The world of shipping management and logistics continues to evolve as market conditions change. Maersk, a global leader in transportation, supply chain and logistics management, and general freight, announced February 9, 2022, "The intended acquisition of Pilot Freight Services (Pilot), a leading U.S.-based first, middle and last mile as well as border crossing solutions provider, specializing in the big and bulky freight segment in North America for B2C and B2B distribution models, from ATL Partners, a sector-focused Private Equity firm in New York and British Columbia Investment Management Corporation (BCI), one of the largest institutional investors in Canada." As one of the latest mergers and acquisitions (M&As) in logistics, it is no surprise that many shippers are concerned about its implications for their freight management strategies. Let's take a deeper look at what this freight M&A experience means and how it renews the importance of accuracy and accountability, hallmarks of a dedicated freight audit advisor and solution, in shipping cost management.
Maersk is among the global brands that experienced record-setting profits at the height of the container shortage. The company had seen a massive acceleration in demand across all service levels, including air and ocean freight. That demand created a new need — a need for improved efficiency and long-term stability once the market declines.
Industry experts have expressed a strong belief that container rates for both air and ocean will remain on an upward trend through the first half of 2022. However, the market will begin to stabilize in the latter half with a possible return to pre-pandemic rates.
While a nice outlook, it is subject to change. Consumer purchasing continues to grow, and e-commerce is on track to break additional records throughout the remainder of the year and beyond. Therefore, Maersk saw the proverbial writing on the wall and is actively diversifying its reach by bringing another global powerhouse of freight management, Pilot Services, into its fold. Knowing why mergers and acquisitions lead to greater risk for invoicing errors is also a critical factor that shippers must consider.
The short answer is that any new merger or acquisition comes with structural and organizational changes. As Pilot begins to use more Maersk technology and processes in freight management, there will inevitably be an opportunity for error. Meanwhile, Maersk also faces the uncertainty of integrating Pilot's existing systems into its data streams and management platforms.
Together, these processes might seem trivial, but with freight invoicing already subject to the dual risks of errors coming from both human and process elements, another merger and acquisition leads to a higher risk.
In turn, shippers will need to stay vigilant over their landed shipment costs across a wider network, especially when the Pilot-originating shipments go through now-partner channels at Maersk.
Vigilance over shipping spend is easiest to understand when working with an independent view of total costs and their respective granularities.
For example, both companies relied on different yet similar processes to manage shipments and their networks. However, not all systems can seamlessly share data and integrate, and it will take time for both Maersk and Pilot to create a harmonized balance across their resources.
For shippers, the changes amount to a need for an independent resource like Intelligent Audit that can aggregate data from multiple resources. Unified data can then be properly cleansed, parsed, analyzed, and applied to generate core metrics for individual modes, specific carriers, service levels, and more. Thus, shippers realize a continued stream of insightful, actionable analytics recommendations and metrics to maintain optimum network performance despite possible slips in the freight M&A experience.
There are also the rising shipping rates that could be affected by changes within the upstream transportation of goods through Pilot or Maersk.
As another example, shipping with USPS recently grew in costs due to the rising pressures of pandemic-fueled business growth. While USPS may operate independently, the upstream supply chain and transport of goods may involve Pilot or Maersk in getting goods from overseas to the U.S. As a result, shipper landed costs could be driven higher by the higher cost of shipping with USPS and the risk of additional errors following the merger. Therefore, the best strategy is to bring all the data eggs into one basket for review, use and application to manage landed shipping costs proactively.
Maersk's acquisition of Pilot Services will continue to have a ripple effect throughout the industry. Intelligent Audit CEO Hannah Testani had previously noted that consolidation in the industry would be a major trend following the turmoils of 2020 through the present. More M&A activity is coming, and the differences in freight M&A experiences will drive a greater need for a single source of truth across all freight management activities and spending. As a result, shippers need to keep a closer eye on landed spend and what new billing practices may come out of such freight M&As. Stay ready for organizational structure changes and new freight acquisition announcements by using a freight business intelligence and audit solution you can trust, Intelligent Audit. Speak to an expert today.
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President Biden is hopeful that the recently signed Ocean Shipping Reform Act of 2022 (OSRA) will be a turning point for "the consumer price that hit a new 40-year high this month," according to Supply Chain Dive.