Logistics: The Art of the Deal - Home | National Defense ...

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Benjamin GordonLogistics: The Art of the Deal

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2018: A Rocky Year for the Supply Chain Sector

(25.0%)

(20.0%)

(15.0%)

(10.0%)

(5.0%)

0.0%

5.0%

Dec 2 Dec 6 Dec 10 Dec 14 Dec 18 Dec 22 Dec 26 Dec 30

BGSA Index S&P 500

(25.0%)

(20.0%)

(15.0%)

(10.0%)

(5.0%)

0.0%

5.0%

10.0%

15.0%

Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18

BGSA Index S&P 500

(15.2%)

(10.2%)

(15.6%)

(7.0%)

One Year Stock Performance One Month Stock Performance

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The BGSA Supply Chain Index, by Segment

(25%)

(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%


(40%)

(35%)

(30%)

(25%)

(20%)

(15%)

(10%)

(5%)

0%

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10%


(35%)

(30%)

(25%)

(20%)

(15%)

(10%)

(5%)

0%

5%

10%


(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%

25%


(15%)

(10%)

(5%)

0%

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25%


(20%)

(15%)

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0%

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10%


(30%)

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0%

5%

10%

15%


(25%)

(20%)

(15%)

(10%)

(5%)

0%

5%

10%

15%

20%


Energy Transportation & LogisticsTechnology Distribution

TruckloadLogistics

Healthcare Distribution

Global Parcel / Logistics

Supply Chain Technology & SoftwareLess-Than-Truckload Railroads / Rail Services

(17.6%)

(8.5%)

(31.2%) (29.1%)

(0.6%) (7.0%)(12.3%)

(24.2%) (16.5%)

Source: Capital IQ, as of December 31, 2018

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The Outlook

Challenges

• Trade: War and Peace

• Labor: The $100,000 Truck Driver

• Technology: The Octopus

• The Biggest Disruptor: Amazon

Opportunities

• Technology: The Empire Strikes Back

• Incumbents Create Corporate Venture Groups

• Consolidation: The Party Continues

The power of connectivity

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Trade: War and Peace

• The cost of freight from LA to Dallas is spiking, as the market is seeing a decline in exports from LA to China

• In November, over 186,000 containers in Long Beach were shipped empty back to Asia, reflecting an 11% increase, as China finds alternatives to the USA

• Paradox: Long Beach volumes at all time highs, with over 7.5 million containers handled, as US retailers load up on Chinese purchases to beat the tariffs

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Labor: The $100,000 Truck Driver

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

Werner Schneider ArcBest YRCW

Trucking Valuation: TEV/LTM EBITDA

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

Average Trucking Salary Walmart Year-One Trucking Pay

Truck Driver Cost

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Technology: The Octopus

New technologies and market trends

can disrupt the logistics industry.

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Autonomous Trucks: Coming SoonAutonomous trucks will likely roll out in four waves.

Graphic: McKinsey & Co.

“The future is already here. It’s just not evenly distributed!” – William Gibson

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The Biggest Disruptor: Amazon

Last-mile expansion

In Q4, Amazon delivered over

1 BB “free” packages via

Amazon Prime

It spent over $9 BB on shipping

charges, representing a 30%

Y-O-Y increase

Delivers 10% of its own

packages

Warehousing expansion

2017: Amazon bought

Whole Foods for $14 billion

2018: converting stores into

distribution centers

Aircraft expansion

Added 33% more planes to its

leases with ATSG, while

extending duration by 2 to 10

years. Plus 40 767 planes

with Atlas Air

Plus warrants that could boost

Amazon’s ownership to 39.9%

of ATSG and 20% of Atlas

Patent expansion

Amazon’s 2018 patents

included a “robotic pitcher.”

The arm will identify, grab,

and throw objects into bins

Another patent provides

ultrasonic pulses on

wristbands to guide

employees’ hands

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Technology: The Empire Strikes Back

Target bought Shipt

Target bought Grand Junction

Shipt will soon reach 50 MM

households

Target is rolling out 2-day free

delivery for “Redcard” holders

and purchases of over $35

Walgreens saw Amazon buy

Pillpack

They responded by forging a

partnership with FedEx to

pursue next-day prescription

delivery

Now Walmart is investing in

patents too

A recent patent seeks to provide a

“Fresh Online Experience”

Consumers will be able to see

individual fresh items remotely

before making a purchase

Transportation meets retail

Pizza Hut and Toyota

joined forces to create a

“pie-making truck”

In the truck bed, robots are

going to produce pizza pies

on demand

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Incumbents Create Corporate Venture GroupsThe Auto Case Study

* Venture financing valuations shown for Uber, excluding debt

2009

2003

1908

1903

Founded

GM makes post-

bankruptcy IPO

Tesla

IPO

Uber Series G

financing

Ford peaks

at $79B

Incumbent corporations in the auto industry outpaced by technological innovators

Market Capitalization *

Uber and Tesla

didn’t yet exist in

the year 2002.

Less than 15

years later, their

combined market

value is larger

than the combined

market value of

GM and Ford —

despite those two

companies having

a one-hundred-

year head start.

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Ford’s Response: Go to the Valley

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Ford’s Actions

Transition

Ford: “the fastest transformation in

100 years”

Formed strategic venture arm in

Silicon Valley: the Ford Research and

Innovation Center

Investments in Mobility Formation of Venture Arm

Today, Ford sees its future as not

just a carmaker, but also a

“mobility manager.”

Will other transportation sectors

and companies follow suit?

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Consolidation: The Party Continues

Niche

Consolidation

Geographic

Expansion

Service

Synergies

Global

Technology

Logistics Plus

TechnologyChina

Time-critical logistics:

MNX-Network Global

Logistics

DSC Logistics-South

Korea’s CJ Logistics

BNSF-Unlimited

Freight (Flatbed)

Project44-GateHouse

(European visibility

data)

Yusen Logistics-ILG

(ecommerce

warehousing)

Alibaba and Cainiao

Network: $1.4B in ZTO

Express

Truck leasing: Penske-

Old Dominion Truck

Leasing

Canada’sCFI/

Transforce-Optimal

Freight

Pilot-Manna (last mile) Australia-based

WiseTech-various US

customs brokerage

tech companies.

Ryder-MXD

(ecommerce fulfillment)

Alibaba’s 3rd deal after

YTO Express and Best

Drayage: RoadOne-

First Coast Logistics

Panalpina-Skyservices

(South Africa)

Hub-CaseStack (asset-

light warehousing)

FedEx-Wirecard (India,

Germany)

FedEx-P2P Mailing

(ecommerce

transportation)

JD.com: $115M

investment in China

Logistics Property

Holdings

Cold storage: Lineage-

Service Cold Storage

AIT-ConneXion World

Cargo (UK)

Transportation Insight-

Nolan Transportation

Group (freight

brokerage)

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Has been acquired by

Exclusive advisor

to Dixie Warehouse


Exclusive advisor

to Interlog USA

Has acquired

Exclusive advisor

to England Logistics

Has acquired

Exclusive advisor to

PWC Logistics


Exclusive advisor

to Converge

Has acquired


Open Mile

Has acquired

Exclusive advisor to YRCW

Has acquired

Exclusive advisor to PCD

Has acquired


Hyphen and Wynnchurch

Has acquired


4SameDay

Has acquired

Exclusive co-advisor to

ITRenew

Has acquired


Clover Telecom

BG Strategic Advisors – Leading Investment Bank in the Supply ChainRepresentative Transactions

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What Should You Do?

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