Mergers and Acquisitions in the 3PL Universe

For decades, mergers and acquisitions were a staple of the logistics industry, serving as the key avenue for achieving scale, expanding geographic reach, and acquiring coverage of specific industries. This trend slowed significantly in the global recession of 2008, but the last year has shown a resurgence and steady rise in mergers and acquisitions in the 3PL world.

Despite these current trends, Westset Logistics is committed to remaining a family owned business, believing that sole entrepreneurship gives us a significant advantage in taking care of our customers’ unique needs. Furthermore, the past few years have proven that we are capable of scaling our operations on our own, while maintaining the personalized experience our customers have come to expect.

While we understand that mergers and acquisitions can provide benefits for service providers in terms of scalability and extended reach, it’s our feeling that the accompanying changes to service can be difficult for customers caught in the transition.

In light of the 3PL industries penchant for consolidation, we’d like to examine a few little-known consequences of mergers and acquisitions, and how they can be detrimental to customers:

Systems Integration — The logistics industry runs on efficiency, and successful 3PLs have gotten to where they are by creating effective systems suited to their needs and the needs of their customers. There’s very little universality in information systems across the industry, or even between different branches of certain companies. When two 3PLs come together, they face a costly and time-consuming challenge of marrying their information systems. Even worse, many continue to operate their separate systems for a time in order to postpone the disruption of integrating. This situation can be costly, and can lead to communication problems within the new enterprise, which may in turn hurt communication with customers and vendors.

Leadership transition — By nature, a merger or acquisition will be accompanied by changes in top-level management organization. Unfortunately, this can also lead to an exodus of valuable management talent, which can hinder the future operations of the company.  This is not always the case, but it takes care and finesse to mitigate a drain of experienced managers.

Leadership changes can also lead to changes in company culture and brand identity. Even if done with the best intentions, these efforts can affect the relationship with the customer and create conflicts in mission statements when two companies come together.

Synergizing Transportation Modes — A merger or acquisition can mean uniting multiple transportation models for the first time. While the prospect can be exciting, the challenge can quickly become overwhelming for a 3PL that is used to a single dimension of transportation. Synergistic combinations can benefit a supply chain after a time, but the transition can create vulnerabilities and room for error where it didn’t exist before.

At Westset, the vast majority of our transportation is handled by our sister company, Total Transportation. Our relationship with Total and their fleet keeps communication fluid and efficient, and cuts down errors in tracking and shipping.

Employee Morale — When two businesses merge — or one is acquired by another — it can lead to redundancies of human resources at all organizational levels. Even when the move is approached with the best intentions, rumors of a merger can lead to pessimism and fear of lay-offs long before any papers are signed. This can affect efficiency on the warehouse floor, or cause talented operators to start seeking new employment in anticipation of the transition.

Customer relationships — Many 3PL customers report considerable anxiety over acquisitions, especially when they’re accustomed to the personalized service of their current provider. Their concerns range from the quality of service from the new enterprise, to becoming an insignificant blip on a much larger list of customers.

Furthermore, the transition from small business to merged enterprise can lead to hiccups in operations or confusing changes in procedure. Our current clients know the value Westset Logistics puts on customer relations. While we often take steps to expand our business and scale our offerings, we ensure clear communication and transparency with our customers.