The North American third-party logistics industry in 2008: The provider CEO perspective

Abstract

This note has discussed the results of a 2008 survey of the CEOs of twenty of the largest 3PL service providers operating in the North American marketplace. Collectively these companies generated more than $35 billion in North American 3PL revenues during 2007. All but five of those companies met their revenue growth projections in 2007, and nineteen reported that their companies were at least moderately profitable during the year. As a group these companies are also quite bullish about the next three-year period for both their companies and the North American 3PL industry. On average, they projected that the revenue base of their companies would grow by 12.6 during 2008, and that their revenue growth rates would average 13.4 percent per year over the next three years. Their projections for revenue growth in the North American 3PL industry for the one- and three-year periods were estimated at 9.0 percent and 9.8 percent respectively. While slightly less than one-quarter of the CEOs reported their companies were involved in significant merger/acquisition activity during the past year, most respondents believe that the consolidation movement will continue in the North American 3PL industry. Most of the North American 3PL companies involved in the survey have become increasingly involved in green/environmental sustainability issues. Their involvement has been triggered by many factors, but the most important of those to date have been a corporate desire to do the right thing, and competitive pressures. Many of these companies have not only established formal programs in the area, but also developed formal green/environmental sustainability statements, and appointed key individuals to lead related initiatives. Further, these companies have collectively taken numerous steps to pursue green/environmental sustainability goals. The survey also determined that many potential and existing 3PL clients in North America express strong interest in related topics during contract discussions with the 3PLs, but according to the CEOs, green/environmental sustainability issues are major determining factors in getting or keeping existing business about 5 percent of the time. The CEOs continue to rank continuing downward pressure on pricing as the most important North American 3PL market dynamic. Based upon the results of our 2008 surveys in Europe and Asia, price compression in the industry continues to be a major issue throughout the world. This issue appears to be growing in importance as half of the North American 3PL CEOs indicated that procurement professionals are increasingly involved in the 3PL selection process, and that they tend to be much more focused on pricing issues than the value being generated for their companies through the 3PL relationship. The slow growth economy, ongoing pressures for 3PL service providers to internationalize their service offerings, and rising fuel costs were among the other important industry dynamics identified by the respondents. The respondents, in recognition of the continuing globalization of the 3PL industry, once again selected further expansion of international services as the most significant opportunity for 3PL service providers in North America, followed by providing more integrated supply chain services to their clients. Not surprisingly, the CEOs again identified finding and keeping management talent as the major problem faced by their companies in the North American marketplace. Ongoing pricing pressures and the slow growth economy were identified as the second and third most significant problems faced by 3PLs in the market.