Big, Bigger É

Shippers, carriers and logistics providers searching for common ground in Anaheim this week at their annual three-sided meeting can find it in an overriding trend that is reshaping business just as it is redefining relationships in transportation and logistics.

It's a trend that cuts across business sectors and across the varying segments of the supply chain and preoccupies companies in their own industries and in the ways they interact with vendors and their competitors.

It's consolidation, and anyone who thinks it's merely another ongoing and long-term feature in the daily life of business should take another look at where consolidation has gone. It's the line that ties Yellow Roadway to Wal-Mart to UPS and it touches companies of all sizes as the scale of the largest companies grows over their competitors.

New reports on business suggest some of the impact. 

In a new report on the state of business, the McKinsey Group says the sheer size of companies is changing business behavior.

"The world's largest corporations are greatly increasing their scale and scope, and the resulting mega-institutions are fundamentally changing the landscape of business," McKinsey says in its quarterly report on business trends.

"These mega-institutions have disproportionately high profits and market values," McKinsey writes, and they "are pioneering a new model of competitive advantage by using their huge size to develop and exploit intangible assets in novel ways."

If you ship to Wal-Mart, you probably have a pretty clear understanding of what that means.

Two stories in this week's magazine look at the nature of Wal-Mart's relationships with the logistics market. In one case, Wal-Mart faces tough questions over its RFID mandates and in a separate case the world's largest retailer may have an enormous impact on the trucking market as it seeks many millions of dollars in fuel efficiencies.

Now apparently in the works, the sale of BAX Global has been rumored for years but the sheer scale of the business deserves a second look. Combined with Swiss forwarder Schenker, BAX may approach nearly $4 billion in annual revenue. Not bad, but only a fraction of what Deutsche Post World Net is forging by buying up Exel, creating a logistics business worth some $20 billion.

And take another look at the $2 billion business at Yellow - today, it's part of a $9 billion LTL behemoth and very interested in using "intangible assets in novel ways."

That may be what is needed when Procter & Gamble buys Gillette in a $57.2 billion deal.

Standard & Poor's says in a new report that the growing scale of businesses is creating something of a snowball effect, drawing "a continuing deluge of private-equity money" that will drive more mergers and acquisitions in the United States, Europe and Asia.

The larger companies, says S&P credit analyst David Wood, may "become more venturesome competitors on price, innovation and service, thereby cutting into the sales and profit margins of traditional players."

So there may be common ground for just about everyone across the transport and logistics field. The trouble is, the ground is moving.

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