Should warehouse operators buy their own trucking company?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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There is no one correct answer for this that would apply to all warehouse owners.  Much depends upon the individual warehouse owner’s characteristics.  A company that has a lot of money would be more likely to do well buying a trucking company, for example.  So would one that at least has some experience working in the transport industry.  By contrast, a warehouse firm that has no expertise in transport and has little cash flow would not be as likely to succeed if it bought a trucking company.

In general, this sort of purchase makes sense.  Many companies have done well by participating in what are called “vertical mergers” or “vertical integration.”  This occurs when a company buys another company with which it has a buyer-seller relationship.  Such a relationship exists between a warehouse owner and a trucking company.  This means that the merger could be beneficial.  The warehouse owner would no longer need to go looking for a trucking firm to deliver to its warehouses or to take goods from them.  If the warehouse firm does not have any of the disadvantages mentioned above, a vertical merger with a trucking firm would be a good idea.

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