Macroeconomics | May 18, 2023

Convergence of business models – a race for the largest piece of the pie

Part 3 of 5 in the series on macroeconomics – part of the 4flow trend monitor

Affected industries: Industries requiring high service levels and product-service bundles

Affected supply chain segments: All segments, especially forwarding businesses and carrier markets

What is connectivity in supply chain?

Logistics service providers (LSPs) have historically stuck to dedicated business models and usually operated as distinctive market players. Now, the market is seeing LSPs transform to offer additional services traditionally seen in other segments. Having achieved incredible EBIT (earnings before interest and tax) margins of over 50% in the last few years, deep-pocket players are looking to expand their business in new markets globally, often through mergers and acquisitions. Often, this leads to the convergence of business models: while some ocean shipping companies are acquiring forwarders and contract logistics providers, some forwarders have even set up an ocean shipping company themselves to offer end-to-end services. Moreover, traditional CEP (courier, express and parcel) providers are now competing with LTL (less-than truckload) networks to fulfil the demand for e-commerce services by offering services usually provided by dedicated CEP or LTL players.

What does convergence mean for my business?

Usually, 3PLs and 4PLs offer tailored end-to-end solutions for their customers, which requires extensive expertise and coordination involving multiple stakeholders. Now, new opportunities and forms of cooperation can arise as carriers start to offer many of these services themselves. In addition, prominent players are utilizing their own platforms to offer more and more services to their end customers, which could make specialist providers like customs brokers obsolete.

Getting ahead of the trend

New opportunities and forms of cooperation can arise from converging business models. Businesses should evaluate this new landscape and the risks and opportunities it poses for them. Could vertical or horizontal integration expand business opportunities? Could a merger or acquisition make sense? Do new competitors present a risk?

4flow trend monitor

Supply chains are in constant motion – and innovation promises to speed up the rate of change. With all these developments, businesses need to know where to focus their efforts to ensure the future viability of their supply chains. The 4flow trend monitor will provide a trend outlook highlighting important developments expected to have an impact on supply chain in the next one to five years.