UPS buys Freightex

UPS has bought the UK based freight exchange, Freightex, for an undisclosed sum. The Atlanta based express and logistics company said that it had purchased Freightex to “provide UPS customers an immediate, knowledgeable and competitive UK and European presence”.

Alan Gershenhorn, UPS Chief Commercial Officer, commented that UPS intended to align “Freightex with Coyote for greater efficiency and continue to invest for further growth.”

Freightex is a successful iteration of the concept of the ‘freight exchange’. Most of these are little more than posting boards for small truckers, often owner-operators, to communicate with potential customers. Freightex is much more sophisticated. Based around algorithm concepts taken from the financial sector, it dynamically reconciles supply and demand, seeking to create the sort of visibility and efficiencies seen in capital markets. FreightEx also has a much closer relationship with both its customers and its suppliers, even to the extent of creating dedicated services on certain routes. All of this has resulted in dramatic changes in how its clients managed their freight, with large OEMs restructuring their traffic patterns around the market data that FreightEx delivers. Up until this week’s purchase, Freightex has been growing fast.

The reasoning behind UPS’ move is not completely clear; however, it appears to be an attempt to replicate the success of Coyote Logistics. Although UPS has not broken out precise figures, the clear implication is that ‘freight brokerage’ Coyote Logistics is the profitable element of its otherwise troubled freight business. However, Coyote seems to be quite an American concept, offering services including intermodal and even air freight, which is very different from Freightex. Yet the latter has been expanding across continental Europe and an injection of capital could be useful. The questions come over UPS’ ability to integrate such new innovative concepts in markets which they may not be wholly familiar with.

This is an exciting area. The hype tends to focus on the likes of Uber or Amazon but it is the more down-to-earth concepts such as Freightex or Coyote that offer the prospect of a leap forward in logistics productivity. The question is, can UPS be the right platform to deliver such a change? If so, it has the ability to transform the express carrier’s business model.

Source: Transport Intelligence, January 10, 2017

Author: Thomas Cullen