though, that this self-perception was influenced by the recognition of the enormous cost of trying to build world leadership in three markets.  Even Deutsche Post, with all its financial might, failed to break into the US express market, despite pouring billions of Euros down the proverbial t.

The logistics business at that point had revenues of € 3.4 bn.  TPG would retain the freight management business (turnover about € 800 mn) and certain logistics activities such as spare parts logistics, where there was clear synergy with the express business.

To complete the story of the Dutch Post Office’s dalliance with business other than mail, in May 2011 the TNT Express business was demerged and the mail business was rebranded PostNL.  PostNL retained 29.9% of TNT’s equity.  TNT has had an unhappy time as an independent company and was of course the subject of a 2012 bid from UPS which was stopped by the EU.

The birth of Ceva

TNT’s logistics business was sold in August 2006 for € 1.5 bn to Apollo Management LP, a private equity fund.  In December of that year the business was rebranded as CEVA Logistics.

EGL logo

In August 2007 Apollo bought EGL, a US-based freight forwarder which had been founded in 1984 and was listed on NASDAQ, and combined it with the TNT logistics business in CEVA.

Next: how the new company looked, and how it performed.

More women in logistics

As I spent literally seconds trawling the internet following my earlier article on the under-representation of women at senior level in the industry, I found a UK-based organisation addressing exactly this issue.

Somewhat unimaginatively but very effectively they are called Women in Logistics UK.

Further meriting mention is the Women in Logistics and Transport initiative of the International side of the Chartered Institute of Logistics and Transport.  Take a gander here.

I have tried but failed to find similar bodies in France and Germany, but that could well be because my knowledge of French and German is atrocious.  If you are able to share contacts, please email me.  My name is Joe and my address is that, followed by the usual symbol for at, then the domain name of this site.  Sorry to be so convoluted about the address, but the amount of spam flying around is hard to believe.

 

Product mix of quoted logistics businesses

Journalists tend to lump logistics businesses together but these show a wide range of product mixes.  This note analyses the service offering mix of selected players by revenue from their latest interim statements.

We talk and write about logistics businesses in general but of course when we generalise we run the risk of obscuring details that distinguish between competitors.  One important trend over the last fifteen years or so has been consolidation of the industry (although it is still very fragmented) and the combination of what were separate contract logistics and freight forwarding businesses into conglomerates aiming to become soup-to-nuts supply chain service providers.  The structural models of the big players probably doesn’t help to bring these services together, but let’s look at that some other time.

In the chart below I compare the proportions of our chosen sample of companies’ turnover which are reported in certain segments.  A clear problem is that although international and national accounting standards require segmental information, interpretation is often up to the boards of the companies and they are inconsistent.  For example:

  • Kuehne + Nagel shows Air-freight, Sea-freight, Overland and Contract Logistics.
  • DP-DHL naturally enough shows Mail (or as it is now called Post-eCommerce-Parcel) and Express, with Global Forwarding, Freight as a division plus Supply Chain.  They are good enough to disclose Freight (European road transportation) separately.  Similarly Williams-Lea is in Supply Chain but disclosed.
  • Expeditors shows customs brokerage, which no other of our sample does.  I have included that revenue in forwarding.
  • Panalpina discloses Air-freight, Sea-freight and Logistics.
  • Wincanton distinguishes between contract logistics and specialist businesses.

So ensuring comparability isn’t straightforward but I have done my best.  The major adjustment I have made is to exclude Mail and Express from the DP-DHL numbers.  These constituted 50% of the group’s turnover and masked the story in which I am most interested: the balance between contract logistics and freight forwarding.

For all companies other than Wincanton I have used the first-half 2014 published results.  For Wincanton the full year results to 31st March 2014 were the latest available.  I have also, where possible, excluded non-margin earning revenue such as duties.

Turnover analysis by product or service for major logistics companies that disclose such information
Turnover analysis by product or service for major logistics companies that disclose such information

You can draw your own conclusions from this, but what it tells me is:

  • Expeditors is still essentially a pure forwarder; Panalpina isn’t far behind.
  • K+N’s contract logistics business is still quite small, although combine it with Overland and they represent some 39% of revenue.
  • Ceva and DP-DHL have a close to 50:50 split (for the latter, excluding Mail and Express and grouping Freight (road transportation) with forwarding).
  • Norbert Dentressangle has come from a transportation background but has built up its contract logistics business so that it is now of equivalent size; the forwarding business is minimal.
  • Wincanton is 85% contract logistics, 15% specialist business.

None of that will come as much of a surprise, but it does confirm that really only Ceva and DHL have built businesses of comparable size in forwarding and contract logistics.  The others all have a particular strength (forwarding or contract logistics) which dominates.

 

Women in Logistics

Oh dear.  My praise for DHL’s appointment of women to senior positions is rather diminished by the following comment in their interim results for the six months ended 30th June 2014:

On 2 July 2014, Angela Titzrath, Board Member and Labour Director of Deutsche Post DHL, resigned from the Board of Management. Pending the appointment of a new Board Member for Human Resources, Dr Frank Appel, CEO of Deutsche Post DHL, will take on the corresponding responsibilities in a dual role.

Angela Titzrath, ex-member of DP-DHL's management board
Angela Titzrath, ex-member of DP-DHL’s management board

I must have missed the original announcement, but strike one from the women’s total.

Women at the Top in logistics

Women are successful and valuable contributors to senior management in a wide range of industries but the logistics industry has a reputation of being led by men.  What is the level of participation to the leading teams in the industry?

More years ago than I care to remember (well ten to fifteen years ago) I was unlucky enough to get press-ganged into attending a couple of conferences on board ocean-going liners.  The first time was on the SS Canberra, the second the newly-commissioned MV Oriana.  They were strange times; three days on a comfortable (Oriana) or somewhat less comfortable (Canberra – some ten years earlier it had been in the Falklands) with days chock-full of 30-minute meetings with what were ostensibly prospective customers but in practice were mostly freeloaders who agreed to meet because they got  a free cruise.

But what I remember most are the formal dinners and what followed.  The dinners, bizarrely, were black-tie affairs.  The diners (there were hundreds of us) were predominantly (and by predominantly I mean over 95%) men.  I’ll ignore the ethnic or religious background of the participants (that’s another can of worms for a later date) but the gender mix of the participants reflected that of the industry at the time.  A medium-sized UK haulier was run by a woman.  ‘Bees round a honey pot’ sprang to mind to describe the attention she got after dinner.

The world has thankfully moved on a lot since those days, and that made me wonder whether things had changed much.  It’s clear to anyone that works in it that the industry is still male-dominated and it’s difficult to get meaningful data, but an unscientific review of the most readily available information – the published 2013 statements of quoted logistics companies – does give a certain flavour.

These statements are largely focused on financial information, naturally enough.  They might have some corporate jargon about their equal opportunities policies but there is little concrete measurement disclosed.  The one tangible piece of information on gender balance comes from the composition of their boards.  I have complemented the published information with that gleaned from company web sites

Most of my sample have similar structures; in the Anglo-Saxon world non-Executive directors (in continental terms a Supervisory Board) with the Management or Executive Board or team.  Ceva, perhaps unsurprisingly now the holding company is incorporated in the Marshall Islands, was the most opaque.  The first mention of the management team comes in note 7 to the statements on page 39, with a further mention of the management team in note 28 on page.  I have used the Ceva web site to get an up-to-date picture.  Deutsche Post DHL was probably the clearest and most accessible.

Representation of women on select boards and senior management teams
Representation of women on select boards and senior management teams

So the most impressive participation is in DP-DHL, where some 22% of the participants are women.  Before we get too carried away, mind, the bulk of these are employee representatives on the Supervisory Board, which rather confirms the stereotype of left-/right-wing attitudes to equality.  DP-DHL also deserves credit for having a woman executive, although I must confess to slight disappointment that she works in a stereotypical role – HR.

Expeditors had one woman on the board and two executive officers.  Pleasure at the presence of two women on the Norbert Dentressangle Supervisory Board is slightly muted by the surname of one of them – Dentressangle.  As for the rest, the table tells its own story.

Overall some 11% of these directors or management are women.  But take out DP-DHL and the proportion is a measly 6%.  I’m no demographer but I recall that the proportion of women in the general population is about 50%.  That’s one hell of a gap.  As an industry we should be ashamed of this.

Room at the Top

Like buses, no examples for a while, then a bundle of changes turn up together.

DHL Supply Chain

In March 2014 it was announced that Bruce Edwards would be retiring and would be succeeded by John Gilbert as the Board of Management member responsible for DHL Supply Chain.

It doesn’t seem to have taken long for the ripples to flow through the organisation.  In June it was announced that:

  • Paul Graham former CEO APMEA is to become Global COO for DHL Supply Chain and CEO Mainland Europe, Middle East and Africa (MEMEA)
  • Oscar de Bok is appointed as CEO for DHL Supply Chain’s Asia-Pacific Region

In a separate announcement Graham Inglis, CEO Europe at DHL Supply Chain, has become divisional chief development officer, responsible for the growth agenda including sales and marketing and the global sector and product teams.

And in the Exel business in the Americas:

•    Scott Surredin named Chief Executive Officer of North America
•    Jose Nava appointed Chief Executive Officer of DHL Supply Chain, Latin America

All these changes appear to involve internal DHL Supply Chain people.

Ceva

Meanwhile on the good ship Ceva on 2nd July it was announced that Brett Bissell is appointed Chief Operating Officer, Contract Logistics.  I wonder if he’s known to his friends as ‘Bex’?

On 3rd June it was the appointment of Christophe Cachat as Chief Information Officer.  In May CEVA announced Michael Schaecher as Chief Operating Officer, Global Airfreight.  Two days earlier Hakan Bicil’s appointment as Chief Commercial Officer was announced.  He joins Ceva from from Panalpina where he was EVP, Head of Strategic Business Development.

These last three Ceva appointments are external.

The decline and fall of the UK logistics industry

Fifteen years ago, as the world partied because it was 1999, the average stock analyst following logistics companies on the London Stock Exchange (‘LSE’) had some choice.  In the Support Services, Shipping or Transportation sectors (or whatever they were at the time) there were at least the following players (in alphabetical order):

  • BOC (logistics business BOC Distribution Services became Gist in 2001)
  • Christian Salvesen
  • Hays (Hays Logistics)
  • NFC (including Exel Logistics)
  • Ocean Group (MSAS and McGregor Cory)
  • Tibbett and Britten
  • Transport Development Group
  • Unigate (Wincanton)

This collection of operators considered themselves to be amongst the global industry’s leaders.

Depending on ones definition of logistics, one could throw P&O and Bibby in the mix too.

The logistics industry has flourished on the globalisation phenomenon and this has surely contributed to the consolidation the industry has witnessed.  And that consolidation has affected the UK logistics industry more than most.

So what happened to the UK’s players?

Where are they now?

  • BOC    – acquired by Linde 2006
  • Christian Salvesen    – acquired in 2007 by Norbert Dentressangle
  • Hays (Hays Logistics)    – Hays Logistics spun off as ACR 2004 to Platinum Equity Group; acquired by Kuehne + Nagel 2005
  • NFC (including Exel Logistics)    – merged with Ocean Group 2000 to form Exel
  • Ocean Group (MSAS and McGregor Cory)  – merged with NFC to become Exel 2000; acquired by Deutsche Post 2005
  • Tibbett and Britten    – acquired by Exel 2004
  • Transport Development Group    – acquired by Laxey Investment Trust 2008; sold to Norbert Dentressangle 2010
  • Unigate (Wincanton)    – Wincanton spun off 2001; still independent

So of the eight businesses in our 1999 list (to some extent of course an arbitrary selection), four (BOC/Gist, NFC, Ocean Group and Tibbett and Britten) are now in German hands, two (Christian Salvesen and TDG) are French-owned and one (Hays Logistics/ACR) is Swiss, leaving a solitary remaining independent British player, Wincanton.

Of course the nationality of the ultimate holding company might not mean anything (witness how Jaguar Land Rover has thrived under Indian ownership), but a group does not need two head offices, so one suspects that Bracknell and Windlesham have suffered and when push comes to shove decisions are made in Bonn. Munich, Saint-Vallier or Schindellegi.  It probably does not reflect a diminution in British influence, but both the new DHL Supply Chain CEO and the post’s previous holder came from Exel in the US.

And who’s around now?

The Motor Transport Top 100 is a useful if flawed summary of the UK industry and that reveals the growth of parcels operators.  A significant new entrant to the quoted ranks is Royal Mail and Wincanton has been joined on the LSE by Eddie Stobart (in 2007) and Clipper Logistics (June 2014).

And that’s your lot.  A somewhat different picture to that at the end of the last century.

Letter to shareholders

As I wandered through the 2013 annual statements of our leading logistics companies in search of financial insight, my curiosity turned for some reason to the letter to shareholders that often seems to kick such documents off.

Having spent my fair share of time drafting mission statements, vision statements and chairman’s statements explaining why the last year really wasn’t as bad as the numbers suggest, I was interested to see how industry leaders set the scene for the dry facts that follow.

Often, quoted companies seem constrained by the regulatory restrictions imposed on them; others limit themselves by choice.  Ceva‘s report dives straight into the meat, explaining that on 2 May 2013 CEVA completed a major financial recapitalisation. CEVA Holdings LLC (a company incorporated in the Republic of the Marshall Islands, of all places) became the new parent company of CEVA Group Plc and its subsidiaries.  In the circumstances I suppose one has to respect their fact-based approach.

Of the others I looked at the principal common theme was the essentially bland and frankly meaningless, sometimes almost cut-and-paste management-speak that too often pervades such documents – challenges, focus, efficiency and the like.  Here’s the earth-shattering contribution from the CEO of the industry’s leader, Deutsche Post DHL:

In today’s age, tailored logistics services are a key to success for companies in many industries. We are proficient in this business and are determined to offer every customer precisely the service they need to be successful. Doing this means facing a wide range of challenges,

I have no idea how many man-hours went into this prose but do they think anyone actually reads something like that?

K+N‘s chairman used an interview format to lead with:

With net earnings of CHF 607 million, Kuehne + Nagel’s result for 2013 marks a new milestone. It shows that our company has returned to its former strength. Our measures to enhance efficiency have proved effective, and I am particularly pleased that we have achieved such a positive result in a year that was challenging and characterised by uncertainty both from a macroeconomic viewpoint and from the internal perspective of the company.

I need to dig a little more into that ‘uncertainty… from the internal perspective of the company‘.

Panalpina took a very matter-of-fact approach:

In 2013, we were able to improve our result by CHF 80 million.  Whilst this is a positive improvement over last year, we still have much to do to reach the targets we have set ourselves. We are therefore focusing our organization into converting more of our considerable gross profit into net profit, in which our shareholders participate.

Good to see the acknowledgement that shareholders participate in net profit.  Of course, improving the result by CHF 80 million isn’t the same as making CHF 80 million.

But my personal award goes to Expeditors for their refreshing and very human statement:

2013 was a decent year, but not a great one.

Well done them!