On behalf of all of us at BGSA Holdings and Cambridge Capital, we wanted to share some highlights of BGSA Supply Chain 2024. For those of you who joined us, we hope you had a great time.
For our 18th annual Supply Chain conference, we returned as always to the Breakers in Palm Beach. Amidst the sunshine and palm trees, we were able to join with over 350 CEOs and leaders across all areas of the supply chain sector.
This record turnout included CEOs from North America, South America, Europe, Asia and Africa. We got to exchange ideas with leaders in logistics, distribution, freight forwarding, truck brokerage, warehousing, trucking, shipping, last mile, fulfillment, and other areas. As technology has become more and more embedded in the supply chain, we met with software all-stars in WMS, TMS, reverse logistics, predictive pricing, digital brokerage, and a host of ecommerce logistics categories. And we got to talk with over 30 of the top supply chain CEOs about their outlook for 2024. This was truly a "Davos for Logistics" week!
The Year Gravity Won
2023 was the year that proved gravity is undefeated. What went up during COVID came down thereafter. Freight rates, for instance, doubled from March 2020 to December 2021. But the air came out of the tires, as rates plunged 38% in the subsequent two years, returning to 2019 levels. The "COVID Hangover Effect" rippled through supply chains, causing freight rates to plummet, inventory replenishment cycles to slow down, and demand to soften. Meanwhile, overcapacity lurked over the industry — net carrier levels dropped 25%, to 379K.
On average, the supply chain public markets underperformed the S&P 500. At BGSA, we track the BGSA Supply Chain Index, a basket of 61 companies across nine segments. While the S&P 500 grew 24.7%, the BGSA Supply Chain Index only increased 15.2%.
In 2023, we saw a major divergence between overperformers and underperformers. The LTL sector dominated, with a 60.0% value increase led by XPO (171%). Supply chain software also generated strong results, with a 33.3% boost spearheaded by Manhattan Associates (78%) and WiseTech (55%). And three logistics companies (Kuehne & Nagel, GXO and Ryder) led the way in contract logistics, delivering 39-47% growth. Three themes emerged:
• LTL: Addition through Subtraction. The Yellow bankruptcy removed capacity from the market, boosted market pricing, and enabled other LTL carriers to gain revenue
• Software: Clouds Clear. The most successful public supply chain software companies achieved strong growth in Software-as-a-Service, and accelerated through acquisitions like WiseTech-Envase and Descartes-GroundCloud
• Logistics: Greed is Good, but Bland is Better. The top performers were contract logistics giants like K&N, GXO and Ryder, who delivered steady growth supported by predictable long-term contracts
Our Outlook for 2024
We see four key issues: (1) Supply chain recession: gravity wins; (2) Globalization and its discontents: the resurgence of nearshoring; (3) Tech: less is more; and (4) Capital Markets: carpe diem.
First, we have just witnessed the deepest supply chain recession since deregulation. During COVID, carrier rates spiked 84%. After peaking in January 2022, rates plummeted 49%, returning to 2018 levels. Brokerage margins fell from their 21% peak to 14%. The good news: we seem to have hit bottom, as rates stabilized in H2 2023 and appear to be starting to resume growth.
Second, we are witnessing a shift in US global trade partners. This past year, Mexico surpassed China and Canada to become America's #1 trading partner, and nearshoring investment is increasing. Meanwhile, global threats continue: Houthi attacks on Red Sea shipping have disrupted 30% of all global container trade that passes through the Suez Canal.
Third, technology funding has hit a 5-year low. After nearly doubling to $681B in 2021, tech investment has dropped to $285B — driving startups toward M&A exits. On the other hand, corporate IT executives expect to increase technology budgets by 3.8 to 5.1% over the next 3 years.
Fourth, the capital markets suggest that 2024 is a time to seize the day. Four M&A themes emerged: consolidation (Knight-Swift, TFI, Hub, GXO), divestitures (Forward Air, Shopify), assets to services (CMA CGM, Ryder), and base to niche (UPS, WiseTech, Loadsmart). And some of those acquisitions came together here at our BGSA Supply Chain conference! The sentiment for the coming year was quite positive: over 60% of attendees expect to see double-digit growth this year.
Perspective at Cambridge Capital
At Cambridge Capital, we believe we are in the early innings of a transformation in high-growth digital supply chains. Key themes include last-mile logistics, AI to automate supply chains, supply chain visibility, reverse logistics, and tech-enabled "man + machine" services. Our investments include Bringg, ReverseLogix, Parcel Perform, Everest, Boa Logistics, byrd, Liftit, DeliveryCircle, and Greenscreens.ai — which has grown nearly 10x over the last 2 years and now serves over 140 of the top 200 freight brokers. Cambridge backs outstanding CEOs on a majority or minority basis, focusing on $10-$50 million investments.
Perspective at BGSA
On the advisory side, BGSA continues to expand its M&A services, having worked on over 50 transactions in the sector. Clients and transactions have included NFI, C.R. England, GENCO (now FedEx), New Breed (now XPO), and many others. BGSA's client NavTrac recently sold to Loadsmart, and several other engagements are currently under way.
Closing Thoughts
In sum, we thank you for being a part of the BGSA Supply Chain ecosystem. We all learn and benefit from the collective wisdom of this outstanding network of CEOs and industry leaders. Please save the date for next year's BGSA Supply Chain Conference: January 22-24, 2025, when we will again return to the Breakers in Palm Beach for our 19th annual conference!
Thank you and best wishes for the coming year.
Benjamin Gordon
This story was published by an outside outlet.
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