How is Europe’s largest road freight transport provider competing in the highly-fragmented market?

DB Schenker Logistics is the clear market leader for European road freight with a 2.0% market share, according to Ti’s bespoke market size and rankings. How does it maintain its lead in such a fragmented market?

Ti’s recently published European Road Freight Transport 2016 report includes comprehensive profiles of some of the region’s major players. These profiles include an overview of the company’s structure and operations, insight into the company’s strategy as well as analysis of the company’s most recent available financial data.

As an example, please find below an abridged profile of DB Schenker Logistics’ European operations.

DB Schenker Logistics is one of the business units that operates under the DB Mobility Logistics sub-group of Deutsche Bahn. The majority of its revenues are generated from operations in mainland Europe and are categorised into its three main operating divisions: European Land Transportation, Air and Ocean Freight, and Contract Logistics/SCM (Supply Chain Management).

DB Schenker offers Europe-wide land transport, and worldwide air and ocean freight forwarding, as well as logistics solutions and global supply chain management. It also provides services for the automotive, high-tech and consumer products industries, as well as trade fair forwarding, and special transportation and services for major sporting events.

In 2015 DB Schenker Logistics had revenues of €15.45bn.

Segmented by logistics activity, DB Schenker’s revenues were as follows: European Land Transport, €6,317m (40.9%); Air & Ocean Freight, €6,753m (43.7%); Contract Logistics, €2,381m (15.4%).

The European Land Transport division employs around 24,000 people at 730 locations, including four Land Transport Terminals in Friedewald (Germany), Malmö (Sweden), Paris (France) and Salzburg (Austria). The business links regions in 36 European countries with a network of approximately 32,000 regular services per week. During 2015 the division handled 101.7m shipments.

Following a poor set of company results in 2015 there were some significant management changes. Coupled with these changes, DB Schenker Logistics appears to be pursuing growth in the one bright spot for its road freight business at present: e-commerce. In March 2016 DB Schenker Logistics signed a strategic partnership agreement with GLS, to offer the Royal Mail subsidiary its road freight services in exchange for access to the latter’s parcels network. The agreement legislates for a commitment to cooperation at the European level, whilst the signing of cooperation agreements at the national level is ongoing; as of November 2016, agreements have been signed for Germany, Austria, Denmark, Sweden and Italy.

Building on this, DB Schenker moved to expand its road freight capabilities in the UK through the February 2016 majority acquisition of a 75% shareholding in Redhead Holdings Ltd, which is a member of the national pallet network Palletforce. DB Schenker described the move as closing “the last gaps in the UK land transport network”. Its management appears to view the palletised and parcels segments as closely related, and described the significance of the company’s GLS deal as meeting “the constantly growing customer demand for an ‘all-in-one solution'”.

Furthermore, DB Schenker has launched a trial in Sweden for a B2C transportation operation, which is managed electronically, and may be rolled out to the rest of Europe. The division head has, however, definitively stated that DB Schenker will not be entering the two-man delivery space.

In an interview, the division head also stated that the European Land Transport business is not currently planning any further acquisitions. Instead, it is looking to consolidate after a turbulent two years.

Despite the opportunities for growth in the business, DB Schenker is still faced with a stagnant, low margin position in its road freight business. It remains unclear whether or not the restructuring of its management, and other initiatives, will aid the situation.

If you would like to access more insight and analysis of the road freight activities of DB Schenker Logistics, you may benefit from downloading European Road Freight Transport 2016. Included within the report, as well as the profiles of significant road freight business, Ti has provided insight into the changing road freight sector and examines recent innovations that are impacting it. In addition, the report contains Ti’s bespoke market size and forecast data and analysis on a regional and country level, split further into international and domestic markets. To find out more, click here.

Source: Transport Intelligence, November 28, 2016

Author: Staff Writer