U.S. 3PLs showed below-trend growth in 2012

U.S-based third party logistics (3PL) providers posted 2012 gross revenues—revenues before the cost of purchased transportation—of $141.8 billion, a 6-percent increase over 2011 results, according to an annual report issued Tuesday by Armstrong & Associates Inc.

That figure is almost identical to the 5.9-percent increase in 2011 over 2010 totals but significantly below the industry's long-term growth rate, according to the Stoughton, Wis.-based consulting company's data. From 1996 through 2012, the 3PL market has grown at a 10-percent annual compounded rate, Armstrong said.

The firm believes that 2013's results will be roughly in line with last year's. The company says that continued global economic uncertainty and the across-the-board government budget cuts called for under "sequestration" will dampen U.S. economic activity and, by extension, 3PL revenues.

RESULTS BREAKDOWN
Armstrong said the 2012 results mirrored a subpar U.S. economic recovery, pronounced weakness in Europe, and modest activity in Asia. Perhaps unsurprisingly, results for "international transport management" came in the weakest of the four main categories tracked by Armstrong. Profit margins for this category fell 4.1 percent year-over-year, while gross revenue and net revenue, which includes transportation costs, rose by very small amounts.

Another category, "value-added warehousing and distribution," reported a 3.3-percent year-over-year drop in margins, although gross and net revenues were stronger than in the international transport management category, according to the data. Richard Armstrong, the firm's chairman, attributed the slack numbers to the combination of anemic U.S. gross domestic product growth and rising transportation costs hitting 3PLs that offer warehousing and distribution services.

"Domestic transportation management" services showed a 9.2-percent increase in gross revenues over 2011, according to the report. However, net revenues were up only 5.4 percent as slower demand, increased competition, and increased transportation costs pressured the category. "Dedicated contract carriage," the smallest revenue generator of the four main categories, posted year-over-year gains in gross and net revenues of 4.5 percent and 4.7 percent.

Domestic transport management and dedicated carriage, which combined accounted for $47.4 billion of U.S. 3PL gross revenues, showed double-digit year-over-year gains in profit margins, according to the Armstrong data.

The total 2012 gross revenue figure includes about $3 billion spent on contract logistics software, the firm said.