Global logistics and supply chain: A lackluster year for 3PLs, says survey

STOUGHTON, WI—A leading industry analyst said that 2009 will be the first recorded negative year in 3PL gross revenue growth since he began tracking it in 1996.

Dick Armstrong, chairman and CEO of Armstrong & Associates, Inc. -- a supply chain market research and consulting firm specializing in 3PL market research – said his most recent survey paints a complex picture.

“After 11 modest months in 2008, third-party logistics revenues dove in December and have remained depressed in 2009,” he said in a statement. “While a few third-party logistics providers (3PLs) could drown, most are treading water and some are swimming strongly.”

 Armstrong’s analysis shows gross revenue (turnover) for 3PLs down by 8.8 percent for 2009.  Net revenues (gross margins) were less impacted for many non-asset transportation managers and leading value-added warehousing 3PLs.

 Expeditors, C.H. Robinson, Kuehne + Nagel and other major transportation managers report net revenues decreased 3 percent to 10 percent.  Earnings before interest, tax, depreciation and amortization (EBITDAs) and earnings before interest and tax (EBITs) fell proportionately.  Additionally, net revenues are expected to be down another 5 percent this year for the transportation management group.

In an interview with LM, Armstrong said that quite a few 3PL leaders will nonetheless be investing for the future.

“And this points to one of the key new trends we see in the global marketplace,” he said.

“Third parties that are already entrenched in overseas operations are building upon their base there, while smaller 3PLs are scrambling to get into that end of the business.”

The key differentiator, said Armstrong, is information technology. The companies that continue to sink portions of their profits into IT, are going to prevail over those “who ain’t got em,” he says.

But the recent survey for 3PLs as a group 60 percent shows they are reporting lower gross and net revenues for this year. 

Among value-added warehousing 3PLs, 57 percent are reporting increased net revenues.  Automotive and retail vertical industries were the main drags on 3PL market growth for 2009 with projected revenues down 32 percent and 23 percent respectively.  The food and grocery vertical and 3PL returns management sub-segment are up for the year.  GENCO, Kenco and New Breed expect revenues to increase in 2009.

Read the rest of the article from logisticsmgmt.com here.