miracle grow: 3PL market appears primed for yet another banner year

For a sure-fire revenue rocket, nothing beats the third-party logistics (3PL) service sector. After turning in a strong performance last year, the market looks primed for yet another year of double-digit growth in 2007.

How did the market fare in 2006? According to the latest annual survey by the International Warehouse Logistics Association (IWLA), 80 percent of 3PLs saw revenue increase last year. Of that group, just over one-fifth reported revenue increases of 20 percent or more. Another 8 percent had revenue gains of between 15 and 20 percent, while 25 percent showed sales growth of between 10 and 15 percent. And that's only part of the story. The report, 2007 Business Outlook, also noted that it's not uncommon for mid-sized 3PL providers (those in the $100 million to $500 million sales range) to report annual sales gains of 40 to 50 percent.

2007 looks nearly as promising. Although 21 percent predict that their revenues will remain flat or decline, more than three-quarters (78 percent) of the companies surveyed expect sales to grow again this year. Forty-three percent of those who expect growth predict that sales will go ahead by at least 10 percent.

"In the first quarter, we're double digits ahead of last year," says Linda Hothem, chief executive of Pacific-American Services, a 3PL based in Oakland, Calif. "We're very encouraged by how 2007 has started."

To keep up with double-digit growth, just under two-thirds of the survey respondents expect to add staff this year, and another 35 percent plan to increase their use of temp workers. Third parties expect to expand their facilities as well—61 percent of IWLA survey respondents plan to add space in 2007. More than half of those respondents will add between 100,000 and 500,000 square feet of space, with 12 percent expanding by up to one million square feet.

"Things are picking up," says Jere Van Puffelen, president of Prism Team Services. "More people are out kicking the tires, and outsourcing is gaining momentum." Prism's business so far this year is up 10 percent over 2006.