CHEP Brambles Acquires LeanLogistics

CHEP Brambles, best known for their pallet and containers services, announced on March 3rd that it has agreed to acquire LeanLogistics for $45 million cash.

LeanLogistics is a transportation management solution (TMS) provider who competes directly with Sterling Commerce as well as other smaller hosted TMS players like MercuryGate and Transplace. (See the January 29, 2008 "The Forrester Wave: Transportation Management Solutions, Q1 2008" report for more information)

This acquisition does raise a few questions. First and foremost, why would a pallet provider buy a TMS vendor? Certainly, there is an opportunity to leverage the software within their own operations, but does CHEP really want to be in the software business?

To learn more, we spoke with Pete Stiles, VP of Marketing and Strategy, and Dan Dershem, President and CEO of LeanLogistics.

Forrester: Can you give us some insight into why CHEP made this acquisition?

LeanLogistics: Because of the way CHEP charges for and tracks pallets they have quite a bit of information on the movement of goods, but they were lacking two things to really leverage that data: 1) an enabling technology platform, and 2) domain expertise to deliver a service offering around it. They look at LeanLogistics as an enabler to both.

Forrester: Leverage the data how?

LeanLogistics: The combined network of LeanLogistics and CHEP will have over 20 million shipments moving through it annually. Benchmarking is just one of the types of services we can provide. There is also the managed services aspect of this to help companies reduce the 9-16% empty miles they typically run repositioning equipment. For example, if you can go after certain lanes where five CHEP customers are going each way at once you can start to consider dedicated moves instead of point to point. This is our shared vision, but historically one of the missing elements to achieve this has been the lack of a network with critical mass that is neutral enough to take into execution. Our vision is that the combination our networks, technology, and the managed services expertise can accomplish that now.

Forrester: Are all 40 LeanLogistics customers also CHEP customers?

LeanLogistics: 60% of LeanLogistics’ customers are also CHEP customers. CHEP has 4,000 customers.

Forrester: In our recent TMS Wave, we identified LeanLogistics’ customer service as being a key differentiator. Now that you are part of a larger company, how do you plan to keep that personal touch?

LeanLogistics: LeanLogistics will continue to be a wholly owned subsidiary, so for existing customers it is business as usual with the exception of having an additional resource pool. The leadership team, the office locations will all remains the same. Also, LeanLogistics does not necessarily view itself as a technology company. We are really a services company and our customers recognize us that way. Our customers are excited because they see that as the next wave of value add. We are constantly motivated to continue to bring additional offerings to our customers since we are subscription based so this gives us a new channel to do that.

Forrester: Will the solution continue to be sold to non CHEP customers as a stand-alone TMS?

LeanLogistics: Yes, LeanLogistics will definitely continue to be sold independently of the CHEP solutions.

Forrester: LeanLogistics is not setup today to support global companies. Does this acquisition mean your plans to go global are now accelerated?

LeanLogistics: This will allow us to go global because now the infrastructure exists at a lower risk investment.

Forrester’s take on the acquisition:

Clearly, this acquisition is all about profiting from the wealth of supply chain visibility data CHEP is sitting on today in their network by bringing new service offerings to the table for carrier benchmarking and collaboration opportunities. That is not going to happen overnight, and in the meantime Lean will need to continue to build out their TMS aggressively to compete. Otherwise, over time, they risk being marginalized as just another tool in the CHEP portfolio of pallet service offerings. In the immediate future, LeanLogistics customers should rest easy that they will remain a wholly owned subsidiary. Over the next two years, we expect this vision to start to materialize and they will be able to bring new value add services to their subscription customers. We think LeanLogistics is a great option for TMS buyers seeking a less expensive, easier to implement solution than the traditional on-premise TMS, and really separate themselves from the pack when it comes to outsourcing services, industry expertise, ability to provide extensive carrier benchmarking, and trading partner collaboration tools.

Patrick Connaughton, Senior Analyst - Supply Chain
Business Process & Applications