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DSV + UTi: Are ever-larger forwarders good for shippers?

Posted on 21st October 2015 by YmeriHart

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The news that DSV, already one of the top ten logistics companies in the world, has signed an agreement to acquire UTi Worldwide, comes as no surprise to many observers.

It is not just that there have been rumours for months about talks between the companies, it is also that the pattern of consolidation by forwarders (or logistics/ supply chain companies as they now like to call themselves) is long established.

Both the buyer and the seller claim that the shippers will benefit from an expanded global network and/or new expertise in an area which the company currently does not cover.

Roger MacFarlane, a co-founder of UTi, explained it in this way: “We are operating in an industry where increasingly scale is critical. Joining forces with DSV delivers substantially greater client value and many future opportunities for our people while it is financially very attractive for our shareholders.”

Danish-based DSV has a history of growing by acquisition but this deal is probably the biggest step it has taken – the addition of US-based UTi will increase annual revenue by about 50% and, in DSV’s own words, it will now operate “one of the world’s strongest transport and logistics networks”.

Of course, acquisitions – particularly ones of this scale – come with a period of intensive activity and uncertainty as the buyer seeks to integrate people, operations and IT systems to establish a single network.

And it raises the question, is bigger always better? Maybe for the shareholders of the logistics company – though history shows this is not always the case. But what about the shippers? Do exporters and importers benefit from using a larger company?

Maybe they can benefit from economies of scale – the larger forwarders have more buying power with the shipping lines and air carriers so can usually negotiate a lower rate. And they will argue that they will always have the advantage of keeping the shipments within a single global network which ensures more control and complete visibility.

However, the proliferation and continued existence of many smaller forwarders suggests that there is still room for both in the market. And the changing patterns of global trade also stimulate demand for forwarders with specialist knowledge in new markets or particular products. (Emerging markets now account for 40% of cross-border flows of goods, services and finance compared with just 14% in 1990.)

But the real game changer for smaller forwarders is the availability of technologies which give them access to the same level of visibility as their larger rivals – which means owning each part of the supply chain is not such a great advantage.

In fact, this gives smaller forwarders more flexibility to select precisely the right carriers, routes and facilities to suit their customers’ needs.

The more sophisticated transport management software systems can add new carriers and therefore new markets very quickly. The top notch ones offer multi-carrier management solutions which select the best carrier for each route based on criteria stipulated by the shipper or end customer.

Who needs to ship with a global giant now?

Take a look at our extensive list of carriers here

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