Enterprise expenditure on outsourced and third-party logistics set to experience explosive growth in emerging markets, Datamonitor reports; only the multi-modal may survive
London — July 21, 2006 — Global spending on outsourced third-party logistics (3PL) services across contract logistics, air and sea freight and road transport is set to increase significantly over the coming five years, with the largest growth in demand expected in the Asia-Pacific (APAC) region, according to a recent report from market analyst Datamonitor.
Business for 3PLs looks more than promising, Datamonitor reports in its latest research, "Logistics Global Outlook 2006." And while Western Europe looks set to remain the region with the largest spending on 3PL services, APAC is expected to account for almost one-fifth of global spend on 3PL services by 2010, the research firm found.
"The 3PL players have a huge untapped market which has hitherto been managed either in-house or outsourced to the local, small and unorganized service providers," says Praveen Ojha, logistics analyst with Datamonitor and author of the study. "The industry has huge growth potential achievable through increased outsourcing and 3PL penetration."
But Ojha adds that the global contract logistics market remains highly fragmented. "As players seek to be the one-shop-stop in their quest to gain new business, consolidation among logistics service providers (LSPs) will move with even greater momentum," he says.
Global 3PL Spend Forecast
According to Datamonitor, the strong global economic growth of about 4 percent per annum over the next five years, driven by the emerging markets, will help substantially increase the global spend on logistics. This, coupled with the eastward shift in global manufacturing bases, will help boost global trade and movement of goods.
All these factors auger well for logistics service providers (LSPs) and freight forwarders. Demand for air and sea freight, land transport and contract logistics will increase significantly across all geographical regions, according to Datamonitor, which expects global spend on 3PL services to rise from $222 billion in 2005 to $326 billion in 2010. The global expenditure on 3PL services is pegged to experience high single-digit annual growth rates from 2006 to 2010.
While the EU17 will remain the region with the largest spending on 3PL services, the largest growth is forecast to come in the Asia-Pacific (APAC) area, the research firm believes. Indeed, the APAC region is expected to account for almost one-fifth of the global spending on 3PL services by 2010. According to Datamonitor, the growth in this relatively nascent market will be primarily driven by the region's high economic growth and the increased outsourcing of logistics services to 3PLs.
The EU17 countries include Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Spain, Sweden and United Kingdom.
Consolidation among LSPs
The global contract logistics market is still highly fragmented, with the top 12 players accounting for only one-sixth of the total revenues. However, within the sea freight forwarding industry, the top 10 players account for almost half of the forwarding volumes.
Also, in most cases (e.g. freight forwarding, truck brokerage), size enhances network liquidity (network capacity), making it easier for shippers and carriers to work with larger logistics players. Hence, the smaller logistics players will need to trade up to larger players with broad resources.
Datamonitor writes that customers are looking for supply chain integration through one-stop integrated logistics service providers and hence are more likely to use a major 3PL. The industry will continue to see further consolidation as players want to be one-stop shops for their customers, the research firm predicts.
Only the Multi-modal May Survive
"As businesses continue to increase their focus on operational efficiency and profitability, they are outsourcing more and more of their logistics operations," Ojha notes. "As such, a greater share of enterprise spend on logistics is moving from in-house to outsourced operations. This is creating a bigger market opportunity for global LSPs. Organized players providing 3PL services will increase their market penetration."
But Ojha says that cost pressures are likely to continue in the form of increasing fuel prices, infrastructure congestion, labor shortages and environment protection laws. "Only players that can efficiently provide multi-modal services across various geographies and varied supply and demand levels will successfully survive," Ojha concludes.
Datamonitor's "Logistics Global Outlook 2006" study provides an overview of the global logistics market, incorporating top-level data, competitor market shares, forecasts and insightful analysis of the main factors affecting the industry, both currently and in the future.
Additional Articles of Interest
To learn about best practices for optimizing last mile pick up and delivery operations, read "The Last Mile is the Longest Mile," in the June/July 2006 issue of Supply & Demand Chain Executive.
Read about one high-tech manufacturer's quest to deliver near-perfect fill rates across its global service organization in "Managing a Global Supply Chain in a 'Flat' World," from the June/July 2006 issue of Supply & Demand Chain Executive.
London — July 21, 2006 — Global spending on outsourced third-party logistics (3PL) services across contract logistics, air and sea freight and road transport is set to increase significantly over the coming five years, with the largest growth in demand expected in the Asia-Pacific (APAC) region, according to a recent report from market analyst Datamonitor.
Business for 3PLs looks more than promising, Datamonitor reports in its latest research, "Logistics Global Outlook 2006." And while Western Europe looks set to remain the region with the largest spending on 3PL services, APAC is expected to account for almost one-fifth of global spend on 3PL services by 2010, the research firm found.
"The 3PL players have a huge untapped market which has hitherto been managed either in-house or outsourced to the local, small and unorganized service providers," says Praveen Ojha, logistics analyst with Datamonitor and author of the study. "The industry has huge growth potential achievable through increased outsourcing and 3PL penetration."
But Ojha adds that the global contract logistics market remains highly fragmented. "As players seek to be the one-shop-stop in their quest to gain new business, consolidation among logistics service providers (LSPs) will move with even greater momentum," he says.
Global 3PL Spend Forecast
According to Datamonitor, the strong global economic growth of about 4 percent per annum over the next five years, driven by the emerging markets, will help substantially increase the global spend on logistics. This, coupled with the eastward shift in global manufacturing bases, will help boost global trade and movement of goods.
All these factors auger well for logistics service providers (LSPs) and freight forwarders. Demand for air and sea freight, land transport and contract logistics will increase significantly across all geographical regions, according to Datamonitor, which expects global spend on 3PL services to rise from $222 billion in 2005 to $326 billion in 2010. The global expenditure on 3PL services is pegged to experience high single-digit annual growth rates from 2006 to 2010.
While the EU17 will remain the region with the largest spending on 3PL services, the largest growth is forecast to come in the Asia-Pacific (APAC) area, the research firm believes. Indeed, the APAC region is expected to account for almost one-fifth of the global spending on 3PL services by 2010. According to Datamonitor, the growth in this relatively nascent market will be primarily driven by the region's high economic growth and the increased outsourcing of logistics services to 3PLs.
The EU17 countries include Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Spain, Sweden and United Kingdom.
Consolidation among LSPs
The global contract logistics market is still highly fragmented, with the top 12 players accounting for only one-sixth of the total revenues. However, within the sea freight forwarding industry, the top 10 players account for almost half of the forwarding volumes.
Also, in most cases (e.g. freight forwarding, truck brokerage), size enhances network liquidity (network capacity), making it easier for shippers and carriers to work with larger logistics players. Hence, the smaller logistics players will need to trade up to larger players with broad resources.
Datamonitor writes that customers are looking for supply chain integration through one-stop integrated logistics service providers and hence are more likely to use a major 3PL. The industry will continue to see further consolidation as players want to be one-stop shops for their customers, the research firm predicts.
Only the Multi-modal May Survive
"As businesses continue to increase their focus on operational efficiency and profitability, they are outsourcing more and more of their logistics operations," Ojha notes. "As such, a greater share of enterprise spend on logistics is moving from in-house to outsourced operations. This is creating a bigger market opportunity for global LSPs. Organized players providing 3PL services will increase their market penetration."
But Ojha says that cost pressures are likely to continue in the form of increasing fuel prices, infrastructure congestion, labor shortages and environment protection laws. "Only players that can efficiently provide multi-modal services across various geographies and varied supply and demand levels will successfully survive," Ojha concludes.
Datamonitor's "Logistics Global Outlook 2006" study provides an overview of the global logistics market, incorporating top-level data, competitor market shares, forecasts and insightful analysis of the main factors affecting the industry, both currently and in the future.
Additional Articles of Interest
To learn about best practices for optimizing last mile pick up and delivery operations, read "The Last Mile is the Longest Mile," in the June/July 2006 issue of Supply & Demand Chain Executive.
Read about one high-tech manufacturer's quest to deliver near-perfect fill rates across its global service organization in "Managing a Global Supply Chain in a 'Flat' World," from the June/July 2006 issue of Supply & Demand Chain Executive.
- More articles about Datamonitor.
