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Outsourced Logistics 200811

Outsourced Logistics 200811

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Published by kamarani

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Published by: kamarani on Sep 19, 2011
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Hans Miedema
Regional Support Leader Agility Global Account Team
When does Agility’s Hans Miedema consider a job done? When he successfully executes criticalgas turbine shipments for his global energy customer? When he applies Lean Six SigmaMethodology to eliminate defects for his clients in Eastern Europe and India? For Hans, andmore than 32,000 other Agility employees in over 100 countries around the world, success isn’tmeasured in parts assembled or products shipped. Success occurs when our partners achievetheir goals. It’s an intimate approach to logistics that demands individual attention andpersonal ownership. It’s how Hans Miedema brings Agility to supply chain challenges.
e could be seeing some early signs of a restruc-turing of the global logistics industry.Or it could just be some localized bad news.The whole North American parcel sector is challenged,and current reports have DHL accelerating its restructur-ing to cope with worse-than-anticipated results in the USdomestic market. Described as a critical link in its globalnetwork, the question has been posed whether DHL canreturn its US network to what it had before the AirborneExpress acquisition or, alternatively, what effect a dra-matic downsizing or exit from the US market could haveon its global network. That's only one example.In a larger context, has the march to global dominancebeen stopped? Does this suggest that top-performing localor regional players will remain a key resource rather than atarget for acquisition? In a word, will the consolidation thathas been taking place in the industry turn from acquisitionto alliance? Arguing against ac-quisition is a tightercredit market. Eventhose companieswith good creditcan find it morecostly to bor-row. Those witha strong cash po-sition may find itadvisable to putthat cash intothe cur-rentbusiness and infrastructure rather than acquisitions.The US dollar has rebounded a bit on currency markets, sothe buying leverage the Euro had is largely mitigated. But thedomestic economy may constrain a buying spree abroad.Share prices have dropped, affecting another majorsource of cash for acquisitions (or leverage where a shareswap is used for an acquisition). Volumes and capacity affect pricing, which drives rev-enue and, returning to DHL for a moment, what happens tothe $1 billion outsourcing deal with UPS if volumes are notsufficient to generate the expected base revenue? A similarcase might be made for acquisitions. If the ability of theproposed acquisition to produce a certain level of revenueis impaired, the basic assumptions change. Is the return stillthere? If the timeframe has lengthened, is it acceptable to theacquiring company’s board and shareholders to delay thereturn on its investment?Of course, lowered results and forecasts do create a bar-gain hunter’s paradise. Good companies with quality per-formance levels find their shares undervalued as an entiremarket segment drifts downward. For a group with accessto cash, that may be a deal too good to pass up. And, if you’re that potential target, which way do you go? Look foran alliance partner who can help rebuild the volumes thatprop up your higher valuation, or take the buy out?Two quality players who value their independencemight strike a deal and avoid acquisition, forestallingsome of the industry consolidation that has dominatedthe logistics segment in recent years. If that’s the case, theleading regional player may remain just that.Bargain hunting can backfire though and a companycould acquire an operation that was teetering on extinc-tion only to drag down its own overall performance at atime when it should be enhancing its price/value proposi-tion. In that case, it may have been better to let the poorperformer fail and move into that space with a brandextension that maintains its service promise.Newton’s law of thermal equilibrium says that if youadd hot water to cold, you get a tepid result. The globallogistics market can’t afford more tepid performers. If these down markets are going to force some restructur-ing, let’s build for strength.
Early Signs
Perry A. Trunick
, chief editor,perry.trunick@penton.com
November 2008
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