Skip to content
Search AI Powered

Latest Stories

A strong and sustainable recovery

Thanks to post-recession market dynamics, the outlook for the third-party logistics sector is positive for some time to come.

A strong and sustainable recovery

Three years after the recession of 2008-2009, the third-party logistics (3PL) market in North America is showing clear signs of recovery. According to Armstrong & Associates, in 2010 the market's gross revenue exceeded 2008 to reach $127.3 billion, a 19-percent increase over 2009. In 2011 and 2012, the 3PL industry has so far delivered 6-percent annual growth—two to three times overall economic growth, demonstrating the strength of demand and the leverage that the major 3PL service providers hold.

The industry's operating income has recovered even more strongly and in 2010 exceeded 2008 levels. The positive outlooks for both gross revenues and operating income, shown in Figure 1, have been sustained by strong performance in volume and pricing.


Article Figures
[Figure 1] North American 3PL market


[Figure 1] North American 3PL marketEnlarge this image

Impact of the recession
The 3PL sector includes outsourced logistics services both basic (warehousing, truck brokerage, intermodal, ocean and airfreight forwarding, and customs clearance) and customized (transportation management, load optimization, fulfillment, light assembly, and returns management).

Growth in the North American 3PL market in the past few years has been driven by supply and demand dynamics that grew out of the recession. These dynamics have transformed the market in ways that will keep paying dividends for third-party logistics service providers in the coming years.

Consider supply dynamics, for example. Significant capacity rationalization has resulted in rising rates. Low demand during the downturn led to a decrease in market capacity for most resources and assets (truck drivers, ocean and air capacity, tractors, trailers, railcars, containers, and warehousing space). Asset owners made a conscious effort to bring capacity back online slowly as they continued to enhance their cost structures, maintain pricing, and adjust to new regulations that constrained their hours of operation. This capacity adjustment led to higher rates, a situation that is expected to continue in the coming years as supply operates closer to demand.

Demand dynamics have changed, too. Shippers have been under pressure to optimize their logistics costs while finding the capacity to serve their customers. As a result, they have been forced to become more innovative and open-minded to implementing new transportation solutions, such as intermodal services, collaborative networks, and continuous moves. These new demands have made providers of 3PL services more essential to running shippers' supply chains.

Given this context, it's not surprising that 3PLs have reinforced their position as shippers' strategic service providers. Shippers have relied on them to find solutions, either by optimizing capacity in a rapidly evolving market, or by designing and offering new supply chain solutions that engage multiple transportation modes or shippers. Third-party providers bring a set of unique capabilities to the table that are not easily replicated by asset owners. These include technology infrastructure encompassing multiple providers; best-in-class track-and-trace and reporting capabilities; supply chain design and management skills; and the flexibility to establish the optimal carrier base to serve a shipper's specific needs.

Challenges to overcome
Despite the positive results and strengthened market position of the past few years, 3PLs must adapt in order to overcome such challenges as:

  • Changing demand patterns that have led to more complex and global supply chains
  • An evolving customer base, caused by new customers from emerging economies entering the market and traditional customers aggressively seeking ways to reduce costs
  • Difficulty establishing strategic relationships with shippers as some parts of the offering become commoditized and the cost of switching providers is reduced
  • "Green" mandates from shippers reflecting differing regulations around the world

Third-party providers will have to revise their service offerings and business models over time to meet these new market demands. By provoking a shift in the competitive landscape, these new demands can represent opportunities for both newcomers and existing players to gain market share.

In our view, the 3PL market will continue to be strong over the medium to long term. Shippers will continue to actively seek creative ways to optimize supply chains, a service that 3PLs are uniquely suited to provide, especially in markets with tight capacity. As long as 3PL providers can keep pace with customers' demands, the market will remain attractive.

Recent

More Stories

DHL online shopper report

DHL report shows seven factors about American online shoppers

Online merchants should consider seven key factors about American consumers in order to optimize their sales and operations this holiday season, according to a report from DHL eCommerce.

First, many of the most powerful sales platforms are marketplaces. With nearly universal appeal, 99% of U.S. shoppers buy from marketplaces, ranked in popularity from Amazon (92%) to Walmart (68%), eBay (47%), Temu (32%), Etsy (28%), and Shein (21%).

Keep ReadingShow less

Featured

storm track forecast map hurricane rafael

Louisiana and Texas watch Hurricane Rafael approach

Gulf Coast businesses in Louisiana and Texas are keeping a watchful eye on the latest storm to emerge from the Gulf Of Mexico this week, as Hurricane Rafael nears Cuba.

The island nation today is bracing for storm surge, high winds, and destructive waves, according to the National Hurricane Center (NHC) at the National Oceanic and Atmospheric Administration (NOAA).

Keep ReadingShow less
white house

Business groups push back on Trump tariff plan

In the face of campaign pledges by Donald Trump to boost tariffs on imports, many U.S. business interests are pushing back on that policy plan following Trump’s election yesterday as president-elect.

U.S. firms are already rushing to import goods before the promised tariff increases take effect, to avoid potential cost increases. That’s because tariffs are paid by the domestic companies that order the goods, not by the foreign nation that makes them.

Keep ReadingShow less
clorox brands

Clorox partnership helps suppliers meet carbon reduction targets

Consumer packaged goods (CPG) provider The Clorox Co. has partnered with Manufacture 2030 (M2030) to help Clorox's suppliers meet their carbon reduction targets and advance the company's long-term goal of reaching net-zero emissions by 2050.

In addition to its flagship Clorox bleach product, Oakland, California-based Clorox manages a diverse catalog of brands including Hidden Valley Ranch, Glad, Pine-Sol, Burt’s Bees, Kingsford, Scoop Away, Fresh Step, 409, Brita, Liquid Plumr, and Tilex.

Keep ReadingShow less
U.S. map showing drought risk

Everstream Analytics quantifies how climate risk affects supply chains

Supply chain risk analytics company Everstream Analytics has launched a product that can quantify the impact of leading climate indicators and project how identified risk will impact customer supply chains.

Expanding upon the weather and climate intelligence Everstream already provides, the new “Climate Risk Scores” tool enables clients to apply eight climate indicator risk projection scores to their facilities and supplier locations to forecast future climate risk and support business continuity.

Keep ReadingShow less