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Mergers, acquisitions and consolidation are driving the 3PL industry

For the second survey in a row, leading North American 3PLs identified the consolidation wave as the most important industry trend.
By Robert. C. Lieb
Robert C. Lieb, Ph.D. is a professor of Supply Chain Management at Northeastern University
March 27, 2017

The Current Status and Future Prospects of the Third Party Logistics Industry in North America: The 2016 3PL CEO Survey

The March issue of Supply Chain Management Review featured The 2016 3PL CEO Survey: Threats, Disruptions, and Opportunities, the annual survey conducted by Robert C. Lieb of the CEOs of fourteen of the largest third-party logistics (3PL) companies serving the North American marketplace. Launched in 1994, this marked the 23rd iteration of Lieb’s survey. The SCMR article focused on the threats, disruptions and opportunities confronting 3PL CEO’s as they grapple with e-commerce, new technologies such as 3D printing, West Coast port issues and the political uncertainty emanating from Washington. Yet, Lieb’s study also included research into other areas. Over the next several weeks, we’ll be publishing the rest of the survey here on SCMR.com. Bob Trebilcock, editorial director.

Mergers and acquisitions (M/A)
Last week, we discussed the financial outlook of the North American 3PL industry. This week, we’ll look at mergers and acquisitions.

In our 2015 North American survey we identified the reasons for the massive wave of 3PL consolidations that occurred during 2014-2015. In our 2016 survey we focused not only on the short-term impact of those consolidations on the industry, but also on how continued consolidation might impact the regional industry in the longer-term.

In terms of short-term impacts the CEOs noted many companies that made acquisitions had already become much more diverse in their service offerings. They also reported that more intense price competition had emerged in many markets. Some respondents expressed concerns that Amazon might choose to participate in the consolidation movement by acquiring 3PLs and by doing so would become a formidable competitor in the 3PL space. One downside of the consolidation movement was noted—many companies that acquired other 3PLs are predictably experiencing significant post-acquisition systems integration problems. 

In terms of potential longer-term impact of further consolidation of the 3PL industry the CEOs suggested that:

  • Fewer, stronger players would emerge

  • Many smaller 3PLs would either be acquired or displaced

  • Niche players might enter the marketplace to handle smaller specialized customers and customers that would no longer be of interest to larger consolidated 3PLs

  • More significant entry barriers would emerge at the top of the market due to the stronger technology platforms of some of the larger 3PLs

  • Further industry consolidation would accelerate global expansion and acquisition of final-mile capabilities by 3PLs

  • 3PLs growing through acquisitions might have a difficult time optimizing customer supply chains when their own internal processes are being reformed and adapted

  • Price competition would likely intensity and large technology investments would be made as companies attempt to use it as a differentiation factor.

Five CEOs noted their companies made acquisitions during the past year, collectively acquiring three 3PLs, two transportation companies, two freight forwarders, and one warehousing company. Two companies reported they considered themselves potential acquisition targets.

Future plans
In terms of future plans, on average the fourteen companies projected that 10% of their revenue growth in the next three years would come from acquisitions, but individual company responses ranged from 0-50% with six companies indicating they expect none of their growth over that period to be acquisition-related.

When asked to identify what had been the most significant development in the regional 3PL industry during the past year, CEO responses covered a broad range of developments. For the second year in a row large-scale mergers/acquisitions and their impact on the industry were mentioned most frequently (seven times). That was followed by the continued expansion of E-commerce with six mentions. Amazon’s growth and emergence as a logistics service provider was cited three times.

The CEOs were then asked what major changes they expect to take place in the North American 3PL industry during 2017. The potential changes most frequently mentioned were continued consolidation of the 3PL industry (five mentions for the second year in a row), and the continued growth of E-commerce (mentioned four times). Among the other likely changes mentioned once were: increasing demand for local distribution centers to support E-commerce growth, the emergence of more robust solutions/services to support E-commerce, increased focus on visibility tools, and the continued technology advancement in the industry.

Robert C. Lieb, Ph.D. is a professor of Supply Chain Management at the D’Amore-McKim School of Business, Northeastern University. He can be reached at .(JavaScript must be enabled to view this email address).

Author’s note: 3PLs participating in the survey included Agility Logistics, APL Logistics, Cardinal Logistics, Coyote Logistics, DHL Supply Chain, DSC Logistics, MIQ Logistics, Nippon Express, Transplace, UPS Supply Chain Solutions, Werner Logistics, XPO, Yusen Logistics, (Confidential). *


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