Wal-Mart Looking at Shipping Line
By bobarne on International
Via Glenn, I find this post by the Politics of CP. It point to an article in the Arkansas Gazette which says that the company may be looking at acquiring APL, American Presidents Line. The company is currently owned by a company in Singapore, Neptune Orient Lines( On a side note, I remember when APL was bought out as it involved a suspicious order coming across my desk. Note to wannabe insider traders, don't attempt to buy position limit long call options a few days before the company is bought out. It's fricken obvious when a stock whose options don't trade on average more than a couple of dozen a day suddenly gets an order for 5000 or when the customer desk asks what the position limit is. This happened a few times and I would have loved to have jumped on it but it wasn't worth the potential hassle).
It is rumored that the company may be considering a purchase of a major container shipping outfit. Word out of Northwest Arkansas is that Wal-Mart is eyeing American President Lines (APL) for acquisition.
APL is one of the largest logistics and container transportation companies in the world. It has offices in over 80 countries, including 30 offices in China. APL's parent company, Neptune Orient Lines (NOL), is headquartered in Singapore.
In 2002, APL was named Wal-Mart's International Ocean Carrier of the Year. According to a company press release from 2002, "APL has been working closely with Wal-Mart for three years and provides services to Wal-Mart in 37 countries, shipping everything from electronic goods, footwear and garments, to household products and furniture."
With more imported goods making it onto Wal-Mart's store shelves, the retail giant will have to make sure it can get its goods out of production and into stores faster and cheaper. Acquiring a company like APL would give the company more control of that process. While transportation costs have spiked recently, sea freight unit costs have fallen by over 70 percent during the past 20 years.
Wal-Mart has invested heavily in its own logistic business. It currently operates one of the largest and most complex domestic shipping organizations in the world. It boasts more than 60 distribution centers throughout the U.S., a private fleet consisting of 36 transportation office terminals in 28 states, 5,600 tractor trailers in 48 states and 6,900 truck drivers.
This has implications for the west coast as the article points out. Reports out of Los Angeles-Long beach has that port struggling to keep up with the influx of goods coming in:
There is a lot of that going on at the nation's busiest port these days, as a glut of imports from Asia, a shortage of dockworkers and breakdowns in the harbor's infrastructure have created a tangled backlog in the midst of the peak holiday season.
The crowding is not expected to significantly delay Christmas shipments as additional hiring is starting to pick up the slack. But as the national economy continues to outsource manufacturing jobs, the explosive growth in imports is taxing the capacity of the nation's ports and its road and rail system, transportation officials said.
"That's really swinging the whole transportation system around. It's just overwhelmed the infrastructure and it's catching up and surpassing us," said John Bromley, a spokesman for Union Pacific Railroad Co. Hit with a large number of early retirements, Union Pacific recently began limiting the number of rail cars available to haul containers, creating delays beyond those at the ports.
In San Pedro Bay, dozens of ships are anchored, waiting as long as a week to be unloaded, up from the norm of less than three days. Cargo containers pile up in terminal yards waiting to be placed onto trucks or trains, as drivers like Vaca spend much of their day in line before leaving to navigate crowded freeways and more delays.
"We've been seeing double-digit increases in cargo every year. Everyone in the industry saw this coming, but we didn't prepare for it," said Steve Stallone, spokesman for the International Longshore and Warehouse Union, which represents dockworkers.
With volume increasing more than twice as fast as had been projected and other West Coast ports ill-equipped to handle a large influx of goods, Los Angeles-Long Beach, the largest U.S. container complex, is having to bear the brunt. Many of the ships coming from Asia are too big to make it through the Panama Canal to Eastern seaports. So the ships come in droves to Los Angeles-Long Beach and wait.
If the rumor is true, than the Washington Post article gives a solid rational as to why Wal-Mart is considering such an aquisition. In fact, it would just be an extension of the current logistics operation. If you thought the union flip out over Wal-Mart now, just imagine what would happen if this deal goes through. Some may remember the labor dispute a couple of years ago at the L.A.-Long Beach port, the big issue was over the introduction of productivity enhancing measures being introduced. These weren't even cutting edge at the time. What would happen if Wal-Mart insisted on the latest innovation at the ports they do business.
My hunch is though that this probably has as much to do with the companies international expansion plans and the creation of a seamless organization globally.
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