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Gsm ch robinson
- 1. External analysis Course: Global Strategic Management Group 10 Eva Bloemen Nele De Flou Biwen Feng Swati Singh
- 2. Mission and Strategy Mission Statement: “Our people, processes, and technology improve the world's transportation and supply chains, delivering exceptional value to our customers and suppliers.” Strategy: • Grow market share with new and existing customers • Add services that are consistent with the business model • Expand and optimize global network "C.H. Robinson makes me feel like we are their only customer” (Kraft) Customer intimacy & IT capabilities "We selected C.H. Robinson's because their TMS & execution capabilities are innovative and unique in the marketplace," (Cummins)
- 3. Company History 1905 | C.H. Robinson Company Incorporates as produce broker in ND 1976 | C.H. Robinson becomes 100% employee owned 1989| C.H. Robinson International Inc. is formed • First International Office - Mexico 1992| Acquired C.S. Greene International • International freight forwarding, • Air freight operations, • Refrigerated containers. 1998 | Acquired Preferred Translocation Systems • Partial truckloads volume • South American presence 1999 | Acquired American Backhaulers, • Trucking services throughout US Trans-Consolidated Inc (New Segment) • Temperature controlled LTL provider 2012| Acquired Phoenix International • Doubled ocean freight capacity, Apreo Logistics , Poland • provides trucking, air, and ocean shipping services throughout Europe 2015| Acquired Freightquote • +80,000 LTL customers • Connect with global e- commerce market $1 BILLION 1992 $10 BILLION 2011 $13 BILLION 2014 1993| Purchased Daystar International • Distributor of fruit juice concentrates Till 2012| Significant acquisitions in European, Indian, Chinese, and North American market Knowhow & worldwide coverage
- 4. Customer Profile Highest revenue driver (63%) 46.000 customers • Mainly from manufacturing, food & retail • Only 5% = European • One out of 3 customers use truckload & LTL (accounting in total for 77% of revenues) • The top 500 customers take +/- 3 services (accounting for 50% of revenues) 63% 14% 2% 11% 4% 2% 4% 37% 30% 10% 9% 5% 5% 4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 2012 2013 2014 % customers Evolution of net revenues & number of customers • Cummins • Kraft, Dole • BJ's Wholesale • BP, Shell • John Deere • Evergreen Packaging • Vizio, Philips
- 5. Supplier Profile 66.000 suppliers • Partnership model • Mostly small carriers • Advantage: • Better negotiation position • Flexibility • Possible risks: • Capacity shortage • Financial stability "We rely on C.H. Robinson for LTL activities because their access to so many various carriers gives us a larger pool to choose from to help ensure quick, reliable and affordable deliveries” (JB Cutting) Flexibility & responsiveness
- 6. Porter’s 5 forces Threat of rivalry: Relatively high Threat of new entrants: Low - Medium Bargaining power of suppliers: Low - Medium Threat of substitutes: Relatively high Bargaining power of buyers: Medium - high Threat level: Low High Size & knowhow Service offering Customer satisfaction Carrier network
- 7. 3C – Context & competition Perfect competition model Corruption Outsourcing Cyclical Driver shortage E-Commerce Visibility Corporate social resp Claim liability Customs regulations 3D printing Panama
- 8. 3C - Chain Manufacturing Food & beverage Retail Chemicals Automotive Paper Electronics Oil & gas Other Shipper (any size & industry) C.H. Robinson global supply chain management Partner carrier Destination 66.000 partners • Road: Truckload, LTL, t°, parcels, special handling, reverse logistics • Customs clearance • Ocean (full & partial shipments) • Air (same day air forwarding) • Intermodal & rail • Warehousing • Visibility services & technology (Navisphere) 60 % Service portfolio
- 9. 0 1 2 3 4 5 6 7 8 9 10 Coverage Reputation Customer intimacy KnowhowFlexibility and responsiveness IT/IS capability Service portfolio C.H. Robinson Spider-web Analysis
- 10. VRIO analysis Value Rarity Imitation Organization Coverage Temporary Advantage Customer intimacy Sustained Advantage Reputation Temporary Advantage Service portfolio Temporary Advantage Knowhow Sustained Advantage Flexibility and responsiveness Competitive Parity IT/IS capability Temporary Advantage
- 11. SWOT Analysis S • Coverage • Knowhow • Reputation • Customer excellence • Skilled personnel W O T • Lack of specialization • Cultural fit • Emerging markets • Truckload & intermodal • Innovation • E-Commerce • Corp. social responsability • Economical factors • Cultural coherence
- 12. Expand service portfolio (Truckload, LTL & Intermodal) •Exploit Truckload (especially parcel deliveries) and LTL •Further invest in Intermodal Expand in Europe and Asia •$522 billion potential in Europe! •3% global growth per year Increase customer loyalty •Transform transactional relationships into strategic partnerships Amazon as potential customer •25 million subscribers •Support business between customers and Amazon or other e-retailers Recommendations
- 13. OPENING MINDS TO IMPACT THE WORLD
- 14. Annex 1 - Company Overview 111 Years They have 281 offices in 38 countries and thereby offer global and local expertise. 4th ranking Their top 500 customers account for approximately 50% of their net revenues 46,000+ customers (<> DHL = 2,5 million) 66,000+ partners
- 15. Annex 1b – Activities market share & net revenue 63% 14% 2% 11% 4% 2% 4% 0% 20% 40% 60% 80% Net revenue per activity (and evolution) 2012 2013 2014 Growth in revenue (2012-2014) C.H. Robinson 24% DSV 12% K&N 6% Panalpina 3% DHL Logistics 2% DB Schenker -3% CEVA Logistics -15% Average growth for the top 7 4%
- 16. Annex 2 – Profit margin & EBITDA (compared to competitors) 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 2012 2013 2014 Profit margin C H. Robinson Expeditors DHL 0 1,000,000,000 2,000,000,000 3,000,000,000 4,000,000,000 5,000,000,000 2012 2013 2014 EBITDA CH Robinson Exepeditors DHL
- 17. Annex 2b – Share price evolution Share price evolution (3 years) Close to global index Financially attractive Legend Global Dow (GDOW) C.H. Robinson (CHRW)
- 18. Annex 3 – Global and local presence 2015: 281 offices in 38 countries
- 19. Annex 4 Structure-Conduct-Performance Analysis – 3PL Structure • Fragmented • Several thousand industry participants • Continued stream of new entrants • Asset-based providers are having a resurgence • 3PL shrinking but growing in size Conduct • Compete based on prices, service offerings • Asset light to Asset Right • Strong disparity between small niche players and large companies • Partnership between 3PL and shippers • Driven by technology • Increased focus on sustainability Performance • Average logistics cost ↓11% • Average inventory cost ↓6% • Shippers and 3PLs are now about equally satisfied (70% and 69%, respectively) • Top 10 providers generate approximately two-thirds of aggregate industry revenue in North America • Average 3PL revenue 2014 9.57% (America, Europe, Asia) of Global GDP
Editor's Notes
- C.H. Robinson profiles itself as a worldwide 3PL who wants to be close to its customer and provide outstanding customer value (customer intimacy). They do so by investing a lot in skilled staff, and by empowering their employees to perform at their best. Anekdote: C.H. Robinson’s salary policy is performance based. Their customer centric approach has resulted in numerous awards and appraisals such as the “Inbound logistics excellence award” (cf. Kraft’s and Cummins’ quote). (Sources: Annual report C.H. Robinson http://www.inboundlogistics.com/cms/article/readers-choice-top-10-3pl-excellence-awards-2014/)
- C.H. Robinson is one of the oldest freight forwarders (knowhow) and has a long history of acquisitions giving them a broad coverage. This map shows its most significant investments. EVOLUTION: Beginning in 1989, C.H. Robinson began expanding its international logistics operations with the opening of its Monterrey, Mexico, office. It acquired C.S. Greene International in 1992 to add international freight forwarding, air freight operations, and refrigerated containers. In 1993, C.H. Robinson bought a 30% stake in Transeco, a major French motor carrier, and eventually bought the entire company. C.H. Robinson enhanced its operations by purchasing companies including Daystar International, a distributor of fruit juice, and FoodSource. It also became an exclusive marketer for Tropicana, Motts, Glory and Welch’s. The company continued expanding its logistics services by purchasing regional logistics firms like the Chicago-based American Backhaulers, Inc., for $136 million in 1999 and the Minnesota-based Trans-Consolidated Inc. At the end of the 1990s, the company began making targeted acquisitions to broaden its global presence and position it to better deliver shipping and logistics services in international markets. These acquisitions include: Preferred Translocation Systems; the Argentina-based Comexter Group; the Western European transportation provider Norminter; New York-based Vertex Transportation Inc.;Smith Terminal International Services, one of the largest third-party logistics providers in Florida; the Germany-based international freight logistics provider Frank M. Viet GmbH Internationale Spedition; Dalian Decheng Shipping Agency Co.; FoodSource Procurement LLC; Apreo Logistics S.A.; and other major European, Indian, Chinese, and North American logistics providers. In 2012, C.H Robinson purchased Phoenix International for $635 million and doubled its ocean freight capacity. The company also acquired the Polish shipping firm Apreo Logisitics S.A., which provides trucking, air, and ocean shipping services throughout Europe. The company launched a technology-enabled platform called Navisphere in 2012. The service provides facilities to C.H. Robinson employees, customers, and service providers to manage supply chain logistics, transportation, and sourcing activities on a global scale. TMC, a division of C.H. Robinson, provides support for C.H. Robinson’s network through its Managed TMS a combination of global transportation management system (TMS) software and logistics process management. To connect its shipping and logistics services with the global e-commerce market and expand its opportunities in less than truckload markets, the company acquired Freightquote, a privately owned online transportation broker that provides shipping rate comparisons for national and regional freight carriers, in 2015 (Sources - Benefits of acquisitions: Preferred Translocation Systems: http://www.referenceforbusiness.com/history2/5/C-H-Robinson-Worldwide-Inc.html American Backhaulers: http://www.joc.com/american-backhaulers-be-bought_19991121.html Freightquote: http://blog.chrobinson.com/customers/why-we-bought-freightquote/ Phoenix international: https://www.chrobinson.com/en/us/Newsroom/Press-Releases/2012/09-25-2012_CH-Robinson-Worldwide-to-Acquire-Phoenix-International/)
- At customer side C.H. Robinson has 46.000 customers. Their customer base is mainly composed of the manufacturing, food and beverage (especially fast perishable food products) and retail sector, accounting for 62 procent of their total revenue, (or respectively 29%, 20% and 13%). In terms of origin, only 5% of their customers is from Europe (accounting in total 2433 customers). The majority is US based. Truckload and LTL are the most used services. Truckload alone accounts already for 63% of C.H. Robinson’s net revenues, and is used by 37% of their customers. LTL accounts for 14% revenues, and is used by 30% of customers. Their top 500 customers account for 50% of their revenues.
- At supplier side, C.H. Robinson has 66,000 partner carriers. Remarkably they mostly partner up with small carriers (84%) (carriers with less than 100 trucks). +) This gives C.H Robinson a better negotiation position & flexibility. This is also appreciated by the customers (cf. quote from JB Cutting). -) On the other hand, working with small carriers entails some risks such as ‘capacity shortage (for instance ‘when demand peaks, the small carriers may not always have the capacity to meet demand’. Another disrupting factor is illness of employees (truck drivers) that significantly affect the small carrier.) Also the financial stability of a small carrier is more easily subject to bankrupcy than bigger players. Anekdote: The carrier always takes the risk in execution.
- SCP and 5 forces Threat of new entrants: low-medium The T&L industry is a very accessible and fragmented market, but it’s highly unlikely that a new actor is able to directly compete with a company the size & outstanding reputation as the one of C.H. Robinson. C.H. Robinson has the knowhow, global and local coverage, large customer base and good relationships with the many partner carriers. Already established competitors (big players) can however decide to copy the service portfolio and geographic presence. Within the industry you have asset-intensive and asset-light companies. The advantage of asset light companies is their flexibility. Threat of rivalry: High Other logistics providers with similar services are direct competitors Logistics is a large industry with relatively few big companies -> you know who your competitors are You need to diversify/specialize to set yourself apart. C.H. Robinson achieves this through their very extended service portfolio, innovative technology and customer intimacy approach. Customer loyalty is extremely important in this sector – top 500 companies account for 50% of revenues for C.H. Robinson Bargaining power of buyers: medium - high C.H. Robinson strives to form partnerships with their customers and offer excellent customer service thereby satisfying their customers. (From transactional to strategical relationships) C.H. Robinson has 46.000 customers worldwide: big and small from all kinds of industries. This gives them a very diverse base. Bigger customers have more bargaining power Customers have the choice between substitutes – competitors. For instance Expeditors Threat of substitutes: relatively high Transport is considered as a commodity. Customers can decide to forgo their service and deal with the logistics companies directly There are substitutes – competitors offer similar services Important for C.H. Robinson to set itself apart by for example adding more services or having better expertise or a bigger logistics network However, it is expensive and risky (reliability) to change logistics provider, so companies stay loyal to the same one. Bargaining power of suppliers: low-medium 84% of the partner carriers of C.H Robinson are small carriers (<100 trucks). Only 9% and 7% of the partner carriers are medium (100-400 trucks) and large carriers (> 400 trucks). Being in partnership with mostly small carriers puts C.H. Robinson in a better negotiation position. Important to have good partnerships with logistics companies of good reputation (Source: CHRW Q3 2015 Investor Presentation)
- Context P(oliticial): C.H. Robinson expects that the 2016 Panama Canal expansion will open up new opportunities, especially in function of time sensitive shipments. Even more, based on a researche done by the Boston Consulting group, CH Robinson expects that approximately 10% of container traffic between East Asia and the US could shift from West Coast ports to East Coast ports by 2020, The T&L industry suffers a lot from corruption (Libya, Sudan, Venezuela, Russia…). CH Robinson therefore encourages the WCO initiatives to realize more visibility thereby reducing corruption practices. E(conomical): There’s an ever increasing demand in outsourced services, which is promising for the sales of the ‘services management’ activity. On the other hand, T&L is very cyclical to economic conjuncture. The Chinese economic downturn is affecting export activities. Also the GDP is not doing incredibly well as it shows slow growth. S(ocio)-cultural: The driver shortage is negatively affecting the T&L industry. The ever increasing e-commerce activity and corresponding global transactions on the other hand are positively influencing T&L activities. T(echnology): Customers request more visibility (e.g. for track and tracing, or for planning purposes). Technology allows this. 3D printing might pose a threat to T&L. E(cological): Corporate social responsability is becoming more & more a decision criterium for selecting a carrier. (Although C.H. Robinson shows a humble willingness to embed sustainability in its activities, it is not truly showing entrepreneurism or initiatives in this area. It’s not a core value as it is for some of their competitors). L(egal): Stricter customs regulations are a revenue driver for freight forwarders (such as CH Robinson) who offer ‘managed services’. Another legal aspect for 3PL industry is to protect your company from being held liable for a claim that was caused by the carrier executing a transport instruction for the 3PL. Thorough risk management is to keep these risks to a minimum. Competition: The freight forwarding industry has a perfect competition model because it is very fragmented; a lot of small and several big players offering more or less similar services. (Sources http://blog.chrobinson.com/supply-chain/what-the-wto-agreement-really-means-for-international-trade/ http://www.transparency.org/cpi2014/results http://www.avalonrisk.com/questnewsletter/quest/2009-Apr/C.H._Robinson.htm http://talkinglogistics.com/2015/11/23/on-your-radar-important-logistics-trends-and-outlook-for-2016/ https://www.chrobinson.com/resources/white-papers/?d=368 CHRW Q3 2015 Investor presentation)
- Within the chain it’s remarkable how diversified C.H. Robinson’s customer and service portfolio is; At customer side we see that companies of all sizes and industries rely on C.H. Robinson for logistics handling. C.H. Robinson services 46,000 customers of which their top 500 customers (in manufacturing, food & beverage and retail) account for 50% of their net revenues. Even more, the top 150 account for 37% of their net revenues. The company has also received recognition from its customer(s) for excellence. C.H. Robinson strives to keep their existing customers satisfied by focussing on excellent customer service. They move from transactional to strategical relationships. C.H. Robinson takes care of an extended service portfolio. Whether it’s temperature controlled goods, a parcel, a helicopter; C.H Robinson offers customized transport & warehousing solutions as well as transport visibility with their TMS ‘Navisphere’. The road services, more specifically Truckload and Less than Full Truckload are the biggest revenue drivers of CH Robinson. Truckload makes up 63% of their revenues. For a detail of their net revenues per activity, see annex 1, Furthermore C.H. Robinson offers customs clearance, ocean shipments, air (and same day air forwarding), intermodal, rail and warehousing solutions. Besides the flow of goods, C.H. Robinson has been investing heavily in the flow of information (through their software solution Navisphere that allows precise track and tracing and financial follow up). We suspect this tool will be even more valuable in the years to come when they will be expanding their eCommerce services. - C.H. Robinson relies on a network of 66,000 partner carriers. Remarkably 84% of those carriers are small carriers (<100 trucks), and respectively 9% and 7% are medium (100-400 trucks) and large carriers (> 400 trucks). These partnerships with smaller carriers give C.H. Robinson more negotiation power, and flexibility.
- The Benchmark analysis focusses on ‘over the Road Services’ in the US. C.H. Robinson is benchmarked against DHL and Expeditors on the Key Success Factors derived from the previous analysis. (In some of the previous slides the key success factor is indicated in the left corner). Why DHL and Expeditors? Because they are the most relevant competitors; DHL because of its n°1 position in revenues and Expeditors because it originated in the US (just like C.H. Robinson), it has comparable business activities and shows similar profit margins and EBITDA (cf. annex 2). DETAILS: Coverage: C.H. Robinson is still in the phase of establishing themselves in the global market (especially in Europe and Asia) but it’s growth is promising. DHL – 1417 locations Expeditors- 253 locations. C.H. Robinson – 235 locations (C.H. Robinson has stronger presence in US) Reputation: C.H. Robinson is one of the most admired companies, top 5 in Europe, Top in America. Internal Employee reviews: http://www.careerbliss.com/ch-robinson/reviews/. Employee rating however is less than industry average and has fallen over the years. Customer intimacy: C.H. Robinson is really good at maintaining long and close relations with its customers. On the official websites, there are a lot of positive feedbacks from their customers. DHL- 9% not happy with services http://www.slideshare.net/saindur/14969686-customersatisfaction) Knowhow: C.H Robinson flourishes from its expertise in trucking. DHL is also a competitor by investing in new innovation and sustainable projects related to trucking. DHL is also involved with few government initiatives to solve the issue of traffic due to trucks. Flexibility and Responsiveness: C.H. Robinson guarantees responsive, local experts to help companies execute their shipments, ensure global compliance, and connect them to a large network of contract carriers, and other service providers. Decentralized and entrepreneurial in nature. IT/IS Capability: Although Robinson has a strong TMS and WMS software to back its services, it has lost a major market share from companies who have matured into 4PL providers. Robinson still has a traditional approach to tackle problems. DHL has expertise in using technology where it also used real time shipment management to improve its operations and have crisis command center to tackle urgent issues Service portfolio (of ‘over the road services)’: C.H. Robinson and DHL both offer a very large range of truck services: FTL, LTL, Cold chains, Flat Beds, Special handling, Reversed logistics, parcels… for any kind of industry and size of company. DHL however seems to offer slightly more such as secure transportation for high value goods. Expeditors scores far below the others in terms of truck services.
- With VRIO we identify which resources are sustainable competitive advantages for C.H. Robinson by answering the following questions: 1) Value: Does the resource enable C.H. Robinson to exploit an environmental opportunity, and/or neutralize an environmental threat? 2) Rarity: Is the resource currently controlled by only a small number of competing firms? 3) Imitability: Do firms without this resource face a cost disadvantage in obtaining or developing it? Is it difficult to imitate? 4) Organization: Are C.H. Robinson’s policies and procedures organized to support the exploitation of its valuable, rare, and costly-to-imitate resources? C.H. Robinson’s global and local coverage is very valuable, and is costly to imitate because it requires high investments to achieve it to this level. Their long & close relationship with customers is very valuable, and rare to accomplish in this very demanding industry, It is costly to imitate as well as one of the biggest issues faced by customers is customer service and most 3PL fails to accomplish it. Thanks to their focus on customer excellence they have built a strong brand and a good reputation. This is extremely valuable for the company and costly to imitate, but it’s not rare. The large service portfolio in road services is very valuable for the company and requires heavy investments to get to that level. Their expertise in LTL and cold supply chain is their specialty, costly to imitate but not rare. With 111 years of expertise, and continuous investments in ‘managerial knowledge and skills’ (paying off in customer excellence and in an employee turnover rate of 16 years for management), C.H. Robinson’s knowhow is very valuable and rare in the industry. We consider it to be a sustained advantage. Thanks to the large carrier network, C.H. Robinson has been able to position itself as a flexible and very customer oriented 3PL. Their flexibility is considered valuable but easy to duplicate and is thus considered as a competitive parity. C.H. Robinson develops their IT solutions themselves and ensures that it meets the customers’ demands for more visibility. This is considered very valuable, and because it’s a customized solution, it’s difficult and costly to imitate.
- Strengths: Global and local coverage and expertise (through its physical presence). On top of that they keep on investing in new trade lanes to expand their service portfolio. C.H. Robinsons 111 years of knowhow make them a very credible, trustworthy 3PL. C.H. Robinson enjoys an excellent reputation in being flexible and responsive. This is thanks to their large partner network that allows them to find the best carrier/solution for their customer. They take great care in their customers (small and large), which has lead them to get worldwide appraisal. They invest heavily in their personnel to ensure customer excellence. In return, the average tenure of their people is 6 years, and for management this is 16 years which illustrates stability. Weakness Except for their expertise in fresh produce, it’s unclear which specialized solutions C.H. Robinson offers to its customers. (For instance; can they handle hazardous goods, fashion, …?). It doesn’t clearly reflect in their service portfolio, and they don’t seem to offer a lot of warehousing solutions. We do see however that C.H. Robinson’s core expertise lies in manufacturing, food and beverage (especially in fast perishable food products) and retail which accounts for 62 procent of their total revenue, (or respectively 29%, 20% and 13%). C.H. Robinson expects a lot of entrepreunirism of their employees worldwide. Each office gets autonomy, and the employees are empowered. This management style may not be a good cultural fit worldwide. Opportunities There are still a lot of growth opportunities; for instance from acquisitions in emerging markets. Furthermore analysts expect the largest revenue growth potential to be in truckload, less-than-truckload and intermodal. C.H. Robinson should keep its eyes open to continue innovating in their technology software and service portfolio. Potential in partnering with e-retailers to manage their inventory and order fulfillment. Threats: C.H. Robinson might miss out on ecologically oriented customers/business as long as they do not embed corporate social responsability in their core value. The company keeps very low profile about their initiatives in sustainability, whereas they could proactively choose to (and communicate about) using more fuel efficient trucks, reducing CO2 emission, consolidation of LTL shipments, … The success of C.H. Robinson’s business is subject to economic conjuncture which does not have the brightest outlook at this moment (only slow growth). In combination with a driver shortage, we expect additional pressure on carriers which may impact the relationship with C.H. Robinson. On top of that, currency fluctuation may also be a threat, because Chinese currency vs US is now at 1USD VS 6.5 CNY. Following an expansion strategy through acquisitions, we can ask ourselves to which extent each new integration truly succeeds in synergy and cultural coherence. Sources http://www.supplychainbrain.com/content/nc/sponsored-channels/kenco-logistic-services-third-party-logistics/single-article-page/article/the-top-25-global-3pls-is-bigger-really-better/
- 1. Expand service portfolio: Truckload and LTL represent 77% of current revenues, so important to foster this eCommerce ever more important, so invest in global parcel solutions. Analysts expect high potential for truckload and intermodal activities. 2. Expand in Europe and Asia Why should C.H. Robinson expand in Europe and Asia? Customers demand global shipping: E-Commerce is ever increasing, and thus customer demand for global transportation will continue to rise. Competition: Expeditors, XPO Logistics and C.H. Robinson are all American companies. We perceive Expeditors to be the biggest competitor of C.H. Robinson due to its similar size, coverage and financial model. It’s crucial for C.H. Robinson to reinforce its position outside of the US to keep its top ranking. Besides that, CH Robinson is feeling pressure from XPO logistics, a new entrant, American corporation headquartered in Greenwich, Connecticut. It’s an asset-light global provider of transportation and logistics services with operations in 27 countries, primarily in North America and Europe. It follows a similar business model like C.H. Robinson (light asset, acts as a middleman between transportation vehicles and customers that need to ship product. Whether by air, sea, rail, or road, they utilize their enormous networks to find customers the best route and the cheapest price to get goods and products from point A to B.) Luckily XPO Logistics does not yet enjoy the same economies of scale as C.H. Robinson as it’s showing a negative operating income. Geography Center of gravity: Asia pacific, EMEA( Europe, the middle East and Africa), and North America and South America are the centres of gravity for global trade. Growth expectations $522 billion potential in Europe! 3% global growth per year C.H. Robinson aims to become the largest 3PL transportation provider in Europe. They therefore are to further develop their services and customer binding in Europe. According to a study of Armstrong and Associates there is still $522 billion potential in Truckload and LTL in Europe. Furthermore, according to Global Logistics Markets-Trend Analysis (Roland Berger Strategy Consultants and Barclays) the global logistics industry is expected to grow up to 3 percent per year until 2020. Especially intra-regionally and in eCommerce; Europe and Asia show promising expectations and might thus contribute to revenue growth for C.H Robinson in the coming years. 3. Increase customer loyalty Transform transactional relationships into strategic partnerships: through cross selling (currently on average 3 services/customer) incentivizing customers to bring on board new business partners and by offering advanced technological benefits (to tie in the customer and make it more difficult to switch from logistics partner). Motivation Already an excellent customer reputation in the industry (several awards) Become less dependent of the top 500 customers (= 50% of their revenues). It is more costly to get new customers than retain existing customers 4. Amazon as a customer Potential threat to 3PLs 27 million subscribers - Amazon employees work in some of that 3PL's distribution centers to support some of the 3PL's customers that do business with Amazon. Many retail startups are relying upon Amazon to handle warehousing, inventory management, and fulfillment for them. These can be managed by 3PL (Source: http://www.supplychain247.com/article/global_logistics_sector_to_grow_3_annually/c.h._robinson http://seekingalpha.com/article/3448126-ch-robinson-worldwides-profits-tell-us-xpo-logistics-future)
- C.H. Robinson is one of the largest and most mature (longest existing) Global Freight Forwarders, offering managed transportation services in road, air and ocean, of which their truckload activities are the highest revenue generators (Annex 1). They’re the n°4 largest global freight forwarder in terms of revenues. The company exists for over 111 years, which makes them a stable, knowledgeable logistics service provider. They have 281 offices in 38 countries and thereby offer global and local expertise. (Annex 3) Their top 500 customers account for approximately 50% of their net revenues. In total they serve over 46000 customers (consisting of small and large companies). They rely on 66,000 partner carriers to perform the transportation services.
- C.H. Robinson’s service portfolio consists of truckload, LTL, air, ocean, intermodal, customs clearance and managed services activities. They enjoy a more than fair market share in all of their activities, especially in their outsourcing activity (managed services) and LTL and FTL transportation. Truckload is the highest revenue generating activity, it makes up 63% of their net revenues. Next in line is LTL and ocean which accounts for respectively 14% and 11% of their revenues. All other activities represent less than 10%. Financial analysists expect truckload and intermodal to be the highest revenue drivers in the coming years. Besides transportation, C.H. Robinson is also famous for its ‘Fresh Produce’ brand for which they buy and sell fresh produce. This activity will not be further examined in this assignment, and is thus out of scope. (Source: C.H. Robinson annual report 2014) CHRW Q3 2015 Investor Presentation
- In terms of profit margins, we see that CH Robinsons margins have decreased since 2012, but remained stable after that. They are very close to the profit margin of Expeditor, but far below DHL. As for EBITDA, all 3 companies show the same slightly increasing trend. Again, CH Robinson and Expeditors show a similar financial level and evolution, but lie far below DHL.
- Over the last 3 years, CH. Robinson’s share price has been evolving positively making them an attractive company for shareholders. Financial analysists perceive C.H. Robinson to be a good investment. Compared to the industry index ‘Global Dow’, we see that C.H. Robinson is closely following the trends. The Global Dow covers 150 companies with a national reputation for quality, reliability and the ability to operate profitably in good times and bad; serving both developed and emerging markets. C.H. Robinson has continued to show healthy financial figures, in which they were growing organically (= net revenue growth of 17% since their IPO in 1997, and only 2% of that growth comes from their international acquisitions). In fact, Armstrong & Associates evaluates C.H. Robinson to be the most profitable 3PL. C.H. Robinson did well in choosing international acquisitions that allowed them to enter in new foreign markets. Zooming in on 2014, C.H. Robinson’s Globoal Forwarding business booked very nice accomplishments; Despite a rough start of the year (in the winter season), their net revenues grew 9% (compared to 2013). Their activities in ocean, air and custom services were the main contributor to this increase. Furthermore they achieved double digit growth (15%) in earnings per share (in 2014). The integration of their latest acquisitions was successful. It contributed to a strong performance in sales and productivity metrics (for instance in customer service excellence). (Source: C.H. Robinson annual report 2014) http://www.marketwatch.com/investing/stock/chrw
- C.H. Robinson’s global and local presence reflects their global and local coverage and market knowledge. It’s clear that C.H. Robinson wants to be close to its customers and wants to offer them customized, professional solutions. Their headquarter is based in Minnesota. They have 281 offices in 38 countries (blue coloured). Remarkably, their North American business (including Canada and Mexico) produces 90% of their gross revenue. C.H. Robinson enjoys a 22% market share in the non-asset based domestic transportation management 3PL segment in the United States. Since 1992 C.H. Robinson has entered Europe and has been able to replicate it’s US success story by partnering up with local carriers (+10,000) and customers. They key European customers include: ArcelorMittal, ArjoWiggins, CHEP, Danone, Kimberly-Clark, Manitowoc, Mars, Nestle, P&G, Reckit Benckiser, SCA, and Tetra Pak. About 20 years ago, C.H. Robinson began operating in Asia via agent relationships. In 2002 it invested directly by establishing C.H. Robinson Worldwide, Inc. (Hong Kong) Limited. Initially the Hong Kong office focused on ocean freight forwarding. Since 2004, C.H. Robinson has been acquiring Asian shipping agencies, freight forwarders, thereby expanding their service portfolio in ocean and air freight, customs clearance services, basic warehousing, and of course ‘over the road’ transportation management. Tetra Pak is their largest customer. Detail; 184 offices in North America (accounting for 10,314 employees) 6 in South America (166 employees) 52 in Europe (1102 employees) 39 in Asia (1574 employees). Sources: http://www.3plogistics.com/CHRW_7-2012.htm (2012) https://www.3plogistics.com/CHRW_7-2009.htm (2009)
- (Source http://www.supplychain247.com/paper/2014_third_party_logistics_study_the_state_of_logistics_outsourcing)