3PL mergers can lead to unhappy clients

William Walker, sales director of Walker Logistics Ltd., shares his thoughts on dealing with supply chain inefficiencies following a logistics service provider’s acquisition or merger.

As the logistics services industry becomes increasingly competitive it is inevitable that more companies operating in the sector will seek to grow through mergers and acquisitions.

By merging with or buying a controlling stake in a rival, a logistics specialist will expect to benefit from economies of scale and synergies across its expanded business and, of course, enjoy an increased market share.

But, for the clients of any company that has been absorbed either through merger or acquisition into the corporate framework of a bigger entity, the news that a trusted – often formerly independent – supplier is now part of a large corporation, will understandably be a cause of some anxiety.

Many people believe that a smaller 3PL is far better equipped to respond flexibly to their changing requirements than the biggest operators and, from conversations I have had, there is concern that this aspect of a relationship can be lost when a 3PL is taken over by, or merges with, a bigger player.

It is inevitable that if the quality of service and levels of customer care suffer following a 3PL’s merger or acquisition, the company’s clients will look to switch supplier. Indeed, across all industries, supplier acquisition is one of the most common triggers for terminating a business relationship.

Of course, exiting a supplier relationship can sometimes be less than straightforward and it is always a good idea to seek expert legal advice before making the split. Some contracts may contain termination penalties but these may be minimal compared to the damage that can be done to a business if the efficiency of its supply chain starts to suffer following a 3PL’s acquisition or merger with another operator.