APX Logistics to File for Chapter 11

Mar 16, 2006 4:10 AM  By

MULTICHANNEL MERCHANT has heard from several sources that Santa Fe Springs, CA-based third-party logistics provider APX Logistics will be filing for Chapter 11 bankruptcy protection. Several sources confirm that the company will also no longer be serving the small parcel/small package business for the U.S. Postal Service.

Numerous calls to the company were not returned. Marketing director David Garcia, the one APX Logistics employee who did respond to calls, said only, “No comment.”

On its Website, APX Logistics claims to be the USPS’s leading package partner and its largest Parcel Select mailer. It processes more than 250 million packages and manages more than 200,000 truckloads a year. The company employs more than 1,850 workers and has 47 facilities nationwide.

Unlike parcel carriers such as FedEx and United Parcel Service, APX Logistics doesn’t offer an end-to-end ground service but instead provides zone-skipping services to merchants, delivering parcels to post offices; from there the Postal Service delivers the packages to residences.

Upon hearing the news, merchants scrambled to get the day’s orders delivered.

“It affects us big time,” says Rick MacDonald, facility manager at Huntingburg, IN-based home decor cataloger Touch of Class. On March 15 he took about 600 packages, weighing 1-15 lbs., that had been slated for an APX Logistics truck and transferred them to FedEx “just to get them delivered.” MacDonald heard the news of the impending bankruptcy from his APX Logistics sales representatives, who said they’d heard the news from their headquarters as they were en route to the Touch of Class facility on Wednesday.

Touch of Class, which has been an APX Logistics customer for about a decade, dating back to the consolidator’s days as CTC Distribution Direct, has contacted FedEx Home Delivery to pick up the slack until it can secure a contract with another consolidator.

Chuck Frenette, the chief financial officer of Chippewa Falls, WI-based multititle shoe cataloger B.A. Mason, has been seeking delivery alternatives since he received a telephone call from his APX Logistics rep at 11:00 Wednesday morning. B.A. Mason ships about 95% of its orders through APX Logistics. Frenette says that the company recalled an APX Logistics trailer with 7,000 packages on it; he didn’t want the parcels to enter the postal stream because USPS told him it wouldn’t deliver the packages, as the agency couldn’t be certain that it would be paid by APX Logistics.

APX Logistics was formed in August 2004 when APX, with the backing of Boston-based private investment firm Heritage Partners, bought the package logistics business of Chicago-based RR Donnelley Logistics (once known as CTC Distribution Direct) for an undisclosed amount.

At the time of the deal, Donnelley Logistics contracted about 60% of its packages with APX to handle the middle haul. Donnelley picked up the packages at fulfillment centers, dropped them off at its own regional sortation centers, loaded its trailers, and transported them to regional APX facilities. At that point, APX performed an additional five-digit-zip-code sortation for delivery to destination delivery units (DDUs), a.k.a. local post offices.

While at least a dozen other companies offer similar consolidation and zone-skipping services, APX Logistics is the largest third-party logistics provider specializing in small-package delivery. While merchants may be able to turn to smaller consolidators to handle some of their volume, Rob Shirley, president/CEO of Austin, TX-based shipping and logistics consultancy ExpressShip, believes that “the big three”—FedEx, UPS, and DHL—will reap much of the business.

“FedEx, UPS, and DHL could absorb a heck of a lot of volume, and that could cost the catalogers more,” Shirley says. “It could result in more costs in transportation for catalogers.”

Shirley says there is extra pressure on carriers such as APX Logistics to offer added value. “The big guys have figured out how to throw fuel surcharges in there and other ancillary charges, but some of the other guys haven’t been able to do that,” he says.