Logistics firm staging expansion
When PWC Logistics revealed its new name to employees in its Southern California operation recently, it involved more than just a change of signs and office stationery.
“We want to get our people rallying behind a single identity, a single brand,” said Charbel Abou-Jaoude, managing director of global integrated logistics for the Kuwait-based company.
The name -- Agility -- is meant to evoke a company that is “agile, that is dynamic, that represents a new aggressive player,” he said.
Behind the catchy new handle is a company whose industry, though largely invisible to the public, is vital to global commerce. It is broadly called logistics and incorporates a variety of services that get goods from the factory to the customer. Last year, total sales in the sector amounted to $370 billion.
The industry, once made up of thousands of small freight forwarders, customs brokers and supply chain consultants, has undergone a “vigorous wave of mergers and acquisitions” in recent years, said Jock O’Connell, a trade consultant in Sacramento. “The little guys can’t compete too well, and they want to become part of bigger companies.”
Southern California’s fame may be tied to movie studios and beaches, but logistics was the region’s second-largest export industry last year, trailing only tourism, said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp.
“It’s the elephant in the room that nobody sees,” he said of the logistics business, pointing out that the Los Angeles-Long Beach port complex was the largest in the nation and fifth-largest in the world.
Agility is emblematic of the industry’s scope and evolution.
If the job is delivering perishables to mess halls in Iraq, hauling giant mining equipment through the jungles of Papua New Guinea or erecting stage sets in Asia for touring rock groups such as the Doobie Brothers, Agility has a business that can get it done.
To provide such diverse, specialized and often far-flung services, the company has gone on a worldwide acquisition spree that has tripled its annual revenue to $4.5 billion.
In the U.S. alone, Agility invested more than $500 million in three companies last year, the largest of which was Santa Ana-based GeoLogistics. The 150-year-old firm, which started as a freight hauler, has built a large customer base in Europe and Asia.
“GeoLogistics has a long history of limited profitability and ownership changes, none of which have been very good for it,” said Dick Armstrong, chairman of Armstrong & Associates, a Wisconsin-based logistics research firm. “PWC may give GeoLogistics the resources it needs to be competitive with major global supply chain managers.”
In the last two years, Agility also has acquired Louisiana-based Transoceanic Shipping Co., which specializes in moving equipment for the energy and construction sectors; Taos Industries Inc., a Louisiana-based military spare parts supplier; Trans-Link Group, a Singapore firm that provides support services for the entertainment industry; and Cronat Transport Holding, a Swiss freight forwarder.
Unifying Agility’s empire won’t be easy. The latest round of purchases has left the company with more than 20,000 employees in 450 offices in more than 100 countries.
Whatever growing pains might develop, the company is hoping to put scale and diversity to its advantage in building sales, especially as the likes of express-mail shipping giants FedEx Corp., United Parcel Service Inc. and DHL move onto the turf traditionally handled by logistics firms.
One of Agility’s proprietary tools, for example, is a software program called MicroClear, developed with Microsoft Corp. The program is being used by the governments of Kuwait, China and Pakistan to help streamline their customs handling procedures.
“We’re striving to eliminate those archaic logbooks and give traders as well as governments a more efficient and more effective flow of goods in a secure and transparent manner,” Abou-Jaoude said.
By year’s end, Agility’s facility in Torrance will have handled at least 20 million cartons of goods. On a recent day huge stacks of flat-screen televisions and DVD drives were stacked in one corner of the 170,000-square-foot warehouse, positioned for easy access for just-in-time delivery to factories and retail stores.
Another section of the cavernous building was filled with goods heading for cruise ships, including huge pipes, boxes of bottled water and a giant toolbox for onboard repairs. On-time delivery of such goods is paramount, because ships are often in port for just a few hours.
After years of operating largely in their own backyard, Middle Eastern companies such as Agility have begun to seek a larger role on the world stage, empowered by rising oil prices and an increasingly prosperous regional economy.
Last year, one of those companies, Dubai Ports World, a state-owned firm, triggered an outcry in Congress when it gained control of management contracts at six U.S. ports. Critics said the deal posed a security threat. This week, insurance giant American International Group Inc. agreed to purchase those controversial contracts. The deal must be approved by federal and state regulators.
Some Middle Eastern investors say the incident has sent a message that they remain unwelcome in the West, even though the United Arab Emirates, where Dubai Ports World is headquartered, and Kuwait, Agility’s home base, are allies of the U.S.
But Abou-Jaoude said he was undeterred by the Dubai Ports firestorm, pointing out that his company’s deals had been approved by the interagency Committee on Foreign Investment in the United States. He said he planned to continue expanding his business here and was looking for possible acquisition targets.
“The U.S. is a key market for anybody playing a part in global trade, and we have nothing to be ashamed of for wanting to invest in the U.S. market and for wanting to serve our U.S. clients,” he said.
Agility, which began life as a government-owned real estate entity more than two decades ago, has become one of the Middle East’s fastest-growing private companies and is listed on the Kuwait and Dubai stock exchanges.
The company has developed close ties with the U.S. Department of Defense, providing support and warehousing services for the military across the Middle East. Those contracts account for 20% of the firm’s business.
Abou-Jaoude said Agility had undergone intense scrutiny to win security clearance for its government contracts, which include supplying heavy-transport equipment to the U.S. military in Iraq and supporting Navy disaster relief and humanitarian missions.
Its close ties with an unpopular American administration have been costly in other ways: Abou-Jaoude said his company had suffered casualties in the Middle East, although he would not say how many people the company had lost there.
If the new Democratic leadership in Congress changes U.S. direction in Iraq, that could take a bite out of Agility’s government contracts. But Abou-Jaoude said he was not worried.
“Once stability prevails in the region,” he said, “the commercial opportunities in Iraq will be significantly larger than anything we are doing for the U.S. military in Iraq.”
*
