Above the Fold: Supply Chain Logistics News (January 28, 2022)

A big snow storm is heading our way. Or so says the weatherman. They’ve been wrong before, you know. 

There are four shovels in our garage, but only one shoveler: me.

My older kids are off at college, one will be away skiing this weekend, and my youngest daughter sometimes helps. Sometimes.

My wife? She has an undiagnosed mom injury that prevents her from shoveling.

Sure, I can hire somebody to plow our driveway and shovel our sidewalk and steps. Maybe one day I will. But to be honest, as someone who spends most of his workday sitting in front of a computer, I actually welcome the opportunity to do some physical labor. It keeps me connected to my roots.

Shoveling snow, raking leaves — it’s nothing compared to cutting sugar cane in the hot Cuban sun, which is what my father and uncles had to do growing up. 

But it’s something.

It’s in my blood, and it’s in my sweat, and when the work is done, I’ll have some cafe con leche like they did, so warm and so sweet, and through the living room window, in the dying light, I’ll see

the fruit of my work.

In this week’s supply chain and logistics news…

Retailer Buying 3PL, Ocean Carrier Buying Airline: What’s Going On?

As I highlighted in “Taking More Direct Control Of Your Supply Chain,” it seems like a growing number of companies are retaining or taking more direct control of their logistics operations. 

For example, in November 2021, retailer American Eagle Outfitters announced that it was buying Quiet Logistics for $350 million. The latest example is BJ’s Wholesale Club, which announced this week that it has entered “into an agreement to acquire the assets and operations of four distribution centers and the related private transportation fleet from longtime partner Burris Logistics. The transaction will allow BJ’s to insource its perishable supply chain.”

Here are some excerpts from the press release:

“For more than 20 years, we have enjoyed a true partnership with the Burris Logistics team as we distribute the freshest perishable products to clubs throughout our chain. As we continue to accelerate our new club growth, broaden our footprint, and expand our fresh food offerings, we are excited to insource these capabilities to support our future growth [emphasis mine],” said Bob Eddy, president and chief executive officer, BJ’s Wholesale Club.

“The addition of these four facilities and the private fleet is part of a larger strategy to expand and scale efficient supply chain capabilities [emphasis mine], positioning BJ’s for continued growth while delivering the best quality and freshest products to our members,” said Jeff Desroches, executive vice president and chief operations officer, BJ’s Wholesale Club.

Does this mean that BJ’s no longer believes that it can achieve its “future growth” objectives  or “expand and scale efficient supply chain capabilities” unless it brings these operations in-house, unless it takes more direct control of its logistics operations?

I’ll keep repeating what I wrote almost eight years ago in “Keeping Control: What 3PLs Must Convince Their Customers”:

What does this mean for third-party logistics providers (3PLs)? It means that you have to convince your customers and prospects that outsourcing does not necessarily mean loss of control.

It means that outsourcing relationships are becoming more dynamic. The services 3PLs provide to customers today will be different from what they will provide to customers in five years. Customers might bring some functions back in house because they now view them as core competencies, but they will likely outsource other functions that they’re currently managing in-house today. This implies 3PLs must innovate their business models, and the nature of how 3PLs and customers manage their relationships must also change.

Speaking of third-party logistics providers, the landscape there continues to change too.

Back in December, I highlighted how ocean shipping leaders A.P. Moller – Maersk and CMA CGM see their future growth and fortunes coming from land-based logistics services (as well as technology) and they’re moving aggressively in that direction.

Well, maybe having a footprint in ocean and land-based services is not enough. Why not add air freight capabilities too?

Apparently, that’s what Mediterranean Shipping Co. is thinking. As reported by Daniele Lepido and Chiara Albanese in Bloomberg:

Mediterranean Shipping Co. said it’s seeking a controlling stake in new Italian flag carrier ITA Airways through a deal that would also include Deutsche Lufthansa AG.

MSC filed an expression of interest to ITA’s Italian government owner detailing the plan, it said Monday…ITA, the successor to defunct Alitalia, is attractive for the synergies it would offer in both the cargo and passenger sectors, according to MSC. The Geneva-based shipper, owned by the Italian Aponte family, recently became the world’s largest container line in an industry flush with cash after pandemic-driven demand for consumer goods propelled it to the most profitable year ever. MSC also operates the world’s third-largest cruise brand.

So, retailers buying 3PLs and an ocean carrier potentially buying an airline. What’s going on here?

Logistics has (finally) become strategic for many companies, so they want to bring it back in-house and have more direct control of these operations.

This does not mean that the 3PL industry is in trouble. However, it means that the formula for success moving forward, and the value proposition of outsourcing, won’t be the same as in the past. That is why we’re seeing so much M&A in the industry at the moment (coupled, of course, with all the money out there to invest). More on this topic in a future post.

And with that, have a happy weekend!

Song of the Week: “Sometimes Always” by The Jesus and Mary Chain