For a brief period after the 9/11 tragedy, it looked like globalization might be slowed by heightened security. But globalization is stronger than ever, and it's creating logistical nightmares.
Those nightmares in turn translate into opportunities for specialized logistics and supply-chain management companies untangling the messes, simplifying the processes, and creating efficiencies. That's where logistics outsourcing comes in. Consulting and outsourcing companies of all sizes, both private and public, are offering logistics services. In fact, some of the largest and most widely used services are offered by private companies. The opportunities, however, haven't gone unrecognized by some of the biggest public conglomerates.
Companies including United Parcel Service (NYSE:UPS), Motley Fool Stock Advisor holding FedEx (NYSE:FDX), and Ryder System (NYSE:R) have offered logistics services for years. But the scope of prospective business is rapidly increasing. Logistics services companies are entering the market from every direction: package delivery, freight transport, moving, IT services, accounting, and consulting. The business needs are as diverse as they are complex, making it an area of such specialization that many companies doing business globally can benefit from outsourcing their logistics and supply-chain management needs.
Unfortunately, from an investment standpoint, many of the leading logistics outsourcing companies poised to benefit the most are such massive conglomerates that revenues from logistics-related services are, at this point, only a fraction of the whole. For example, General Electric (NYSE:GE) owns Penske, which operates a logistics and supply-chain solutions unit. The unit is just one of Penske's business channels, not to mention a tiny fraction of the tangled web that is GE. Odds are that the unit isn't going to have a significant impact on GE's bottom line anytime soon.
However, there are leading companies for which logistics services could become an increasingly important source of revenue. For example, had it not been for a shift to IT outsourcing, IBM (NYSE:IBM) might not exist today. The IT outsourcing market took off in the early 1990s, and IBM reinvented itself to become the world's largest full-service IT company. It is now shifting its attention to the logistics business. Its purchase of PricewaterhouseCoopers in 2002 was a big part of that push.
Other companies with global potential include Electronic Data Systems (NYSE:EDS), which owns logistics specialist A.T. Kearny, and UPS, a logistics pioneer. Look for logistics and supply-chain management to be a significant source of future revenues, even among the behemoths.
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Motley Fool contributor Mark Mahorney doesn't own shares of any companies mentioned.
