U.S. 3PL growth to moderate in 2012 due to international uncertainties, consulting firm says

The U.S. third-party logistics (3PL) market will end 2012 with historically moderate growth over 2011, according to estimates from Armstrong & Associates Inc. Continued economic turmoil in Europe and an economic cooling in Asia have curtailed expansion for the traditionally high-flying industry, the consulting company said.

The U.S. 3PL market will report gross revenues—revenues before the cost of purchased transportation—of $142.2 billion, a 6.3-percent increase over 2011 figures, according to the Armstrong data. The gains are actually an improvement over 2011 results, where revenues rose 5.3 percent from 2010 totals.

The low point for the industry was recession-wracked 2009, when gross revenues came in at $107.1 billion and the industry reported the first year-over-year decline since Armstrong began tracking gross revenue data in 1996.

Since 1997, domestic 3PL revenue growth has averaged 10 percent a year, more than quadruple the average annualized growth rate of U.S. gross domestic product (GDP). Even with 2012's slower pace, the growth rate will likely be triple that of U.S. GDP, which is projected to finish the year with a roughly 2-percent annual growth rate.

3PLs are non-asset-based businesses, meaning they do not own any transportation assets. Instead they buy capacity on conveyances to get their customers' goods moved.

The growth in 3PL demand has been sparked by businesses increasingly relying on outside specialists to handle an important yet noncore function such as logistics. Stoughton, Wis.-based Armstrong is considered the leading research and consulting authority on the 3PL segment.

Fast-growing segments
In the past 16 years, international transport management has been the fastest growing segment of 3PL services as companies use third parties to expand their international presence. From 1995 to 2011, revenue generated from international transportation management grew 15 percent on a compounded annual growth rate (GAGR) basis, Armstrong said.

The next fastest growing segments were value-added warehousing and distribution at an annualized rate of 14.3 percent and domestic transportation management at 11 percent.

The largest 3PL in 2011 was DHL Supply Chain & Global Forwarding, an amalgamation of freight forwarders and 3PLs that over the years have been clustered under the DHL umbrella, Armstrong said. DHL generated more than $32 billion in revenue, outpacing its nearest rival, Swiss behemoth Kuehne & Nagel, by approximately $10 billion.

Additionally DHL controlled more than 95 million square feet of warehousing space in North America last year, far more than its two nearest rivals—Genco ATC and Jacobson Companies—combined.