3PL CEOs are optimistic about growth prospects, according to annual survey
October 28, 2013
A focus on growth, regardless of its pace, was a key underlying theme in the results of the 20th Annual Survey of Third-Party Logistics (3PL) CEOs, which was released last week in conjunction with the Council of Supply Chain Management Professionals (CSCMP) Annual Conference in Denver.
This survey was conducted by Dr. Robert Lieb, professor of Supply Chain Management at Northeastern University, and sponsored by Penske Logistics. It is based on feedback from 34 3PL CEOs throughout North America, Europe, and Asia-Pacific, with cumulative revenues in 2012 at roughly $50 billion.
The survey found that the 3PL CEOs in North America and Europe forecasted three-year revenue growth projections of 14.6 percent and 10.3 percent, respectively, with Asia-Pacific CEOs calling for growth of 11.6 percent, down from 12.5 percent a year ago.
What’s more, the survey found that 52 percent of all CEOs surveyed met or exceeded 2012 revenue projections, which were off from 63 percent a year ago, but even with that decline it found that more than two-thirds of these companies had a profitable 2012.
“Growth expectations for all three regions were somewhat surprising,” said Lieb in an interview. “The forecast for the industry in these regions is always substantially lower than individual company forecasts. The companies profiled in this survey are the ‘big guys,’ and it might be that they can capture very large contracts in these markets, which is far different for smaller 3PL players.”
Lieb said that at the moment North American-based 3PLs are best positioned for future growth, whereas the slow recovery in Europe, especially southern Europe, and an increase in manufacturers shifting operations out of the Asia-Pacific region are impacting those respective areas to a degree.
Penske Logistics Vice President for Sales Joe Carlier said pressures on CEOs in Asia-Pacific and Europe remain intact, with shippers demanding more from their 3PLs and are looking for alternatives and innovative approaches to reduce costs and inventory cycle time, and improved customer service, among other things.
“The difference I am seeing over there is that discussion points relevant to strategy from three years ago are gaining momentum now compared to back then, when more shippers were looking for more help on the technology side,” he said.
Lieb added that more shippers today are less reliant on things like expedited and higher-end services and are looking for lower-cost alternatives.
The topic of global near-shoring received a fair amount of attention in the survey, with 78 percent of CEOs observing that increasing labor costs in China are leading to some companies to relocate manufacturing and export consolidation functions to Thailand, Vietnam, Indonesia, and Sri Lanka.
And in North America the survey cited how near-shoring continues to occur, with shippers moving from Asia-Pacific to Mexico, most notably in the automotive, technology, and pharmaceutical sectors for sourcing- and manufacturing-related activity. On top of that the survey found that 87 percent of CEOs in North America that are active in Mexico say that their work there represents 9.3 percent of total U.S. revenues, and that figure is expected to rise to 12.5 percent by 2016.
“Over the last few years, it has become clear that this is more than just talk,” said Lieb. “Movements are taking place and being driven by a number of things like labor costs and benefit levels, resource costs rising, and transportation costs going up, too. There have also been supply chain disruptions due to natural disasters, which are resulting in more companies making the move their product closer to the point of consumption.”
Other key trends cited in the survey included:
-Talent Management: Finding and keeping talent, specifically managers, has ranked as one of the most significant market challenges in each regional response over the past twenty years. To ensure a bright future, third-party logistics providers must be competitive across multiple dimensions when it comes to hiring, and they must try to understand what the new generation of employees are looking for in an employer;
-Forecasting Revenue: With slow economic growth continuing over the next year, North American third-party logistics CEOs expect there to be a greater emphasis on developing new financial and economic indicators to provide more accurate revenue projections;
-Sustainability: The third-party logistics industry continues to get “greener,” with 56 percent of companies launching new sustainability initiatives during 2012. However, these initiatives have not yet been linked to attracting new customers or keeping current customers;
-Retail/ E-commerce: Shifting dynamics in the global retail economy towards omnichannel retailing has led to an expansion of reverse logistics activities in North America and increased popularity of e-commerce and e-fulfillment in Asia-Pacific; and
-Healthcare: Twenty-eight of the 34 companies provide third-party logistics services to customers in the healthcare industry, and many cited increasing regulations of the industry as being a major challenge in their efforts to grow business in that vertical.
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