Key takeaways from A&A’s Third Annual 3PL Value Creation Summit
Discussions covered the global landscape, emerging
technologies, best practices and executive sentiment.
By Modern Materials Handling Staff
November 06, 2015
Last week, Armstrong & Associates (A&A’s) Third Annual 3PL Value
Creation Summit drew top executives from North American, Asian,
European, and Latin American third-party logistics providers (3PLs),
shippers, and leaders in the global investment community to Chicago.
Creation Summit drew top executives from North American, Asian,
European, and Latin American third-party logistics providers (3PLs),
shippers, and leaders in the global investment community to Chicago.
The conversation was fluid in a panel-driven format, and below is a list
of some key takeaways:
● A&A reports omni-channel retail is growing. Stores are becoming
warehouses. Inventory optimization is key.
● According to A&A, Uberization of transportation (UOT) applications may
help short-haul trucking where empty mile percentages are higher versus
long-haul lanes; however, the additional revenue will need to cover additional
pickup, delivery, and driver costs, plus add to profits. Also, Department of
Transportation (DOT) requirements need to be covered. Local courier work
was seen to have more potential for UOT applications.
● A&A reports a general feeling that supply chain management is more
important to corporations than ever before to mitigate risks and optimize
supply chain networks.
● Allowing Federal Motor Carrier Safety Administration (FMCSA) licensed
Mexican motor carriers to provide transportation services within the U.S.,
and not just part of international moves, could dramatically increase U.S.
domestic carrier capacity.
● Most European and U.S. based 3PLs have built relationships with
universities to develop entry-level talent.
● The Prince Rupert, Canada port, with its efficient rail links to the U.S.,
was citedas a good alternative to Long Beach and a way to improve transit
times for Asian imports.
● The rapid pace of 3PL merger and acquisition (M&A) activity is showing
no signs of slowing; however, 2016 is expected to be dominated by mid-
and small-sized deals versus the $100M+ deals A&A has seen in 2015.
In theU.S., non-asset based 3PLsare still valued higher than asset-based
3PLs, but asset-based providers have seen an increase in the past three
years.
● When evaluating companies, A&A reports private equity likes to see
solid management, revenue and earnings growth, and a solid business model.
Companies where external capital can be used for expansion, or to fill
operational gaps such as IT, are favored. Those with “lofty” future revenue
projections, or cost cutting to drive short-term profits, are frowned upon.
● According to one source, strategic 3PL buyers are looking for companies
where they can increase revenue by three to four times in three to four
years. Cultural fit is important as well as the ability to expand a 3PLs
existing operating network geographically, or add capabilities to its solutions set.
● There is interest in Asian 3PLs buying into the U.S. and 3PLs based in
slower growth countries expanding into higher growth Asian and North
American markets. 2015 has
been dominated by size and scale M&A activity versus other strategic
plays such as service portfolio, or vertical industry diversification.
● Almost all 3PL executives see future growth in Asia and North America
continuing to outpace Europe. Cross border e-commerce is a very hot
market in China as increased wealth is driving the demand for products
sourced in other countries.
● With Chinese labor rates increasing approximately 20% per year in
some areas, nearshoring of manufacturing to Mexico from Asia is a
significant trend in automotive, high-tech, and industrial manufacturing.
Low oil prices are making the U.S. attractive to manufacturers with oil and
gas manufacturing inputs.
● Reasons not to nearshore? Product from suppliers which is also heavily
sold in local markets. The Chinese market is so large for many products, such
as consumer electronics, that it makes sense to manufacture close to its
regions of large demand
and export to other countries.
● Technological innovation was discussed in detail. “Data is the new Oil”
was one comment. People are interconnected by systems more now than
ever before. Automated computer processes and machine learning will
replace much clerical/data entry work.
● Autonomous (self-driving) trucks could add carrier capacity in the not
too distant future.
of some key takeaways:
● A&A reports omni-channel retail is growing. Stores are becoming
warehouses. Inventory optimization is key.
● According to A&A, Uberization of transportation (UOT) applications may
help short-haul trucking where empty mile percentages are higher versus
long-haul lanes; however, the additional revenue will need to cover additional
pickup, delivery, and driver costs, plus add to profits. Also, Department of
Transportation (DOT) requirements need to be covered. Local courier work
was seen to have more potential for UOT applications.
● A&A reports a general feeling that supply chain management is more
important to corporations than ever before to mitigate risks and optimize
supply chain networks.
● Allowing Federal Motor Carrier Safety Administration (FMCSA) licensed
Mexican motor carriers to provide transportation services within the U.S.,
and not just part of international moves, could dramatically increase U.S.
domestic carrier capacity.
● Most European and U.S. based 3PLs have built relationships with
universities to develop entry-level talent.
● The Prince Rupert, Canada port, with its efficient rail links to the U.S.,
was citedas a good alternative to Long Beach and a way to improve transit
times for Asian imports.
● The rapid pace of 3PL merger and acquisition (M&A) activity is showing
no signs of slowing; however, 2016 is expected to be dominated by mid-
and small-sized deals versus the $100M+ deals A&A has seen in 2015.
In theU.S., non-asset based 3PLsare still valued higher than asset-based
3PLs, but asset-based providers have seen an increase in the past three
years.
● When evaluating companies, A&A reports private equity likes to see
solid management, revenue and earnings growth, and a solid business model.
Companies where external capital can be used for expansion, or to fill
operational gaps such as IT, are favored. Those with “lofty” future revenue
projections, or cost cutting to drive short-term profits, are frowned upon.
● According to one source, strategic 3PL buyers are looking for companies
where they can increase revenue by three to four times in three to four
years. Cultural fit is important as well as the ability to expand a 3PLs
existing operating network geographically, or add capabilities to its solutions set.
● There is interest in Asian 3PLs buying into the U.S. and 3PLs based in
slower growth countries expanding into higher growth Asian and North
American markets. 2015 has
been dominated by size and scale M&A activity versus other strategic
plays such as service portfolio, or vertical industry diversification.
● Almost all 3PL executives see future growth in Asia and North America
continuing to outpace Europe. Cross border e-commerce is a very hot
market in China as increased wealth is driving the demand for products
sourced in other countries.
● With Chinese labor rates increasing approximately 20% per year in
some areas, nearshoring of manufacturing to Mexico from Asia is a
significant trend in automotive, high-tech, and industrial manufacturing.
Low oil prices are making the U.S. attractive to manufacturers with oil and
gas manufacturing inputs.
● Reasons not to nearshore? Product from suppliers which is also heavily
sold in local markets. The Chinese market is so large for many products, such
as consumer electronics, that it makes sense to manufacture close to its
regions of large demand
and export to other countries.
● Technological innovation was discussed in detail. “Data is the new Oil”
was one comment. People are interconnected by systems more now than
ever before. Automated computer processes and machine learning will
replace much clerical/data entry work.
● Autonomous (self-driving) trucks could add carrier capacity in the not
too distant future.
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