So DB Schenker is on the table for sale. The rumors that the logistics giant is looking for a go-out strategy were floating in the air from 2021, but this seemed a talk only. And like with the case of digital freight forwarders, many now believe that the market consolidation will end the life of SM freight forwarders. We all know that doomsday stories about digital freight forwarders haven’t come true (you can read more about why digital freight forwarders are not a threat here). And I believe that market consolidation is more of a spooky story than a real threat. I’m not saying that SM FF can now sleep well; of course, such level consolidation will make some shifts in the market, but A players will survive.

In this article, I will underline my thoughts on why this kind of concentration is happening and whether this is a real threat for SM #freightforwarders, and provide some advice on what to do to hedge this new situation.

Why is the concentration of the logistics market happening? 

The concentration of the logistics market is not a new thing. It’s been happening for 30 years but has reached its final phase.

The critical part of why consolidation is happening is because of the changing shippers’ needs. Today’s global supply chains have become complex. The concept of #robust and #responsive supply chains leads organizations to develop complex chains involving outsourcing, nearshoring, offshoring activities and leveraging omni sales channels. And the balance of each of the above activities is constantly changing. Additionally, we need not forget that shippers continually seek to cut costs. So #logistics companies reflecting on those changes must widen their service portfolio and geographical reach and look for ways to make their operations more efficient. M&A is the easiest way to achieve this.

The other important part is related to the import-export shifts. The #nearshoring and #d2c sales channel eventually will remove capacity from long sea legs and rely more on trucking, rail, and short sea legs. We need not forget #sustainability initiatives. Logistics companies are one of the most significant environmental pollutants. Many initiatives are being introduced to decarbonize the logistics industry. Total decarbonization can only be reached with technological developments that allow moving freight without polluting the environment. But in the transitional phase, there will be more emphasis on rail deliveries, reducing speed and net zero last mile deliveries. Companies that have control of those means will gain more significance in the value chain.

So now, global logistics players are looking for ways to get more considerable control of the value chain because, in such a way, they can be better hedges for future developments and earn better margins.


Why is DB Schenker interesting for other players?

At first look, DB Schenker doesn’t look like a company that could provide positive synergies to any of the existing companies. Each TOP 5 logistics company has already acquired many other companies, which helped with its presence worldwide. They all have enough funds for R&D, digitization, and automation. It seems they are set up.

But I believe the DB Schenker rail business is one main asset with many potential and synergies. If DB Schenker sells itself with their rail business, this purchase could create synergies for ocean carriers and other market players, because of the shift to rail, especially in Europe.

Will there be a place for SMM FF business?

I believe there will be a place in sunlight for everyone. We saw the same things in other industries, and I think we will see the same thing here. First, let us not forget that there are millions of shippers worldwide, and no one or five or even 1000 companies could serve them all. We also know that SM FF usually is more flexible and can provide better service levels, which is still essential for shippers that want to take out the complexity of their operations. This can change in the future when autonomous supply chains are viable, but until then, we have many years in front of us.  I know many believe that self-service portals can attract shippers to book directly, but you can’t call a self-service portal at night, and it will not move a stuck container in Ukraine or another part of the world.

I do not want to sound one-sided. Therefore, I must underline that consolidation can have another effect if multinational companies find ways to create a personal service touch experience and provide more flexible services. But I doubt that this will be achieved only with the help of digitization. If those players are looking seriously at this, they need to take the approach of IKEA and adopt the personal touch approach for the logistics industry. Moreover, they need to transform their sales department.

So what should SM FF do to hedge the risks and thrive in the new environment?

 1st. Wider service packages. By this, I mean not just putting information on your websites but actually looking for ways to implement multimodal services and align with the prices. If you can’t do this alone, enter into alliances, and join logistics networks.

2nd. Niche down. Do not try to beat the multinationals in their own game; instead, create and play your own game. Look for verticals that are not interesting for the global players, and become the best player in this field.

3rd. Faster expansion. Most logistics companies are growing at a pace of 5-15% a year. Except for the pandemic period, I doubt the same growth pace will be achieved in the future (you can read more about whether the growth during pandemics is sustainable here). Therefore you need to look for ways to speed up new business development. You can read more about the best ways to generate new customers here and here.

4th. Build the best customer experience. The only real differentiator that SMM forwarders have are excellent service experience and flexibility. Although businesses need to understand that it’s not enough to declare those differentiators, organizations need to have all the processes for customer experience measurement, and they need to be documented and engraved in your company’s culture.

5th. Invest in branding, marketing, and sales activities. Stating that you are the best company and provide the best services on your website is not enough as it’s also not enough to rely on referrals.  Providing outstanding services and not spreading the word within the media is a big mistake; not building advocacy around your brand is another mistake that limits your growth potential. Having no sales process and not training your sales team to sell your key differentiators effectively makes your competitors happy.  Great logistics companies understand this and work on all of the above initiatives. You can read more about P&R, marketing, and mistakes herehere,  and here.

Ultimately, I want to draw your attention to one last thing. The market is changing, which creates many uncertainties, but we, the logistics breed, are the ones who always find ways to solve any problems in between. And I have no doubts that many of you will find ways to walk away as winners from this and any other situation.

About the author: 

Tomas Ananjevas is a supply chain professional with 15 years of experience purchasing and selling Logistic’s services and building a supply chain from scratch. He founded a consulting, training, and staffing company that works exclusively with the logistics industry. Tomas is helping logistics companies implement the necessary changes to ensure business growth and continuity. You can arrange a time to talk with Thomas about possible synergies by clicking here.

Ready to talk?