(AGENPARL) – GLOBAL, gio 14 gennaio 2021
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The economic crisis caused by the COVID-19 pandemic has shone a spotlight on the critical value of global supply chains and the logistics companies that keep them moving. While the pandemic’s impact on the sector has been less severe than that on travel or transportation infrastructure players, market capitalization of logistics companies nevertheless declined by almost 3 percent between February and July. Logistics players rely on their global networks to achieve scale within a highly competitive and relatively low-margin industry. With trade demand plunging by as much as 22 percent in the second quarter and significant drops continuing in the third, many road-, air-, and ocean-transport companies are reporting large declines in volumes from the same periods last year.
Despite these challenges, the crisis presents opportunities for logistics firms to revisit their business models, enter new markets, and innovate around new service offerings. Our research suggests that the high level of external uncertainty—political, social, and epidemiological—will likely be with us well
into 2021. Wise planners will prepare for a number of outcomes, including a continuation of the current volatility or a worsening downturn. In our view, however, they must also watch for the emergence of positive trends and be ready to shift quickly to a growth stance.
A through-cycle approach to growth has already been proven to be an important differentiator between long-term outperformers and their less successful peers. According to our earlier research, companies that outperformed during and after
the 2008 financial crisis made bold moves during the downturn and ramped up their activities in the recovery. Our more recent analysis of corporate growth strategies shows that staying focused on growth throughout the economic cycle is critical not only for generating excess total returns to shareholders (TRS) but also for long-term survival.
These lessons seem to hold for the current crisis as well. Rather than prioritizing operating margins, the most resilient logistics players are using this difficult environment to position themselves for future growth while remaining flexible enough to respond to shifting conditions. The goal is to achieve “escape velocity” from the crisis when the time comes.
The most resilient logistics players are using this difficult environment to position themselves for future growth while remaining flexible enough to respond to shifting conditions.
How logistics growth stars outperformed in the last crisis
To understand how our earlier cross-industry research on growth and resilience may apply to the conditions the logistics industry faces today, we analyzed the sector’s performance before, during, and after the last economic crisis, from 2003 to 2018, a time that saw growth, decline, and recovery phases. We then compared corporate performance during the last financial crisis (2007 to 2011) and
the current COVID-19 downturn. The sample included 125 companies in shipping, contract logistics, freight forwarding, trucking, post and parcel delivery, and freight rail in North America, Europe, and Asia. Our objective was to identify the players that delivered higher-than-average growth in revenue and profitability, as well as higher TRS, and to understand how they accomplished this performance.
We found that 12 percent of the sample outperformed the industry on all three measures during the entire 15-year period.
Through-cycle outperformers are profitable revenue outperformers that also have positive profitability (economic profit/revenue) after crisis (2013–18) and better-than-average TRS performance compared to the industry during crisis period (2007–11).
The group is dominated by players from North America and Asia that are active in trucking, freight forwarding, and contract logistics. These through-cycle outperformers registered
an average compound annual growth rate (CAGR) in TRS of 7.9 percent, which is 2.3 times higher than the industry average. They also grew their economic profit by 3.5 percent compared to an industry-average decline of 1.7 percent (Exhibit 1).
Weighted-average TRS CAGR, 2013–18; weighted-average economic profit/revenues, 2013–18.