Report: Third-party logistics (3PL) market improving
Lorie King Rogers, Associate Editor, Modern Materials Handling -- Supply Chain Management Review, 10/19/2009
The United States third-party logistics (3PL) market revenues for the first half of 2009 were lower than for the same period in 2008, but 3PL results improved in most vertical industries from March to August, according to Armstrong & Associates, Inc., a Wisc-based supply chain and market research firm. Meanwhile, the outlook for 2010 is positive.
A recently released Armstrong & Associates survey of 3PLs reveals that for the first half of 2009 gross revenues decreased -12.2 percent and net revenues declined -5.9 percent. Of the companies reporting, 72 percent said gross revenues decreased and 24 percent said gross revenues had increased over 2008. The average increase for the increased revenue group was 6.6 percent.
All of the 3PLs reporting increased gross revenues have core business in value-added warehousing and distribution. “These companies don’t just store product,” said Dick Armstrong, chairman of Armstrong & Associates. “There’s a whole host of things that value-added warehousers can do to product while they have it, including kitting, repacking, relabeling, and in many cases, returns work.”
“The top 3PLs are getting more sophisticated all the time,” Armstrong added. “And that’s ever-increasing. They keep getting better at managing their supply chain and being an extension of customer operations.”
Consistent with the overall revenue numbers, the value-add segment did better than the transportation management and dedicated contract carriage segments through the first eight months.
Results by vertical industries indicate improvements in most areas. Some warehousers took a big hit this year in proportion with the economy. For example, automotive logistics was off about 18.5 percent through August and retail was off a little more than 11 percent.
Armstrong & Associates’ first survey in March indicated a gross revenue decrease of 37.5 percent. Automotive vertical leaders Penske Logistics and Ryder SCS both experienced large drops in revenue. Ryder SCS reported drops of -29 percent and -28 percent in gross and net revenues respectively for the first half.
The consumer goods, healthcare and industrial verticals showed improvement, although improvements in the last two are small.
Asked how they expected their revenues to do for the 2009 fiscal year, the 3PL responses were primarily negative. The averages were for gross revenues to be down -8.1 percent and net revenues to be down -2.6 percent versus 2008.
Of the 3PLs responding, 64 percent reported positively when asked if business improved in July and August. Those results reflect the slow improvement in the U.S. economy.
“For the remainder of 2009, I anticipate slowly building volumes,” says Armstrong. “We expect for the year, value-added warehousing will be down about 3 percent, but next year it will slowly build back up, and by the end of 2010 we’ll be back in good shape.”
Vertical Industry March August
Automotive -37.5% -18.5%
Consumer Goods -7.3% -3.7%
Healthcare -2.3% -2.0%
Industrial -7.0% -6.3%
Hi-Tech -6.7% -7.2%
Retail -8.1% -11.3%
Food & Beverage -0.1% -1.2%
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