Global 3PL is looking upward.
The 22nd annual surveys of third-party logistics provider CEOs, sponsored by Penske Logistics, revealed they are confident about the current state and future revenue growth potential of both their companies and the regional 3PL industries.
The annual survey, which included the CEOs of 30 of the world’s largest 3PLs, companies generated more than $40 billion in revenue in 2014, found that more than 80 percent of the companies surveyed were profitable in 2014. CEOs from North America and Asia-Pacific forecasted three-year revenue growth averages for their companies of 7.86 percent and 11.50 percent, respectively. European CEOs forecasted 5.33 percent growth over the same period.
CEOs were also asked to project regional industry revenue growth rates for the next three years in each of their regions. North American CEOs projected average industry revenue growth rates of 5.92 percent; European CEOs projected average industry revenue growth rates of four percent; and CEOs in the Asia-Pacific region projected average industry revenue growth rates of 5.75 percent.
“Last year, the logistics industry experienced one if its best years in many years and 2015 is on-track to be a good year as well,” said Marc Althen, president of Penske Logistics. “The 3PL industry continues to deliver value, savings, and efficiencies by collaborating closely with customers and adjusting to rapidly changing economic conditions, business challenges such as capacity and talent shortages, as well as consumer online shopping needs that demand new and agile supply chain and fulfillment models.”
Following the onset of the global recession in 2008 there were relatively few large-scale acquisitions in the 3PL industry. That has changed dramatically with ten major acquisitions by 3PLs totaling $18 billion since early 2014. Many of the CEOs involved in this year’s surveys believe this recent wave of mergers and acquisitions will lead to defensive acquisitions by other 3PLs.
Survey respondents cited significant changes in the e-commerce marketplace in the past year, referencing strong growth, an increased focus on next-day delivery and rapid expansion of international e-commerce.
In both North America and Europe, CEOs reported that Amazon had a particularly significant impact on supply chains and the e-commerce industry in their regions, highlighting the company’s focus on same-day delivery and its developing relationships with 3PL companies for last-mile delivery. On average, e-commerce now accounts for an average of 11.85 percent North American 3PLs’ revenue, and CEOs predict it will increase to 20.85 percent in three years. On average e-commerce revenues now account for 5.33 percent of European respondent revenues, and that percentage has been projected to grow to 9 percent in three years. Growth in Asia-Pacific’s e-commerce market was aided by the region’s massive e-commerce provider, Alibaba.
“Amazon’s recent actions are impacting e-commerce in a major way,” said Robert Lieb, professor of supply-chain management at Northeastern University. “The company’s market dominance and huge popularity with customers creates a great opportunity for 3PLs to assist Amazon, and ensure customers get the goods they need – especially during peak e-commerce seasons.”
In Europe and North America, CEOs continue to be concerned by the truck driver shortage and talent management issues spanning the industry. Twenty-six percent of North American CEOs and 60 percent of Asia-Pacific CEOs cited the worsening driver shortage to be a key factor effecting the global 3PL market.
While a few European CEOs reported observing some improvement in the Eurozone, many agree that the European 3PL market has not rebounded significantly in the past year. The majority of Asian-Pacific CEOs cite the declining GDP growth rate in China as an industry dynamic impacting the region’s 3PL industry.
Ride-sharing companies, most notably Uber, are believed to potentially pose a threat to aspects of the 3PL industry in the future. The company could eventually pose a threat to 3PL business, by providing last-mile delivery services, becoming a small LTL carrier and taking business away from small-volume couriers.