STG CEO Chris Jamroz told American Shipper the container freight station (CFS) industry has been underinvested in, partially because of how fragmented it is, and also because 85 percent of all freight moves are done via full-container-load.
STG Holdings LLC, the holding company of South Kearney, N.J.-based St. George Logistics, is rapidly investing in the consolidation and modernization of the outsourced container freight station (CFS) industry following its acquisition by private equity firm Wind Point Partners in July. STG in October purchased Linden, N.J.-based AZ Corporation, the second largest CFS services provider in North America, and Wind Point plans to merge the companies together to form a single CFS and value-added warehousing juggernaut.
Chris Jamroz, chief executive officer of STG, told American Shipper in a recent phone interview the CFS industry has essentially been left to its own devices and is now suffering from critical underinvestment. Jamroz said the reason for this underinvestment is twofold. For starters, 85 percent of all freight moves are done via full-container-load, and secondly, the CFS industry is highly fragmented. In the United States alone, there are more than 1,500 CFS providers, and because of this fragmentation, the CFS industry is lagging behind the rest of the supply chain, Jamroz said.
“The U.S. CFS industry has suffered from neglect and underinvestment over the last decade and is now in need of massive rationalization, modernization and consolidation,” he said. “Increased operating costs and the complexity of the supply chain challenges are further amplified by excess capacity and cyclicality of global LCL (less-than-containerload) freight volumes.”
Jamroz explained how St. George and AZ complement each other, making for a strong merged entity. St. George has been known for leading the pack in systems and technology, while AZ has been known for its customer centric culture, Jamroz said. In addition, St. George is a leader in import CFS, while AZ is strong in export CFS.
“We are very excited to merge STG, North America’s largest import-oriented CFS provider, with AZ, the continent’s largest export-oriented CFS business,” Konrad Salaber, principal with Wind Point, said of the deal. “With 24 port and inland facilities totaling approximately four million square feet, a talented staff of more than 1,100 logistics professionals and a national network of more than 80 partner facilities, the combined business has unmatched scale and capabilities in outsourced CFS and a leading position in value-added warehousing and related services.”
St. George operates the largest network of independent CFS facilities in North America, in close proximity to all major ports and metropolitan areas for ocean or air cargo. In addition, both St. George and AZ also provide a variety of additional logistics services including warehousing, distribution and transportation services.
As far as the merger goes, Jamroz said there will be full technology automation and a seamless integration, allowing the company to focus on infrastructure and physical upgrades to its combined facilities.
Jamroz said STG does have more acquisitions planned in the near future, but in terms of growth, there will be an even split between organic growth and acquisitive growth.
“Our acquisition program will continue to focus on opportunities in ocean and air CFS, value-added warehousing and distribution, e-commerce fulfillment and related services in the large and growing import/export supply chain,” STG Chief Operating Officer Hessel Verhage said.
In regards to freight forwarders and non-vessel-operating common carriers (NVOs) owning or leasing their own consolidation and deconsolidation facilities, rather than outsourcing to third-party operators, Jamroz said the trend is gearing towards outsourcing.
The rapidly increasing cyclicality and seasonality of less-than-truckload freight volumes has put pressure on customers’ internal cost structures, making it economically impractical for NVOs and freight forwarders to maintain in-house CFS networks, he explained.
Several freight forwarders do things in house, but do not operate at full capacity, while as an independent outsourcer, STG is able to maximize efficiency by operating at full capacity, said Jamroz. Through outsourcing, NVOs and freight forwarders can exit their fixed-cost infrastructure and move to a flexible pay-per-service arrangement, offering direct alignment of operating expenses to underlying business volumes, he added.
New Jersey-based NVO Troy Container Line has been working with St. George for 25 years, and already has a relationship with AZ in Miami. Chief Executive Officer Michael Troy said in a recent interview that outsourcing CFS services though St. George allows his company to focus on other operational issues, and he believes the merger will add even more value.
Greg Howard, chief executive officer of CaroTrans International, which has also worked with both St. George and AZ, told American Shipper his company has historically outsourced 100 percent of its CFS needs. “We’ve found there are meaningful advantages to working with knowledgeable & proficient service providers, such as our longstanding CFS partners AZ and St. George,” he said. “Both organizations are recognized as premier service providers within the CFS operating segment. Carotrans will benefit from the merger through enhanced operational network productivity. Greater efficiency will be seen as they streamline operations and integrate systems and processes.”
Hailey Desormeaux is Web Editor of American Shipper. She can be reached by email here.