Power 25: Top forwarders find strength in integration

Power25_ACW0615ftSize still matters

For all the agility of the smaller players in the market, there is no denying the power of size. In fact, the 10 largest players in the forwarding business currently control 35 percent of the global market.

Sitting atop the list, as usual, is DHL Supply Chain & Global Forwarding, with US$32.19 billion in gross revenue and an untouchable 2.27 million tonnes of airfreight handled in 2014 – almost as much as the combined tonnage handled by its two nearest competitors. Kuehne + Nagel (No. 2) saw a 3 percent rise in revenues to $23.29 billion, compared to 2013, and enjoyed 5.3 percent growth in airfreight tonnage to 1.19 million last year, while DB Schenker Logistics (No. 3) had a more modest – but still impressive – 2.5 percent increase in tonnage to 1.11 million, compared to 2013. Expeditors International was No. 7 in 2014, but it continued its awe-inspiring run of vigorous growth, increasing its overall revenue by 8 percent to $6.57 billion and its airfreight handle by 7.7 percent to more than 823,000 tonnes.

Worldwide, the state of the industry is “very good,” Armstrong said. While he said some of that success came at the expense of seafreight during the West Coast port congestion crisis at peak season, “we’ve seen growth rebound strongly as the global economy recovers.”

The estimated global value of the third-party logistics business in 2014 is about US$723 billion, he said, $238 billion of which was attributable to international transportation management. This means that, from 2010 through 2014, the entire 3PL business has had a compound growth rate of 3.5 percent. More recently, the industry saw a 4.9 percent jump from 2012 to 2014.

Integrators make their moves

With integration the name of the game, it’s no surprise that the forwarding arms of two classic integrators, UPS and FedEx, made significant moves up the Power 25 chart. With a 2.4 percent growth in revenue to $5.76 billion and a 2.6 percent increase in air cargo to 912,500 tonnes, UPS Supply Chain Solutions jumped ahead two spots to secure No. 4 on the list.

One key to the success of UPS is the movement of heavy freight, said Steve Flowers, the president of UPS Global Freight Forwarding. He said that when UPS acquired San-Francisco-based Fritz Forwarding in 2001 and Menlo Logistics around the same time, these acquisitions were intended to fulfill its customer’s needs for shipping heavy freight. “These were other modes of transportation we didn’t have 10 years ago,” Flowers said. The acquisitions also gave UPS ground access and partnerships with other airlines it didn’t have before.

Alan Amling, UPS vice president of global logistics and distribution, said that “the size of UPS’s network – and all that it entails – continues to be a significant differentiator.” He said his customers fluctuate up and down with needed services. For example, many ocean freight customers had to upgrade to air during the West Coast port crisis.

UPS has also invested heavily in the healthcare sector in the past three years with temperature-controlled units for pharmaceuticals or medical equipment. “We serviced all the major electronics manufacturers,” Flowers said. “They need airfreight when it needs to be at market on a certain date.”

Not to be outdone by its chief rival, FedEx Trade Networks and FedEx Supply Chain, the forwarding arms of FedEx Corp., muscled their way onto the Power 25 list, debuting at No. 20, with 250,000 tonnes handled last year and 2014 gross revenues of $1.46 billion. In the last year, FedEx said it built out its freight forwarding capabilities for bulk shipments through FedEx Trade Networks air and ocean services, and now has expanded to 27 countries, with more than 70 offices outside the U.S.

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