Armstrong: Economy ‘limping along’ until next major crisis

2012 3PL report and predictions show modest growth, little help from Washington.

Latest News

State of Logistics 2016: Pursue mutual benefit
Q&A: John C. Langley Shares Views on 3PL Marketplace
Slow down! Feds want to put limiters on newly manufactured heavy trucks
B2B Sellers Prefer a Unified Approach for Ecommerce
Report forecasts growth in automated truck loading systems
More News

Latest Resource

B2B Sellers Prefer a Unified Approach for Ecommerce
A new study from Forrester Consulting, commissioned by NetSuite, found that many midmarket, B2B sellers say their ecommerce solutions have contributed to their growth in sales, new customer acquisitions and improved customer relationships.
All Resources
By ·

U.S. third-party logistics (3PL) market revenues increased modestly in 2012, mirroring U.S. gross domestic product (GDP). According to Armstrong and Associates2012 3PL Market Analysis and 2013 Predictions Report, U.S. 3PL market gross revenues increased by 6% to $141.8 billion.

Value-added warehousing and distribution(VAWD), which traditionally enjoys smaller margins, posted a 2.9% net income, down 3.3% over 2011 figures. In a recent interview, Dick Armstrong, chairman of Armstrong and Associates, said the U.S economy just isn’t hot enough. “There is a little bit of life with regard to new warehousing, but growth rates major markets like the inland empire, New Jersey, Dallas, Chicago, etc., are still very modest with some vacancy.”

Armstrong said folks in real estate are quick to point to what’s happening there as an indicator of coming improvement, but Armstrong disagrees. “When you’re limping along like we are, contracts get renewed and there is organic growth, but the pressure on the demand side is not great. This means customers generally have a stronger hand when negotiating.”

The plus side in terms of VAWD, said Armstrong, is the e-commerce boom. “As business to consumer activity continues to grow, we’ll see business to business e-comm grow as well,” he said. “That’s helpful, but we need some of the old-fashioned things to pick up too.”

More insights from the report:

The 3PL market compound annual growth rate (CAGR) from 1996 to 2012 fell 0.3% to 10%. With U.S. governmental “sequestration” spending cuts kicking in, it is unlikely that the U.S. economy and 3PL market results will break the trend in 2013. A temporary budget surplus has taken pressure off of politicians to find solutions for huge, long-term U.S. deficit challenges. “As John Maynard Keynes turns in his grave,” said Armstrong, “the U.S. economy will grow slowly until the next major crisis.”

Domestic transportation management (DTM) led financial results for 3PL segments again in 2012. Gross revenues were up 9.2%. At the same time, the cost of purchasing transportation, increased competition, and slackened demand are pressuring DTM gross margins and net revenues. As a result, net revenues increased by only 5.4%. Overall gross margins were 14.6%. In 2011 they were 15.2%. 3PL earnings before interest and tax (EBITs) and net income margins remained strong. They were 33.2% and 20.3% of net revenue respectively.

The largest negative in 3PL segment results was international transportation management (ITM). The results in ITM reflect the global economic malaise. Gross revenues grew 0.4% and net revenues were up 1%. Profit margins held as ITM 3PLs controlled costs. EBITs were 12% of net revenues. Net incomes were 7% of net revenues. For Expeditors International and Kuehne + Nagel (including its non-vessel operating common carrier Blue Anchor), EBITs exceed 30% of net revenue. Net incomes are also significantly higher. First quarter 2013 results for Expeditors were nearly identical to first quarter 2012—a good indication of what 2013 results could look like.

The complete report and other A&A market research reports can be found at: http://www.3plogistics.com/shopsite/index.html

null
Source: Armstrong and Associates

null
Source: Armstrong and Associates


About the Author

Josh Bond, Contributing Editor
Josh Bond is Senior Editor for Modern, and was formerly Modern’s lift truck columnist and associate editor. He has a degree in Journalism from Keene State College and has studied business management at Franklin Pierce University.

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Article Topics

All Topics
Latest Whitepaper
B2B Sellers Prefer a Unified Approach for Ecommerce
A new study from Forrester Consulting, commissioned by NetSuite, found that many midmarket, B2B sellers say their ecommerce solutions have contributed to their growth in sales, new customer acquisitions and improved customer relationships.
Download Today!
From the August 2016 Issue
A growing number of low-cost lift trucks offer new avenues for pairing equipment and applications, but less cautious buyers might find that small up-front costs come at a steep price. Selecting the proper lift truck, lift truck tips 2016, Choosing the right Lift Truck
Megatrends in ocean freight
Ocean Cargo Roundtable: What’s in store for 2017?
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Getting the most out of your 3PL relationship
Join Evan Armstrong, president of Armstrong & Associates, as he explains how creating a balanced portfolio of "Top 50" global and domestic partners can maximize efficiency and mitigate risk.
Register Today!
EDITORS' PICKS
2016 Quest for Quality: Winners Take the Spotlight
Which carriers, third-party logistics providers and U.S. ports have crossed the service-excellence...
Regional ports concentrate on growth and connectivity
With the Panama Canal expansion complete, ocean cargo gateways in the Caribbean are investing to...

Digital Reality Check
Just how close are we to the ideal digital supply network? Not as close as we might like to think....
Top 25 ports: West Coast continues to dominate
The Panama Canal expansion is set for late June and may soon be attracting more inbound vessel calls...