3PL CCOs see 2010 recovery, pick-up in M&A activity

After a rough 2009, demand for third-party logistics provider (3PL) services should resume in 2010, predicted the chief commercial officers (CCOs) of four of the country's biggest 3PLs—Ryder, GENCO, CEVA, and Exel—at the CSCMP Annual Global Conference. That demand will be accompanied by an increase in merger & acquisition (M&A) activity with niche players being the prime targets, they said.

While the four CCOs—who are essentially their firms' top business development executives—expect that the current challenging economic environment and cutthroat competition will continue, they also foresee a more favorable climate for their businesses. "We're betting on growth next year," said Stephen Dean, CCO of Ryder System Inc.

The four executives said they would pursue acquisitions of smaller niche companies as well as strategic alliances and partnerships. They all agreed that many smaller firms will either be bought out or fail, though mid-size companies with more financial muscle and with a solid position in a specialized service will likely survive. With the top 3PLs controlling only 15 percent of the U.S. logistics market, the field remains fragmented and ripe for consolidation, they said.

Although their future strategy focuses on expanding through acquisitions, the executives said supporting their customers' internal expansion would be a key objective through the rest of 2009 and into 2010. But they cautioned against assuming that success will come from internal expansion alone. "I don't think bigger is better. I think better is better," said Christopher J. Monica, executive vice president, sales and marketing for CEVA Logistics.