The global 3PL market remains fundamentally strong, even as revenue growth has slowed for most third-party logistics providers amid economic uncertainty. Driving the market are shippers who continue to turn to outsourced logistics services as they expand in developing markets.
The combined growth rate for 3PLs in the list of Top 40 Global Logistics Providers was 0.1 percent in 2012, the second-lowest rate in the survey’s history.
Revenue at U.S.-based 3PLs grew at a combined 4.3 percent, while European 3PLs’ revenue contracted 2.7 percent — not because of revenue shortfalls but because of a 7.6 percent decline in the value of the euro against the U.S. dollar.
“As a group, European 3PLs’ revenue grew as fast as the U.S. 3PLs,” said Satish Jindel, president of SJ Consulting Group, which developed the ranking for The Journal of Commerce.
The top 40 3PLs control 60 to 70 percent of the world market, which generated about $582 billion in 2011.
Damco, the logistics arm of A.P. Moller-Maersk Group, was among the fastest-growing 3PLs in 2012, with year-over-year net revenue increasing 19 percent to $3.3 billion. Gross profit was up 7 percent. Another strong performer was truckload and intermodal hauler J.B. Hunt Transport Services, whose revenue rose 12 percent year-over-year to $5.1 billion and operating income jumped 19 percent.
In a bright note for the industry, 65 percent of shippers are increasing their use of 3PL services, according to the 2013 Third Party Logistics Study, a survey of 2,342 supply chain executives sponsored by Capgemini Consulting and Panalpina. More than half of shippers say their use of 3PL services has led to incremental benefits, while 86 percent describe their relationships with 3PLs as successful.
There were no mergers or acquisitions in 2012 of significant scale to change the Top 40 3PLs rankings. Instead, companies are making smaller acquisitions in underserved and niche markets, to enter new markets or add capabilities, in forwarding, transportation or other services, said Shanton Wilcox, principal of supply chain management for Capgemini Consulting.
For example, Frank Appel, CEO of Deutsche Post DHL, the world’s largest 3PL, said last July that DHL would look to smaller bolt-on acquisitions rather than major takeovers to speed growth in the years ahead. “We have no need to do more large acquisitions anywhere in the world, including Asia,” he said.
In September, C.H. Robinson, the biggest U.S.-based 3PL, acquired Phoenix International, a Chicago-based forwarding company, for $635 million.
Niche acquisitions are likely to continue this year. There’s also strong interest in specialized 3PLs among private equity investors. “When a 3PL goes up for sale, 40 to 50 private equity firms want to come in and take a look,” said Gene Tyndall, executive vice president of global supply chain solutions for Tompkins International.
Damco’s 2012 acquisition of PacNet, a large forwarder in China and Australia, is a good example of the reciprocal benefits possible when global and regional 3PLs merge. Damco’s existing customers gain access to regional expertise and know-how, while PacNet’s Australian customers gain integrated solutions for expanding their China-based sourcing to the rest of the world.
“We have seen a growing demand for a broader outreach in recent years, and we feel that by joining Damco we can provide our customers with a strong global presence,” PacNet CEO Paul Milborrow said.
North American 3PLs will continue to diversify their sourcing in 2013, in some cases by near-sourcing, Tyndall said.
As source diversification, industry specialization and global expansion drive demand for 3PL services, providers must be wary of spreading themselves too thin or falling behind a steep learning curve.
Strategic opportunities for 3PLs in 2013 include global trade and big data management. 3PLs will continue to be challenged to provide end-to-end visibility as shippers expand into new markets and industries. They’ll need the requisite technology and know-how to convert big data into actionable information for business value, Tyndall said.
Contact David Biederman at firstname.lastname@example.org.