Shift of Freight From Air to Ocean Slows 3PL Revenue Growth

| Apr 21, 2014 12:04PM EDT
Norbert Dentressangle rose to 24th from 29th after acquiring Fiege’s logistics operations in Italy, Spain and Portugal.Norbert Dentressangle rose to 24th from 29th after acquiring Fiege’s logistics operations in Italy, Spain and Portugal.

The world’s largest third-party logistics providers showed minuscule growth in 2013 for the second consecutive year, as sluggish trade growth affected forwarding volume and other 3PL segments saw only modest increases.

Revenue from the Top 40 global logistics companies was estimated at just under $225.2 billion, virtually flat with the $225 billion of 2012, in an annual report developed for the JOC by SJ Consulting Group.

When will revenue growth resume? Much of the answer depends on the pace of global trade, said Mark D’Amico, the SJ Consulting analyst who compiled the list.

“Forwarding revenue is dependent on trade growth,” D’Amico said. When trade volume is stagnant, so are 3PLs’ revenues. The World Trade Organization estimates global trade increased 2.5 percent in 2013.

If trade growth meets the WTO’s prediction of 4.5 percent this year, forwarding revenue should benefit, D’Amico said. But there’s a caveat: Cost pressures, increasingly sophisticated planning and more reliable transport services are shifting air shipments to less expensive ocean freight. That cuts into forwarders’ revenue.

The Top 40 logistics providers’ forwarding revenue declined about 2 percent last year as a decline in air freight forwarding revenue more than offset a 2 percent increase in ocean forwarding revenue, D’Amico said. UPS Supply Chain Solutions, 12th on the Top 40 list, reported an 8.1 percent drop in revenue as international air forwarding volume and rates fell.

Currency fluctuations affected global 3PL revenue, as the Japanese yen weakened while the euro regained some of its former strength. “But even on a currency-neutral basis, total 3PL revenue showed only 0.2 percent growth,” D’Amico said.

Contract logistics revenue rose about 1 percent, and other categories, including freight transportation, land-based transport, U.S. intermodal and warehousing, did not change enough to affect the overall revenue total. The Top 40 global logistics providers generate an estimated 60 to 70 percent of the total 3PL market.

Several companies with strong positions in surface transportation, such as C.H. Robinson, J.B. Hunt and Hub Group, enjoyed healthy revenue growth. C.H. Robinson also benefited from the first full year of results from its November 2012 acquisition of Phoenix International, an international non-vessel-operating common carrier.

Merger-and-acquisition activity among large 3PLs was limited in 2013. Dachser posted 14 percent revenue growth as the German 3PL jumped three places in the rankings, to No. 8, aided by the 2013 acquisition of Spanish logistics providers Azkar and Transunion, with combined revenue of 470 million euros.

France’s Norbert Dentressangle, rose to 24th from 29th after acquiring Fiege’s logistics operations in Italy, Spain and Portugal. Fiege slipped to 34th from 32nd on the Top 40 list.

Contact Joseph Bonney at jbonney@joc.com and follow him on Twitter: @josephbonney.