Better together

WINNING FORMULA | Performance Team brings expert knowledge and capabilities in warehousing and distribution that will propel Maersk’s inland logistics presence in North America to the next level and serve the rapidly evolving needs of U.S. retailers.

On 1 April 2020, A.P. Moller: Maersk completed the acquisition of Performance Team, a leading warehouse and distribution provider in North America, further accelerating the company’s regional logistics and services model.

With one full business quarter and a pandemic providing an early test of this acquisition, the combined organisation of Performance Team and Maersk’s Warehousing & Distribution in North America has already seized the opportunity to show its potential.

An introduction to Performance Team

Performance Team, like Maersk, started as a family business and embraced family values which focus on its employees and its customers. Performance Team’s ambition is simple but appealing, “to meet and exceed customer expectation”, a mission fueling its growth since its inauguration in 1987.

Fast-forward to 2019, the company reached annual revenues totaling USD 524m. The strength of Performance Team within the distribution, transportation, transload, and deconsolidation products as well as a thriving ecommerce fulfillment product, has attracted business from some of the largest retail companies across North America. The Performance Team footprint is also sizeable, allowing Maersk to more than double its presence across the region from 22 to
46 sites.

Performance Team in Numbers

SWAT team embodies the customer approach

A key to Performance Team’s track record of growth can be attributed to its unique approach to designing and executing customer solutions. This is most strongly represented by the aptly named SWAT team, comprised of project managers, IT and engineering specialists who provide a distinctive blend of expertise, tasked with customer implementations and continuous improvement activities.

This housing of key roles within one team allows for quick start-up solutions for customers which are swiftly brought to market and deployed. In other words, the team bridges between the point at which a customer awards the business to when the business is fully operational.

Craig Kaplan, CEO of Performance Team and Head of Warehousing & Distribution for Maersk in North America, explains how this SWAT team works:

“We’re designing all the automation, all of the layout, all of the material handling needs, all of the system needs, all the way across the board. This means that we’re not only providing our customers with a turnkey solution, we’re also executing for them and managing the business from the moment the stock arrives at the warehousing facility.”

Adding agility to a static business

Once the business is up and running, customers are also able to tap into the continuous improvement resources within the SWAT team to quickly offer new solutions and improvements to current operations. This enables an agile operation to optimise flows at every point in the distribution cycle.

As explained by Henning Udo Goldmann, Global Head of Warehousing and Distribution for Maersk, this is particularly pertinent within a static capacity business like warehousing and distribution where constraints in warehouse sizing as well as road and yard capacity can cause huge profit reductions for customers if not correctly managed:

“Customers try to blend out these constraints, but logistics is a low margin business. If you blend out something that has 0.5% margin, it’s enormous money,” Goldmann adds.

Whilst at present, the SWAT team mainly supports Performance Team’s distribution product – that is the services inside the warehouse – the potential for growth is substantial. The scalability of this business model promises both an exciting and accelerated growth curve for Maersk – especially within ecommerce fulfillment, which is a growing need for almost every large retailer.

The right fit

Maersk was targeting growth in the warehousing and distribution component of its business even before Logistics & Services and Ocean teams merged in 2018.

“We identified a capability gap for what we needed to become a top quartile player in the warehousing and distribution sector, and we needed an M&A strategy alongside organic growth to really tap into this,” says Goldmann.

Following extensive analysis of the warehousing markets across Europe and North America, Performance Team stood out for multiple reasons: Brand recognition from when people see the logo up until how they execute, capabilities in engineering, the SWAT team, the proposals, the pre-configured solutions and the sales approach.

“Performance Team is the perfect and first very concrete example of the inorganic part of our global Warehousing and Distribution strategy becoming real, and it complements our organic strategy,” Goldmann adds.

When looking across the combined product portfolio of Performance Team and Maersk, it’s clear how these products complement all parts of the customer’s supply chain from origin procurement right until the final consumer or retail shelf.

Maersk’s expertise in drayage, deconsolidation and transload services, together with Performance Team’s fulfilment services, both in ecommerce and brick and mortar operations, inland transportation and distribution capabilities, will become an attractive value proposition for customers and bring new growth opportunities for them worldwide.

Testing times

Retailers need robust fulfillment capabilities to both grow in line with their customers’ needs and to deliver a flexible and agile model that can adapt to inbound demand – a strength clearly underscored during the COVID-19 pandemic.

When asked what was the biggest opportunity to support customers during the pandemic, Jeff Kellan, Maersk’s Head of Logistics & Services in North America, answers:

“One word: Storage.”

The coronavirus pandemic saw retailers of “non-essential goods” needing to halt their global supply chains and stock their inventory wherever possible.

“Several apparel retailers had to close all of their stores in the beginning of spring – most of them ready with their spring collection. That brought business to us to store goods, and we partnered with Performance Team to quantify the amount of surplus warehousing space and container yard space and began to market these solutions through our sales team,” Kellan explains.

These opportunities both accelerated the collaboration between Maersk and Performance Team and allowed for significant revenue growth for both companies, despite the unprecedented downfall in ocean volumes.

With only a small part of the warehousing and distribution outsourced and e-commerce growing 12% annually, there is significant growth opportunity for third party warehousing and distribution players, particularly in North America. Maersk and Performance Team are in a strong position to serve this sector by leveraging their distribution and ecommerce fulfillment capabilities with customers and matching their needs on both a B2B and B2C business model.

The future looks bright

Three months into the integration, customer feedback is positive.

“Customers are really excited about the collaboration of these two products and having that end-to-end solution and a planning partner that can truly talk to them about their entire supply chain sitting at one table,” says Craig Kaplan.

Kaplan, Goldmann and Kellan all agree that the recovery from the coronavirus will be a time of significant change for supply chains globally with customers keen to build both resilience and stability. The upward trajectory in e-commerce growth will also likely continue with global store closures having shifted consumer behavior towards a B2C model at an accelerated rate.

However, in the face of fragmented markets and a shift in supply chain behavior, one thing is certain: Maersk’s partnership with Performance Team offers the flexibility to pivot in the face of challenging times. With combined solutions, an expert knowledge base that brings together specialists in fields across the supply chain and a mix of global and local reach, the position is unmatched in the region.

“When we come out of this pandemic, customers will look back and think of the partners who really helped them through that time. Hopefully, we pop up first in their mind,” adds Kaplan.

With a strong track record of 10-15% annual growth in the warehousing and distribution sector, Performance Team together with Maersk’s Warehousing and Distribution team have cemented a strong partnership. With good planning ahead of 2021, they have a shared ambition to maintain this growth for the benefit of their customers.

B2B or Business to Business – Provision of stocks and supplies to brick and mortar stores. Orders placed by the stores are either picked, packaged and shipped or palletized for delivery depending on the replenishment needs.

B2C or Business to Customer – An item ordered by an end consumer online makes its way to a distribution center closest to your region / country. The order will then be picked manually or packaged for delivery to your home or desired location via a courier service.