Exclusive Interview: 3PL Expert Shares Views on State of the Industry

Cathy Morrow Roberson, Founder & Head Analyst for Logistics Trends & Insights LLC – a boutique market research firm that specializes in global supply chains – recently shared her observations on the current state of the global and domestic Third-Party Logistics (3PL) industry in this exclusive interview with Logistics Management – SCMR's sister publication.

Logistics Management: Were any particular 3PLS hurt by the trade tensions between the U.S. and China in 2019?

Cathy Morrow Roberson: I would be surprised to hear of any major 3PL not impacted by trade tensions between the U.S. and China in 2019. Freight forwarding and intermodal volumes, on average, declined. Those 3PLS that did not have a balanced portfolio of services probably were more negatively impacted.

LM: While it's probably too early to tell, what impact will COVID-19 have on global and domestic 3PLs?

Morrow Roberson: So far it looks like much of the demand for goods is coming from larger shippers as many small-to-medium-sized businesses struggle to reopen. As manufacturing slowly reopens, there will be some pick up in 3PL activity such as warehousing and distribution. Growth in e-commerce logistics will also continue as consumers, accustomed to ordering while confined to homes, will continue to order items online. However, the COVID-19/recession impact will hit 3PLs' profits for at least the first half of the year, if not longer.

LM: Have you seen any major shifts in modal decisions by global 3PLs? More ocean, less air, for example?

Morrow Roberson: Tight air cargo capacity has resulted in some modal changes. For example, rail between Asia and Europe. DHL has added additional rail containers to meet demand for this solution. Some providers are also utilizing trucking between Asia and Europe. Multimodal options such as sea/air are also being used more as well as ocean for goods that usually move by air.

LM: For domestic players, is there a trend for more cross-border and on-shoring concentration?

Morrow Roberson: Cross border activities continue but I think there may be more considerations for on-shoring as we move past COVID-19 particularly, as it relates to the pharma/healthcare supply chain.

LM: To what extent has digitization made an impact?

Morrow Roberson: It's helped to improve visibility within supply chains but at the same time it's also highlighted gaps such as the need for more visibility beyond the tier 1 or tier 2 supplier. Digitization has also helped to obtain and book transportation for goods faster and also to collaborate with supply chain partners in real-time.

LM: Should we expect to see more AI, Robotics, and Block Chain?

Morrow Roberson: I believe we will but I also feel that investments will be slowed until the pandemic eases. Supply chains will likely alter due to changes in demand brought on by the pandemic. In addition, cash flow may be an issue for some 3PLs so any tech investment will be carefully considered.

LM: How about the M&A landscape? Any big deals on the horizon?

Morrow Roberson: M&A will probably not pick up until later this year or at least when we emerge from the pandemic crisis. Right now, there is way too much uncertainty to conduct an acquisition. However, when the time is right, expect a healthy M&A environment. The larger, more financially stable 3PLs will have their pick of companies to choose from.

LM: Which particular 3PLs are heavily reliant on Cold Chain? Will this continue to be a vibrant sector?

Morrow Roberson: Cold chain will continue to be a vibrant sector. In our Global Freight Forwarding report, we highlighted this sector as a strong one for acquisitions in which Kuehne + Nagel and Panalpina (acquired by DSV) are playing leading roles. Air cargo demand for fresh produce, meats, vegetables and flowers has been on the rise in recent years due to a growing middle class in China as well as growing demand in other Asian countries, the Middle East and elsewhere. The ability for air cargo to move perishable goods from one place to another quickly is a key driver of this cargo growth and in some cases, it is replacing profitable electronics volumes that peaked by 2010 for air cargo providers. In addition, those 3PLs with a strong pharma/healthcare emphasis such as UPS and DHL also will see cold chain services grow.

LM: When will the barriers-to-entry finally come down to permit new players to penetrate the “Top 50” marketplace?

Morrow Roberson: As technology investments are made and new start-ups emerge, you'll see the barriers-to-entry fall to allow new players to enter the top 50. Also, it is likely that there will be a fall-out from the pandemic and recession.

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