Third-party logistics providers have enjoyed steady growth for years, but the flagging economy will significantly slow their growth rate, according to the results of an annual study of that industry. For that study, Dr. Robert C. Lieb, professor of supply chain management at Northeastern University in Boston and Michael Hickey of the consulting firm Accenture canvassed 66 executives of large U.S. manufacturers as well as 18 top executives of contract logistics firms.

Only 56 percent of the manufacturing executives surveyed said they would increase the use of third-party logistics providers at least moderately in the coming year. In the past two years, some 74 percent of respondents had said that they would increase their usage of 3PLs. (See accompanying table.)

Not surprisingly, CEOs of contract distribution companies projected a lower growth rate for their businesses than they had in the past. This year, 3PL executives predicted 11-percent growth, compared to 17 percent in the 2001 survey.

The survey also found that other factors besides the economy are reducing demand for third-party services. They include pricing pressures, staffing issues, the increasing technology demands of customers, and the perception that the transition to a third-party logistics provider is too time-consuming. About 40 percent of the manufacturing executives said that the transition to a third-party provider took more time than expected.

Even as growth has slowed, the amount of money paid to contract distribution providers remained steady. Respondents to this year's survey spent 24 percent of their annual logistics operating budget on 3PLs, compared to 25 percent in last year's survey. That number is likely to rise once the economy picks up, as respondents said they expected to spend 32 percent of their budgets on third parties three years from now.

To obtain a copy of the complete study results, go to http://web.cba.neu.edu/~rlieb.