Business for 3PLs looks promising

Staff -- Logistics Management, 7/17/2006

LONDON— Global expenditure on outsourced third-party logistics (3PL) services across contract logistics, air and sea freight, and road transport is set to increase significantly over the coming five years, according to independent market analyst Datamonitor’s latest research Logistics Global Outlook 2006.

The research reveals that while the EU17 (Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Spain, Sweden, and the United Kingdom) will remain the region with the largest spending on 3PL services, the largest growth in demand for 3PLs is expected to occur in Asia-Pacific (APAC)—expected to account for almost one-fifth of global spend on 3PL services by 2010.

Datamonitor forecasts that global spend on 3PL services will rise from $222 billion in 2005 to $326 billion in 2010. The strong global GDP growth of about 4 percent per annum during the next five years, driven by the emerging markets, will help substantially increase the global spend on logistics, according to Datamonitor. This coupled with the eastward shift in global manufacturing bases will help boost global trade and movement of goods.

The global contract logistics market is still highly fragmented, with the top 12 players accounting for only one-sixth of the total revenues, says the report. However, within the sea freight forwarding industry, the top 10 players account for almost half of the forwarding volumes.

Also, in most cases (e.g. freight forwarding, truck brokerage), size enhances network liquidity (network capacity), making it easier for shippers and carriers to work with larger logistics players. In turn, the smaller logistics players will need to trade up to larger players with broad resources.

Customers are looking for supply chain integration through one-stop integrated logistics service providers and are therefore more likely to use a major 3PL. According to Datamonitor, the industry will continue to see further consolidation as players want to be one-stop shops for their customers.