DVZ radar: Here's why Kuehne + Nagel is entering US intermodal
Where others may fear to tread
Last week’s headlines pointed to a rationalisation in the number of routes that CMA CGM would serve in future, as well as brands consolidation as part of a comprehensive efficiency push, yet its consolidated numbers clearly suggest where the axe will fall if it hits its ambitious $1.5bn savings targets. And that’s staff – predominantly, I expect, Ceva Logistics’ staff.
The gist: the 3PL subsidiary it now fully controls via a near-100% stake is central in cost-cutting considerations, although it’s likely ...
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Reality
June 07, 2019 at 5:46 amAnother bean counter article based in assumptions made on moving beans from one bracket to another. CEVA has already slashed its North American mgmt. staff leading up to the IPO and the rest are slowly leaving due to the strain of 16 hr days doing work that was once the responsibilities of three people. A knee jerk staff reduction is an analysts answer to efficiently operating when the reality should be efficiency improvements that reduce the need for staff allowing staff reductions to occur.
CEVA is going to loose its 3PL business when customers walk away from a company unable to operate using warehouses operated by skeleton management crews that have laid off their quality,IT,janitorial and maintenance departments to hit a budget quota. Slowly the wheels will fall off the bus.
CEVA relies on labor not technology as they never had the capital to invest heavy in tech which resulted in the need for highly capable staff which is why CEVA pays it employees more than the competitors. Take that away without making process and tech improvements first and its 3PL business will implode and already is. Freight forwarding executives should not make decisions for distribution centers which is what CEVA operates in its 3PL sectors.
XPO and FedEx supply chain services are already waiting for CEVA’s customers to walk and are picking up the highly experienced staff that CEVA is shedding.
Mass layoffs is not restructuring. Restructure your operations to need less people first or the financial loss due to quality will cost you more than the payroll savings. Financial analysts do not know enough about operations management to make decisions about who to cut and how and only provide quotas to cut and it will be the end of the CEVA 3PL business.
Ale Pasetti
June 08, 2019 at 11:28 amThanks, Reality. Great feedback. “CEVA has already slashed its North American mgmt. staff leading up to the IPO” – you can find all our coverage on the topic on this platform. It hasn’t been enough, clearly, if you are familiar with its capital structure/funding needs/others.
If you have read the story you should know I acknowledged that these calculations should “be taken with a pinch of salt”. If you had read the article, you’d also know that some basic (bullish) assumptions were made to reflect the different assets mix of Ceva vs others. I have never said massive layoffs are the “answer to efficiently” – in fact they are not. Rather, I said if CMA CGM is ever going to hit its targets, that’s where efficiency will be sough. I also agree natural staff turnover is one way to look at it. Mass layoffs is not restructuring, but are part of any corporate restructurings. Then, 5,000, base case, is not mass layoffs (~5% of the combined CMA+CEVA workforce). All else, let’s wait for Q120… Best, AP.