Third-Party Logistics Firms see Fast Growth as Trucker Shortage, Improving Economy Drive Companies to Outsource
3PL firms are growing faster than the logistics business as a whole as more companies outsource supply chain management
A shortage of truck drivers is causing more companies to rely on freight brokerages and other 3PL providers PHOTO: ASSOCIATED PRESS
Business keeps getting better for third-party-logistics companies.
Revenues for U.S. 3PLs, which provide services ranging from booking truck drivers to managing warehouses, rose 7.4% to $157.2 billion last year, faster than the 2.8% growth in logistics spending overall, according to the Council of Supply Chain Management Professionals, which released its annual State of Logistics report on Tuesday.
Driving the growth was an improving U.S. economy and a shortage of capacity in a few key areas, notably trucking, said Dick Armstrong, president of Armstrong and Associates, which provided data on 3PLs for the State of Logistics report. Mr. Armstrong said with truck drivers in short supply, shippers are relying more on freight brokers and their close-knit relationship with trucking companies. Among the winners: C.H. Robinson Worldwide Inc., Total Quality Logistics Inc. and Coyote Logistics LLC, Mr. Armstrong said.
Overall, 3PLs are likely to see continued growth in the coming years, buoyed by continued U.S. economic growth and improving conditions in Europe, Mr. Armstrong said. Armstrong and Associates sees U.S. 3PL revenues growing by 5.7% to $166.1 billion next year and to $195.8 billion in 2018. 3PLs are likely to continue to grab a growing share of overall logistics spending, from 8.2% globally and over 14% in some developed countries, Mr. Armstrong said.
Joe Carlier, senior vice president of sales at Penske Logistics, said retailers and manufacturers are turning to freight brokers in part to minimize their capital investments and risk. Many companies cut back during the recession, and are relying on 3PLs to handle new business as the economy improves, he added. Penske, a subsidiary of Penske Truck Leasing Inc., provided funding for the CSCMP report as its sole corporate sponsor.
“More companies are outsourcing logistics than we’ve seen in many years,” Mr. Carlier said. “As business has increased, customers are saying they need to increase their warehousing as they build up their inventories. But rather than build for themselves, they’re looking to third-party providers. Rather than go through the challenge of hiring drivers, they’re outsourcing.”
