3PL customers report identifies service trends, 3PL market segment sizes and growth rates

Eighty-six percent of Domestic Fortune 500 companies use 3PLs for logistics and supply chain functions according to a new report just issued by Armstrong & Associates. The report “Trends in 3PL/Customer Relationships - 2013” leverages Armstrong & Associates’ proprietary database of 6,398 3PL customer relationships to provide detailed information on the top outsourcers to 3PLs, trends in service demand, and 3PL market size by vertical industry segment from 2005 through 2013E.

According to the report, General Motors, Procter & Gamble, and Wal-Mart each use 50 or more 3PLs. The report also quantifies the Global Fortune 500 3PL market at $250.2 billion, a 67% increase since 2005. Within the Global 500, “Technological” industry 3PL customers spent $66.8 billion with 3PLs in 2012 and are on track to spend $71.1 billion in 2013. The compound annual growth rate for Technological 3PL revenues was 9.3% from 2005 to 2012. “Electronics, Electrical Equipment” companies led all Technological industry sub segments with over $25.7 billion in 2012 3PL spend.

The average customer is utilizing each 3PL for just under three different logistics services with Transportation Management being the most frequent service utilized. Of the total 6,398 3PL/Customer relationships, 1,184 or 18.5% are strategic with the 3PLs performing supply chain management and/or lead logistics provider services. While these strategic relationships were dominated by Automotive and Technological industries in the past, there are increasing numbers of strategic relationships within the Retailing and Industrial industries. In retailing, APL Logistics and Menlo Worldwide Logistics have strategic relationships with Nike globally. Transportation manager Transplace has forged strategic relationships with Industrial companies Cummins and Unisource, and Ryder has a key strategic relationships with Carrier Corp.

Commenting on the report, Evan Armstrong, president of Armstrong & Associates said 3PLs continue to develop business at approximately three times the rate of growth in the U.S. economy. “Even in the current slow-growth global economy, overall U.S. 3PL market growth was 6% in 2012 and is forecasted to be just over 4% in 2013,” he said. “North America is benefiting from a slowly improving U.S. economy with increasing manufacturing levels, the nearshoring of some manufacturing to Mexico, and newly addressable oil and gas operations in Canada and the U.S. At the same time, U.S. consumers bounced back from the great recession of 2009 and started to spend more. All of these factors are driving a slightly improved 3PL market.”

Globally, most of the growth story has been in the Asia Pacific and to a lesser extend in South America, said Armstrong. “The Asian Pacific third-party logistics market has been growing at over 14% annually since 2006. Throughout the 1990s and early 2000s, the growth tended to be international transportation management (freight forwarding and NVOCC) focused. However, in the last five years there has been increased focus on domestic value-added warehousing & distribution to address consumer spending growth and the resultant demand for goods in developing countries including China, Indonesia, India, Singapore, and Thailand.”

Armstrong said the Armstrong and Associates estimate of 3PL penetration of the total potential U.S. 3PL market is 21%, up from 10% in 2002. This compares to current 3PL market penetration rates of 22% in Europe and 16% in the Asia Pacific. “Consistent with the increased U.S. market penetration is our estimate of total U.S. 3PL revenues increasing from $65.3 billion in 2001 to $141.8 billion in 2012.”

“This year’s analysis of 3PL customer relationships is our best to date and builds upon our previous reports. It provides insights into customer outsourcing trends and which services are in demand. Our analysis includes industry 3PL spend and growth estimates for years 2005 through 2013E for the Fortune 1000 Domestic and 500 Global. We have also expanded our vertical industry sub segment analysis and 3PL services segmentations and analysis.”

The complete report is available from Armstrong & Associates online at: http://www.3plogistics.com.