3PL market shows decent gains from 2010 to 2011, says Armstrong & Associates

Data from supply chain consultancy Armstrong & Associates showed that total global third-party logistics (3PL) gross revenue in 2011 at $133.8 billion in 2011 was up 5.2 percent over 2010.

Net revenues-at an estimated $61 billion posted a 5.9 percent annual gain.

Armstrong said that domestic North American transportation and value-added warehousing (VAW) had strong years, while a still difficult economic environment in Europe and a “cooling” Asian economy tempered results in those locales.

Individual market segments showed:
-domestic transportation management gross revenue at $41.3 billion was up 12.2 percent year-over-year, and net revenue at $6.3 billion was also up 12.2 percent year-over-year;
-international transportation management gross revenue at $46.1 billion was up 0.8 percent year-over-year, and net revenue at $17.7 billion was up 2.1 percent year-over-year;
-dedicated contract carriage (DCC) gross revenue at $11.1 billion was up 4.7 percent year-over-year, and net revenue at $10.9 billion was up 4.7 percent year-over-year; and
-value-added warehousing and distribution (VAWD) gross revenue at $34.0 billion was up 8.2 percent year-over-year, and net revenue at $26.6 billion was up 8.4 percent year-over-year.

Armstrong & Associates Chairman Dick Armstrong said in an interview that this growth pattern in the global 3PL sector should remain intact over the next few years even with various global economies, including Asia, Europe, and Brazil, continue to have difficulties. He added, though, that the future for the U.S. looks promising.

“We may be in for a significant improvement in the US because of the consequences of fracking the Bakken & Marcellus shale,” he said. “We already are exporting natural gas.  Our imports of foreign oil have been reduced from 55 percent to 42 percent. Falling gas prices could have a dramatic effect. The trick is to keep [political posturing] from undoing the modest economic gains we have had already.”

The firm also reported that the compound annual growth rate (CAGR) for the U.S. 3PL market since 1996 came in at 10.3 percent. Armstrong explained that the CAGR demonstrates that outsourcing of logistics & supply chain management will continue as customers seek the most effective ways to control inventory and its costs effectively. 

And for 2011, 3PL growth more than three times the growth in U.S. gross domestic product (GDP). Armstrong explained that the CIA GDP growth estimate in real terms was 1.5 percent for 2011, even though other estimates can be higher.  The best comparison, he said, would be to net revenue growth at 5.9 percent, which is 3.5 times higher than U.S. GDP.

“Customers more often view supply chain control as a requisite to corporate financial success,” he said. “Having a 3PL as a partner can make good strategic sense.”

When gauging how much of an improvement 2012 could be over 2011, Armstrong laid out the following estimates on a net revenue basis: total net revenue up
5.8 percent; domestic transportation management up 10 percent, international transportation management up 3 percent, dedicated contract carriage up 4 percent, and value-added warehousing and distribution up 6 percent.