Chris Dupin has an interesting article in the most recent American Shipper. CMA/CGM is trying to buy a majority interest in CEVA, the 3PL firm based in Switzerland. CEVA has been the target of another buyout effort by DSV, another 3PL. the time was certainly ripe for a consolidation in both the 3PL and the maritime transport space. This merger or combination is another attempt to deepen the reach of a maritime company into downstream supply chain management.
Like all of these mergers, we’ll have to see if it works out, and if the combination succeeds in improving results for shippers and receivers of goods. But for me it is a step in the right direction for a maritime company. If you try to tackle the downstream problems, you will start to understand how to improve and deliver more value. Whether a purchase is the best route is an open question, but it is certainly a good try.
The article also points out that CMA/CGM is innovating in other ways now. It has an in-house incubator, ZeBox, of small concerns that have ideas for improvements. It’s moving ahead on tracking containers and monitoring some of the risk conditions they face while traveling; and it is making some investment in bill of lading improvements through a blockchain technology project with BuyCo, another startup. These are certainly ways to get innovators thinking about the maritime supply chain problems. Who winds up with the rents is yet to be determined.
Alex Lennane has written in the Loadstar about the merger or assimilation of six UK diverse logistics firms under one management. Perhaps this is what’s necessary to get firms to work together– a bigger hammer. If they cannot learn to do it on their own, let’s put them together under one management.
However, this approach is fraught with issues. Most mergers do not reach the state of grace they envisioned, because of resistance to change within. And much of the value of a firm is in its people, and their skills at dealing with the countless exceptions that mark any business. Another is the heterogeneity of the businesses– every firm in a merger thinks their way of doing something has to work that way for them. It might not be true, or it might, but even thinking it draws boundaries that can take considerable effort to crack.
We will have to see if this new management structure generates rewards the size the PE firm expects. Of course if they just make something big enough to sell publicly with temporary results, that will be enough for them to make their money and pass the risk on.
Here’s a great idea: why don’t we simply buy a 3PL? It is a lot easier than developing all that wretched software ourselves! Seriously, why isn’t consolidation of 3PLs and maritime firms a good way to extend services beyond the port and put them under the control of someone we can trust to (more or less) handle the movements the way we want? It is a time-honored way to gain capabilities we do not have without doing the work of creating a new business. Sure there can be some coordination issues, but are they as bad as Maersk has coordinating with IBM on their blockchain system?
Remember that providing coordination and visibility of information is mostly what blockchain accomplishes, and the jury is out on whether it can be made competitive with existing types of databases (which may also need improvement, to be sure). And any of these systems is “permissioned” in blockchain lingo– there is a governor who is empowered to make decisions about who is allowed to use it. None of them is truly decentralized for governance, as the Bitcoin advocates would have you believe; in that world, the miners (of whom there are now about 6 with a 75% share of all blocks mined) can exercise control whenever they want.
It comes down to trust. Who do we trust? Central banks, or a bunch of miners? Or are we happy enough trusting Maersk, or CMA-CGM and Ceva, or some other 3PL with our cargo, and prefer to argue with them over damaged or misplaced cargoes, rather than debate with some Ethereum sites about these issues?
I’m not sure how it will come out, but I don’t think it will be all one way or the other.