Q1 TIA report shows solid annual gains despite tough winter conditions

Third-party logistics (3PL) services providers weathered the harsh impact of the winter weather in the first quarter in solid fashion, according to the 1st Quarter 2014: TIA 3PL Market report released by the Transportation Intermediaries Association this week.

This is the 20th edition of this report, which is based on monthly data from TIA member companies who submit real operating data and respond to questions on business conditions impacting the 3PL sector. Types of questions that the member companies’ answer include: number of shipments by mode, total billing, and gross margins. Other data collected are customer-based forecasts to offer up expectations of near-term business volume.

Total invoice revenue in the first quarter for all TIA member study participants—at roughly $2.56 billion—was up 10.2 percent compared to the first quarter of 2013, and total shipments—at 1,381,058 were up 2.7 percent annually. First quarter invoice amount per shipment—at $1,856—rose 1.6 percent annually, and profit margin—at 13.4 percent—was off by 20 basis points.

TIA reported that 70 percent of 3PL revenue came from truckload, which was followed by intermodal at 18 percent, and less-than-truckload at ten percent. Miscellaneous activity within warehousing, air and other services represented 2 percent of 2014 3PL revenue.

LTL shipments were up 23.7 percent compared to the first quarter of 2014, with revenue up 20.4 percent. Intermodal shipments saw a 4.3 percent increase, and revenue was up 12 percent. Truckload shipments were down 0.2 percent and revenue headed up more than ten percent.

Gross profit margin for the fourth quarter dipped 20 basis points to 13.4 percent.

TIA President and CEO Robert Voltmann said in an interview that the first quarter overall saw continued growth in freight volumes, coupled with some weather-related shifts with intermodal and LTL being a little less affected than truckload was in the first quarter.

“Because capacity is tightening, we still see top line revenue rising and continue to see compression on company margins,” he said. “The margin effect is a general trend, and it is because right now our members are paying more for trucks and spot shortages are not across the board. When these shortages are across the board, we will see prices go up even higher and see margins start to rise.”

The nearly 25 percent annual increase in LTL shipments for the first quarter marks the highest increase for that mode, according to TIA, and it also was the first time in four quarters that truckload volume saw an annual gain, just barely at 0.2 percent.

The strong intermodal output in the first quarter continues to highlight the fact that the mode is gaining in traction among 3PLs.

Voltmann said that over the last four quarters, TIA’s reporting members shifted 5 percent of their truckload freight to intermodal.

“The reason for that is a combination of capacity, shipper desires, and that the railroads were less affected by the weather in the first quarter,” he explained. “Shippers are expressing more interest anything that could go intermodal and moving it that way. We are working with our members to better understand where intermodal makes sense for them and what the tradeoffs are.”

Even with though the first quarter saw slight declines in total shipments and revenue and a nearly 2 percent gain in invoice amount per shipment, Voltmann said it is reasonable to assume that if this past winter was not so prolonged there could have been annual improvements across the board.

The main driver was the gain in average invoice amount per shipment, he said, was tight capacity which is giving carriers pricing power, which some industry analysts think could head up 4-to-6 percent this year. Also contributing to the expected increase are the new Hours-of-Service regulations, new engine requirements and related costs, the pending arrival of electronic logging devices in the coming years, and what Voltmann described as a “regulatory avalanche” continuing to make its mark.