The key challenges of credit risks and lower volumes will likely lead to intense consolidation in the logistics and transport sector in coming months, said Richard Bolte Jr, CEO of US-based BDP International, one of the largest privately owned logistics firms.

Speaking to BT while in town for a routine strategy meeting, Mr Bolte said: 'We're in a 'cash is king' environment now, and we're heading into uncharted waters.'

Although merger and acquisition activity has dried up in the past year, Mr Bolte now expects it to flood the industry again.
'There are too many players and many are highly leveraged. There will be a shake-up and a tremendous amount of industry consolidation,' he said.

He identified credit risks and lower volumes as two challenges logistics companies will face.

'The challenge is to analyse the risk inherent in all their accounts receivable and re-look their credit and collection practices, which were likely made in a very different world from the current one,' Mr Bolte said.

Also, lower volumes will affect all industries as the declining demand for consumer end-goods filters through to industries such as chemical and petrochemical.

'It's not a matter of if, but when, so you'll need a strategy,' said Mr Bolte.

For BDP, this will mean being on the aggressive, keeping a lookout for valuable companies selling at a discount, and talent and customers released by weaker companies into the marketplace.

BDP has 26 offices in 11 countries in the Asia-Pacific, and its regional headquarters is in Singapore.

Mr Bolte believes that to ride out the storm, industry players must be flexible and quick.

This, he said, will be easier for 'asset-light' companies who are not as constrained by the need to fill their warehouses and ships.

According to Mr Bolte, being a private, family-owned business has been advantageous for BDP in the current climate.
'We're not beholden to Wall Street, we don't have to run the business for this quarter's earnings. We run it for the long term,' he said.

By, Teh Shi Ning
Copyright © 2007 Singapore Press Holdings Ltd. All rights reserved.