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HANGZHOU, China: June 26, 2017. Best Inc., a logistics company backed by the Alibaba Group, has applied for a listing on the New York Stock Exchange and Nasdaq to raise US$750 million in an initial public offering of American Depository Shares.

Citigroup, Credit Suisse, Goldman Sachs, J.P. Morgan and Deutsche Bank are underwriting the offer.

BEST IPOIn a filing with the U.S. Securities & Exchange Commission (SEC), Best says the emergence of 'New Retail' and the continued growth of e-commerce had presented "vast market opportunities" driven by China's transition to a consumer-led economy, the rise of the country's middle class, and growing disposable income.

The company estimates China's e-commerce market, including B2B and online shopping, will grow from US$2.8 trillion in 2016 to US$5.8 trillion in 2021 at a CAGR of 15.4 percent.

Citing iResearch data, Best says more and more companies in "the world's largest logistics market" are expected to outsource their supply chain needs to third parties. As a result, China's third-party logistics market is expected to double in size from US$176 billion in 2016 to US$366 billion by 2021.

Best Inc. is incorporated in the Cayman Islands and controlled via a Variable Investment Entity (VIE) in China by two PRC individuals, Wei Chen and Lili He - relatives of Best founder, chairman and CEO Shao-Ning Johnny Chou - who together with Hangzhou Ali Venture Capital, an Alibaba subsidiary, hold 36.3 percent, 36.3 percent and 27.4 percent respectively of the company via the VIE.

Shao-Ning Johnny Chou launched Best in 2007 using smart technology to combine supply chain management, express delivery, freight, merchandise sourcing, cross-border supply chain, last-mile, financial and value-added services (see flow chart).

For Q1 2017, Best reported revenue of US$471.9 million from its supply chain management, express, freight and online store divisions and a net loss of US$61.4 million.

The company's filing with the SEC warns: "We have a history of net losses and negative cash flows from operating activities, which may continue in the future."

ATLANTA: January 09, 2017. UPS has purchased Freightex, a U.K.-based broker of truckload, LTL, specialized and refrigerated road services.

FreightexThe transaction follows the purchase in 2015 of Coyote Logistics, a similar company based in Chicago. UPS said both organizations are complementary and it expects to leverage customers across the two units based on shared share system technologies and business processes.

The acquisition, terms of which were not disclosed, is aimed at developing a presence in the U.K. and European 3PL truck brokerage market.

"There is significant cross border opportunity," said Alan Gershenhorn, UPS chief commercial officer. "This acquisition provides UPS customers an immediate, knowledgeable and competitive U.K. and European presence."

Citing data from Grand View Research, UPS said the European 3PL market reached a value of US$174 billion by the end of last year with the brokerage portion growing faster than the total market as shippers and carriers adopted the business model.

"We are excited to join the UPS organization and Coyote brokerage operations," said Freightex CEO Tim Phillips. "UPS and Coyote have industry-leading technology, a no-excuses customer service culture, and a proven record of success."

According to Grand View Research, key players in the 3PL market include C.H. Robinson Worldwide, UPS Supply Chain Solutions, J.B. Hunt, Kuehne + Nagel, DHL, and FedEx.

"UPS has many existing customers who will benefit from U.K. and European transportation brokerage capabilities," Gershenhorn added. "Freightex's proven expertise and strong regional network, combined with Coyote's technology, people, processes, and service reputation will present a best-in-class solution for customers."

LONDON: June 10, 2016. With Britain’s EU Referendum just 13 days away, logistics industry confidence is at its lowest level since 2012 according to the latest UK Logistics Confidence Index from Barclays and accountants Moore Stephens.

Despite continued growth in the UK economy, logistics operators are apparently concerned about the impact of the referendum and a dampening of demand in China and the Eurozone, while struggling with price pressures, increased competition and cost increases.

Moore StephensConfidence is expected to fall further during the second half of 2016 with 47 percent of respondents expecting the outlook to deteriorate. At the same time, pricing is now seen as the most important factor in winning new business, with 62 percent saying new customer acquisition is the result of displacing an incumbent provider, a rise of nine percent year-on-year.

Philip Bird, partner at Moore Stephens (head office, right) commented: “There is no doubt that logistics companies are more pessimistic about the short-term outlook for the sector than our previous survey. This may be due to uncertainty surrounding the referendum and also the continued sluggish growth of the UK and global economies. Within this environment we expect to see further price pressure and consequently continued focus on cost control and M&A activity as a means to achieve economies of scale.”

According to the study respondents cited value-added services including last-mile delivery, co-packing, returns management services, labeling, pre-assembly or even basic manufacturing as a way to establish long-term customer relationships.

Technology is also viewed as a business opportunity for the logistics sector to realize the cost, service level and efficiency benefits of cloud services, digital tracking technology and the insights available through big data analytics.

Rob Riddleston, head of Transport and Logistics at Barclays added:  “Confidence in the UK logistics industry has taken a knock from price pressure and increasing competition. Under such pressure, the high level of planned capital expenditure is welcome news and reflects the sector’s pressing need for investment in technology.  It is also encouraging that the role of technology is recognized as a route to both control costs and improve service levels and investment in this area is a key trend for the sector.”

Barclays and Moore Stephens surveyed over 100 CEOs and CFOs for their latest H1 2016 Index.

LEEDS, UK: June 02, 2016. As 'Vote Leave' supporters rely on the transport industry to promote their cause, logistics specialist Tudor International Freight (TIF) says British businesses face “severe consequences” if the UK decides to leave the EU.

TUDOR JohnsonDavid Johnson (right), managing director of TIF, said a ‘Brexit’ Britain would face three possible outcomes in trading with the EU - describing them as the “Norway, Switzerland and China scenarios”.

“Probably the most straightforward and favorable trading model is that adopted by Norway, which, as a member of the European Economic Area, has a free trade agreement with the EU," he said.

“A Norway-style arrangement wouldn’t involve UK companies paying duties or taxes when moving goods across borders. However, they would need to produce documents proving where the goods originated, to confirm that they weren’t eligible for duties. This is an increasingly costly task, given the ever-greater complexity of modern supply chains.”  

His second scenario would see the UK making a series of bilateral trade agreements with the EU, similar to the 120 treaties the Union has with Switzerland. However he warned that when entering Switzerland, goods exported from the EU still have to undergo Customs clearance and are usually subject to VAT and import duties.

With the China scenario, Johnson said this would take effect if the UK left the EU after the official two-year withdrawal period without agreeing to the Norwegian or Swiss trading options and would mean implementing World Trade Organisation (WTO) rules: “The system would involve us and our former EU partners granting each other access to their markets and charging the same import duties they levy on other WTO members with whom they don’t have free trade agreements.

“In our case, these duties currently range up to the 32 percent levied on wine. The 53 free trade agreements we currently have with other countries as a member of the EU would lapse if we left.” 

BREXT impactJohnson noted that moving goods across borders within the EU is currently easy and cheap: “When we import dental uniforms and medical scrubs from Germany for a workwear company, the only documentation we need is a copy of the packing list or commercial invoice and the travel document.

“For air freight this is a waybill, for sea consignments it’s a bill of lading and for road haulage it’s a CMR note, the initials of which are derived from its French title. No Customs clearance process or duties apply and VAT doesn’t have to be handed over before the goods can be moved from the receiving port or airport. This system is the same whatever the import.”

However In a post-EU, WTO regime, he said importing £50,000 worth of medical scrubs and gowns from Germany would require a VAT payment of £10,000 at the UK point-of-entry, plus £5,000 in import duties.

Johnson said his three scenarios would all involve time or cost increases when moving goods across frontiers.

His conclusions coincide with a report by the OECD that claims an EU exit by Britain would result in a 3.0 percent drop in GDP by 2020 or a loss of £2,200 per household.

OECD secretary general Angel Gurría declared: “Leaving Europe would impose a ‘Brexit’ tax on generations to come. Instead of funding public services, this tax would be a pure deadweight loss, with no economic benefit.”

 

LONDON: The latest bi-annual UK logistics index from Barclays Bank and international auditors Moore Stephens says maintaining existing customers is now the prime focus for logistics companies.

The index reports that for 57 percent of operators, their main source of new business over the past six months has come from "switchers" from other logistics service providers with less than 10 percent coming from customers renewing existing contracts.

barclays corporateOther indicators suggest 73 percent of respondents expect the outlook for the sector to improve or stay the same, but almost a quarter believe that conditions are more difficult; however 75 percent feel sufficiently confident to make capital investments in the next six months; and the industry image remains a key barrier to women choosing to work in the sector.

Barclays said the "intensely competitive nature of the sector continues to put prices under severe pressure suggesting that margins continue to be squeezed as major retailers and manufacturers look to maximize efficiencies before signing up to a new contract".

Index respondents noted contracts can be won by moving away from traditional service offerings to working in partnership with customers. Many highlighted their customers' requirements for a one-stop-shop route to market covering many aspects of the supply chain such as storage, picking, packing, labeling, co-packing and point-of-sale services.

Eight in 10 operators said they expect their turnover to increase in the next 12 months with 11 percent forecasting a rise of 10 percent or more. More than half of respondents (53 percent) expect an increase in profits, down 13.7 percent from six months ago, while 31 percent expect profit levels to stay the same.

Rob Riddleston, head of Transport & Logistics at Barclays, commented: "Following the feel-good factor we have witnessed in recent surveys, it appears that logistic operators are more cautious this time as the sector returns to a more normal footing. Their focus now is very much about finding solutions to longer-term problems such as driver and skills shortages, relentless pressure on margins and the ever-increasing competition to win and retain customers.

"Yet, there is still a lot of confidence amongst operators with high levels of investment, turnover and profitability still being reported," he added.

LONDON: February 11, 2016. Rhenus Logistics says the UK government’s six-month delay in deciding between a third runway at London Heathrow - or second at Gatwick - is adding pressure on the country’s “chronic lack of export route capacity” for manufacturers.

Heathrow cargoRhenus says all UK seaports are operating at maximum capacity and without other routes manufacturers and the logistics industry are “stuck in limbo” without a third runway at Heathrow.

David Williams, Rhenus Logistics UK managing director noted: “The government has set British companies an ambitious target of exporting £1 trillion worth of exports per annum by 2020. However, in order to achieve this, the UK needs serious investment in infrastructure. We are experiencing an increasing demand for airfreight as UK ports continue to operate at maximum capacity.

“It’s unfortunate to see British manufacturing levels decrease by 0.4 percent in November [last year], however the logistics sector will soon begin to struggle to ship this volume of goods through the existing channels despite the downturn. As Heathrow’s cargo capacity still lags behind Frankfurt, Schiphol and Paris it’s becoming increasingly obvious that there is simply no capability to move any additional goods,” he added.

Heathrow CEO John Holland-Kaye responded: “With expansion, we’ll open up 40 new trading links which will carry more British exports to the fastest growing markets in the world. We’ll help the government rebalance our economy and build a better Britain. The prime minister can say yes and we will deliver.” 

Heathrow reported a 2.9 percent overall rise in air cargo traffic in January compared to 2015. China and Mexico were both up 28 percent; East Asia saw a rise of 26 percent and traffic with Turkey rose 16 percent, said the company.

DSV 2DENMARK: The DSV Group has reported revenue of DKK12.5 billion for the third quarter of 2015 and a 4.5 percent increase in gross profit to DKK2.8 billion compared to the same period last year.

Gross profit for the first nine months of 2015 totaled DKK8.4 billion on revenue of DKK38.3 billion. Operating profit before was DKK2.3 billion compared to DKK1.9 billion last year.

The group's free cash flow rose from DKK1.04 billion to DKK1.8 billion million year-on-year during the period.

Company CEO Jens Bjørn Andersen said gross profit for 2015 is expected to reach DKK11 billion to produce an operating profit of DKK3.0 billion: "We are extremely pleased with the progress for the third quarter of 2015; DSV has gained market share in all business areas, with both earnings and cash flow keeping up. The Air & Sea division continues the positive development and delivers 24 percent growth in operating profit, and we can raise our overall performance outlook for 2015."

In October DSV signed an agreement to acquire UTi Worldwide Inc. (UTi) for US$1.35 billion. Closing date is expected in Q1 2016.

DSV said the acquisition would significantly strengthen its air and sea services; increase its industry-specific capabilities; and become "truly global within contract logistics and expand into road freight activities outside Europe".

The company noted its main banks have committed to underwrite the transaction through a combination of debt and equity financing.

CARDIFF, UK: February 03, 2016. As a result of a collaboration with the Cardiff Business School, Panalpina says it has become the first global logistics company to develop its own application that helps customers manage, forecast and reduce inventory levels in their supply chains.

Three years ago, Panalpina and the Cardiff Business School at Cardiff University in Wales (UK), set out to search for a so-called ‘hidden formula’ for lean inventories. As a result the company has now launched ‘D2ID’, a new inventory forecasting application to include new manufacturing technologies such as 3D printing.

Panalpina Cardiff Business School“As a result of our initial partnership we now have a new application at hand that allows us to forecast the demand of a company’s products and plan its inventory accordingly,” said Nicole Ayiomamitou (pictured right), lead researcher on the knowledge transfer project. “To achieve this, we have taken real inventory data from Panalpina and developed a unique product life cycle algorithm based on leading-edge mathematical thinking,” she explained.

Panalpina says the benefit of this approach is that it can predict how much space is needed at its facilities, where to position them and what services to provide in order to keep customers’ products moving and to minimize the working capital in their supply chains.

“We started off by mapping the inventories of our customers across product life-cycles. The more data we analyzed, the more refined we could make our inventory forecasting model,” explained Mike Wilson, global head of logistics at Panalpina.

Wilson, who graduated from Cardiff’s MBA program in 1993, calls this approach ‘Demand-Driven Inventory Dispositioning’, or ‘D2ID’.

Cardiff Business School professor Aris Syntetos added: “Simply put, the new application works at a product level, selecting and applying the best mathematical forecasting method at the click of a button. The application has been tested on various types of products, and the results are remarkable,” he added.

HEDEHUSENE, Denmark: Supply chain management company UTi Worldwide is to be acquired by DSV for US$1.35 billion. The acquisition is expected to complete by March 2016 and is subject to regulatory approvals.

In December last year UTi denied talks with DSV had gone beyond an "exploratory stage" and at the time said no further meetings were planned. Nine months later, UTi's stock had fallen to US$4.75 a share from a high of US$10.25 in June. Current unit price is US$7.13.

In mid-2015 UTi reported its EBITA margin had declined from a high of US$213 million in Fiscal 2012 to US$18 million by the end of the first quarter of Fiscal 2015 and forecast US$8 million by the same period in Fiscal 2016. Between 2012 and 2015 net revenues had fallen from US$1.7 billion to US$1.5 billion.

UTi 2Current revenue is split 33 percent contract logistics and distribution; airfreight forwarding 30 percent; ocean forwarding 25 percent and Customs brokerage five percent.

The company employs 21,306 people in 309 owned locations in 248 cities in 58 countries. Revenue per region is 33 percent Americas; 27 percent Asia Pacific; 24 percent EMENA and 16 percent Africa.

Commenting on the DSV purchase, UTi CEO Ed Feitzinger said: "The potential combination of our two businesses has a strong cultural fit, aligned strategy, and a complementary client base and geographic footprint. We have the opportunity to draw on the current strengths and scale of both companies to bring solutions to our clients that we could not have delivered on our own.

DSV is a global supplier of transport and logistics services and employs 23,000 people in 530 offices and 130 logistics facilities in 75 countries. The publicly quoted company reported annual revenues of US$8.7 billion in 2014.

Kurt Larsen, chairman of the DSV board, noted: "This is a great step for both UTi and DSV. I know that the combined business and workforce will reach new levels together – we will create a stronger company with an expansive footprint in the 3PL space and an exciting value proposition for our customers."

LOS ANGELES: January 11, 2016. A class action lawsuit has been filed against three trucking companies now owned by XPO Logistics.

According to the law firm Kabateck Brown Kellner (KBK), lead plaintiff Horacio Lopez is suing PDS Transportation, Intermodel Container Services, (dba Harbor Rail Transport) and Pacer Cartage, claiming the companies failed to pay wages, provide meal and rest breaks to its employee drivers, “and other labor code violations and unfair business practices”.

In a response to a Wall Street Journal query XPO chief operating officer Troy Cooper said: “We believe this case is without merit and plan to litigate it vigorously. We are in constant dialogue with our independent-contractor carriers and believe the vast majority of them value the significant benefits that operating independently can bring.”

Pacer Truck 2Last week XPO announced the winners of its 2015 Driver of the Year competition for both company and independent contractor drivers. Hank Bartos, president of XPO’s truckload business noted: “It takes an exceptional level of skill and a strong commitment to safety to succeed as a professional driver. We are fortunate to have these seven outstanding drivers on our team, supporting our customers. They set a high bar for excellence and have certainly earned this recognition.”

KBK said it had filed more than a dozen class action lawsuits over the past year claiming thousands of port truck drivers were improperly classified as independent contractors rather than employees.

“This is one of the most pressing labor issues that directly impacts business at two of the nation’s busiest ports, Los Angeles and the Port of Long Beach,” declared KBK managing partner Brian Kabateck. “These lawsuits are the only way to expose the unfair labor practices that run rampant throughout the trucking industry,” he added.

KBK is citing a U.S. 9th Circuit Court of Appeals ruling that independent contractors deserve the same pay and protections as employees, under California law, because they [have] signed independent contractor agreements and are doing the same work and are under the same control of the company as employees.

Prior to the stock reaching a 52-week low, hedge fund Janus Capital Management recently acquired 28,219 shares in XPO for approximately US$672,000.

GEFCO carCOURBEVOIE, France: Russian Railways (RZD), which purchased 75 percent of the French GEFCO Group from Peugeot-Citroen in 2012 for €800 million, has now used its subsidiary to acquire Dutch-based forwarder IJS Global from private equity fund Nimbus.

Terms of the sale, which is subject to regulatory approval, were not disclosed.

Founded in 2004, IJS Global has around 500 employees and had a turnover of €160 million in 2014. The company specializes in pharmaceuticals, humanitarian relief, high-tech, oil & gas, aerospace and fashion business sectors.

GEFCO said the acquisition would allow it to develop services between China, South-East Asia, Australia and the USA while extending its European network in the UK, Netherlands and Germany.

Commenting on the acquisition Luc Nadal, chairman of the GEFCO management board said: "The acquisition of IJS Global is fully in line with our development strategy. This operation will allow GEFCO to enhance its position as the preferred partner of international industrial companies. Our mission is to bring value to our customers' supply chains while enabling them to achieve greater growth and competitiveness. "

Sjoerd Van Loon, CEO of IJS Global added: "We are delighted to join the GEFCO Group, a global leader in high value-added logistics. The networks of both companies are complementary and will significantly contribute to our service offer in all of the world's key markets. We are looking forward to combining the knowledge and experience of our teams to help us grow. "

GEFCO noted the purchase would enhance its logistics and transport services that include storage, Customs and tax representation and the management of complex supply chains covering 150 countries.

Nadal concluded: "We [now] have all the assets to become a major overseas player for all of our international industrial customers."

CSAFE Global

 

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