Logistics Leaders Express Optimism at CSCMP

Philadelphia—Oct. 6, 2011—The 18th Annual Survey of Third-Party Logistics Providers, released this week, revealed logistics companies experienced improved economic conditions in 2010, with 88 percent of companies surveyed in North America meeting or exceeding their revenue projections, as compared with only 50 percent in 2009. The survey is underwritten by Penske Logistics, a third-party logistics provider.

The survey was presented at the Council of Supply Chain Management Professionals Annual Global Conference by survey author, Dr. Robert Lieb, professor of supply chain management at Northeastern University, and Joe Gallick, senior vice president of sales for Penske Logistics. The findings analyze responses from 36 third-party logistics company CEOs across North America, Europe and Asia-Pacific whose companies were responsible for generating approximately $58 billion in revenue in 2010.

Economic conditions appeared to slightly improve for third-party logistics companies surveyed in 2010 in North America. None of the companies were unprofitable and none of the CEOs believed the regional third-party logistics industry operated at a loss for the year. In Europe, economic conditions continued to be challenging for third-party logistics companies with only 55 percent of companies surveyed meeting or exceeding their revenue growth projections for the year, as opposed to 90 percent of companies surveyed in Asia-Pacific. Growth projections are most optimistic in Asia, with companies expecting to grow 15.8 percent in the next year, as compared to 10.8 percent expected in North America and 8.4 percent in Europe.

“CEOs continue to grapple with industry dynamics such as a stagnating economy, pricing pressures, rising costs and the impact of regulatory changes,” said Lieb. “These are similar to the trends we’ve been seeing in years past, and we are confident that the industry can adapt.”

“This year’s survey indicates the logistics industry has largely adjusted to the new economic realities and are now investing in growth,” stated Gallick. “Companies are leaner and more adaptive than just a few years ago. Today, logistics companies are better positioned to help serve their customers as catalysts for supply chain transformation and innovation, which ultimately drives their own growth prospects.”

European and APAC Results

Both European and Asia-Pacific CEOs reported a shortage of managerial and operational talent in the industry as one of the major problems in their regions. In Europe, marketplace concerns about stability of the third-party logistics industry were also cited. The Asia-Pacific market is expanding, according to the survey findings, with CEOs seeing a variety of growth opportunities in the region, including increased volumes in China and India. The report also cited more extensive road transport services to support manufacturing in China as it moves inland. The most significant development in the APAC region for third-party logistics services during the past year was the diminishing role of Guangdong and Hong Kong as manufacturing centers, with manufacturing shifting to other low-cost countries and to China’s Western Provinces. Demand for “all-in-one” supply chain services increased in 2010, as the industry in Asia-Pacific becomes more sophisticated.

Both European and Asia-Pacific CEOs reported a shortage of managerial and operational talent in the industry as one of the major problems in their regions. In Europe, marketplace concerns about stability of the third-party logistics industry were also cited. The Asia-Pacific market is expanding, according to the survey findings, with CEOs seeing a variety of growth opportunities in the region, including increased volumes in China and India. The report also cited more extensive road transport services to support manufacturing in China as it moves inland. The most significant development in the APAC region for third-party logistics services during the past year was the diminishing role of Guangdong and Hong Kong as manufacturing centers, with manufacturing shifting to other low-cost countries and to China’s Western Provinces. Demand for “all-in-one” supply chain services increased in 2010, as the industry in Asia-Pacific becomes more sophisticated.

Major Supply Chain and Logistics Industry Trends and Insights

Revenue Projections Improve

With few exceptions, the CEOs are more bullish about the financial prospects of their companies over the next one and three year periods.

  • One-year company revenue growth projections were 10.8 percent for North America (10.4 percent in 2010), 8.4 percent for Europe (7.2 percent in 2010), and 15.8 percent for APAC (22.5 percent in 2010).  The average three-year company growth projections were 10.3 percent for North America (10.6 percent in 2010), 9.1 percent for Europe (8.3 percent in 2010), and 14.6 percent for APAC (19.5 percent in 2010).
  • One-year regional 3PL industry revenue growth projections averaged 6.8 percent for North America (7.3 percent in 2010), 6.1 percent for Europe (4.8 percent in 2010), and 9.0 percent for APAC (15.4 percent in 2010).  The average three-year regional 3PL industry growth projections were 8.0 percent for North America (7.8 percent in 2010), 6.3 percent for Europe (5.4 percent in 2010), and 10.3 percent for APAC (12.9 percent in 2010).
  • Twenty-eight of the 36 CEOs surveyed reported their companies were profitable during 2010, with three reporting they broke even, and three reporting their companies were unprofitable.

Outlook for Logistics Mergers and Acquisition Activity (M&A)

  • Only five of the 36 CEOs reported their companies were involved in significant M&A activity in their regions during the past year.
  • Most believed the 3PL consolidation movement will continue in their regions.
  • CEOs in all regions expect less than 9 percent of their companies’ average annual revenue growth to come from M&A over the next three years.

Disruptions from Japan Tsunami and Earthquake Cause Rethinking

•     25 percent of the North American 3PL CEOs reported that some of their customers had experienced a loss of sales in Japan. Thirteen percent of the European CEOs reported similar experiences, as did 50 percent of the CEOS surveyed in the APAC region.

•     Eighty-eight percent of the 3PL CEOs included in the North American and European surveys reported that some of their customers had experienced a disruption of supply. Eighty percent of the CEOS in the APAC region also reported that that was the case.

•     31 percent of the North American 3PL CEOs reported that some of their customers had experienced supplier failures as a result of the tsunami/earthquake. Fifty percent of the CEOs involved in the European survey and 30 percent of those involved in the APAC survey also reported that to be the case.

Environmental and Sustainability Investments Continue

Despite the volatility of the global economy, the 3PL industry’s involvement in environmental sustainability issues continued to expand.

  • Sixteen of the 36 CEOs reported their companies launched new sustainability initiatives during 2010.
  • Nineteen CEOs reported expanding existing sustainability projects.
  • The percentage of existing customers asking third-party logistics providers to analyze their supply chains in terms of environmental impact/cost were 8 percent for North America (15 percent in 2010), 8 percent for Europe (7 percent in 2010), and 7 percent APAC (9 percent in 2010).
  • “Green” capability is ‘infrequently’ a major factor in attracting and retaining clients, according to 86 percent of CEOs surveyed.

 Social Media Plays a Growing Role

The third-party logistics providers are generally optimistic about the value of social media activities moving forward, despite the impact of these activities having been limited to date.

  • 69 percent of companies believe social media will become increasingly important in 3PL industry
  • 64 percent of companies have LinkedIn accounts
  • 47 percent of companies have Facebook pages
  • 36 percent of companies have Twitter accounts
  • 28 percent of companies post videos on YouTube
  • 17 percent of companies surveyed have blogs

Survey Design

Thirty-six CEOs completed surveys via an Internet-based questionnaire during the summer of 2011.  Companies participating in the annual survey included: Cardinal Logistics, DSC Logistics, DHL Exel Supply Chain, Genco Supply Chain Solutions, Kuehne+Nagel Logistics, Menlo Logistics, Penske Logistics, Schenker, Schneider Logistics, Transplace, UPS Supply Chain Solutions, UTi Integrated Logistics, Caterpillar Logistics Services, Agility Logistics, Werner Logistics, Yusen Logistics, MIQ Logistics, CEVA Logistics and Wincanton.

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