The CEO of Maersk indicated to a European business publication that acquisitions involving land logistics and transportation services are expected over the next 2-3 years. This is another clear sign of pending industry consolidation of capabilities.
This Supply Chain Matters blog is a follow-on to Prediction Eight of our just published 2019 Predictions for Industry and Global Supply Chains (Now available for complimentary downloading in our Research Center).
Our prediction declared that in 2019, global logistics, transportation and third-party logistics entities (3PL’s) will begin to finally confront the converging forces of industry business model disruption with a lot of process, technology and stakeholder implications.
In essence, all logistics and industry stakeholders want to participate in the implications of a permanent shift to online Cloud focused business and retail customer fulfillment, and all that this requires in a far different logistics and last-mile fulfillment business model. Our belief is that multi-industry and global supply chains will eventually witness the creation of Network of Networks as business strategies and advanced technology that aligns to future levels of capability.
We predicted that industry supply chains will see discernable signs of such strategies being percolated in the 2019-2020 period. We highlight one very discernable sign.
In late December, the CEO of ocean container line industry leader Maersk told Europe’s business publication the Financial Times that the next few years will feature this ocean container giant diversifying parts of its business through tuck-in acquisitions beyond just global shipping. That includes areas such as inter-modal surface transportation as well as operating warehouses. Specifically indicated in the interview was scaling the land side of Maersk’s business model.
Our global transportation readers are likely aware that Maersk’s land side is built around the Damco logistics business unit. In 2017, Damco introduced Twill, a technology that promised to make ocean transportation movement as easy booking an airline ticket. Plans were already in place to merge processes of global shipping with Damco, including more integrated inter-modal and last-mile delivery process capabilities.
Maersk’s CEO indicated to FT that currently, less than 20 percent of existing customers buy the land side of logistics, but almost all need to coordinate truck transportation to and from a port. Noted was a vision that ocean container shipping customers would acquire everything required for a global supply chain movement from a single carrier.
The implication is to avoid all the current intermediaries involved including freight brokers, transportation or third-party logistics providers. As noted in our prediction, these intermediaries are continuing to consolidate their inter-modal capabilities as-well.
Hence industry forces are indeed showing signs for moving toward consolidation. Industry supply chain management teams will have to make some strategic choices in the coming months as to where the end-state is headed, and which options provide the best opportunities for enhanced customer service, while delivering meaningful cost savings that simplify today’s hand-off complexities.
We believe the keys to such choices will revolve around advanced technology enablement of such capabilities, namely which industry participants demonstrate the most proficiency and market timing.
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