Rising oil prices 'will see wave of M&As in logistics'

OPEC’s recent surprise decision to cut oil production could lead to a surge of mergers and acquisitions in the logistics sector, a top analyst has told Supply Chain Digital. 

In the face of spiralling cost inflation, fuel efficiency is crucial to logistics companies who are struggling to maintain profit margins. The latest OPEC-engineered oil price rise is a major blow to the logistics industry.

Frank Kenney, a former Gartner Analyst, and currently Director of Industry Solutions for Cleo, the cloud-based integration platform, told Supply Chain Digital that the OPEC move “will impact the supply chain from the top down and trickle down to impact everyday life”.

Kenney said: “The global oil market is constantly shifting. Production levels and policies change in response to various factors such as geopolitical tensions, and changes in demand can have a ripple effect across the supply chain landscape.”

He says that the logistics market is currently seeing record levels of low-load rejections and high capacity.

“With these conditions the market is more competitive than ever in terms of securing loads, so even if fuel prices increase incrementally, manufacturers and shippers may absorb part of these costs,” he says. 

Kenney adds: The rest of the costs might be pushed down the supply chain. Freight brokerage companies might be forced to absorb some of these costs, and as a result, we might see a rise in mergers and acquisitions of smaller freight brokerage firms.

Kenney feels that logistics firms are well advised to offset higher costs by investing in ecosystem-based technology.

“This can also help prepare enterprises to merge or acquire other companies and quickly integrate them into their systems,” he adds.