What's the most important problem facing the third-party logistics (3PL) industry in North America? Continued downward pressure on pricing, according to chief executives at 16 of the largest contract logistics service providers. The CEOs' responses were outlined in a new report, "The North American Third Party Logistics Industry in 2010: The Provider CEO Perspective," by Northeastern University professor Robert C. Lieb and Emerson College professor Kristin Lieb. The report is part of a long-running multi-part study of the outsourced logistics services market.
Although 10 of the 16 executives said they believed that the economic recovery was already under way, they expected continued resistance by customers to attempts to raise prices. But price hikes could be a matter of survival for some: Only three CEOs described their companies as "very profitable," 10 termed them "marginally profitable," two said they "broke even," and one said the company was marginally "unprofitable." Their average projected revenue growth for 2011 was 10.4 percent.
The second most important problem facing the 3PL industry, in the CEOs' view, is a shortage of professional talent at a time when contract logistics service providers are starting to rebuild their work force. Nearly all—15 of the 16 CEOs—said they had begun rehiring workers. Only 7 percent of the new hires were former employees, and 43 percent were former employees of other 3PLs. Another 20 percent were recent college graduates, and consulting firms furnished an additional 5 percent. The remaining 25 percent were hired from such sources as customers, the military, and other industries.
As for the future of the third-party logistics industry, most of the CEOs still think that it has not fully stabilized and are predicting further consolidation.