Manufacturers Seen Accounting for Majority of 3PLs' Revenue

ARC study points to chemicals, pharma as underserved industries for logistics service providers

ARC study points to chemicals, pharma as underserved industries for logistics service providers

Dedham, MA — July 11, 2005 — Manufacturing companies accounted for over 78 percent of net revenues for the20 top third-party logistics service providers (3PLs) in 2004, or a total of $18.3 billion, according to the results of new research published by technology consultancy ARC Advisory Group.

Automotive, high tech and consumer packaged goods (CPG) were the three largest vertical industries, representing about 67 percent of manufacturing-related net revenues for the 3PLs, ARC reported in its market study "Strategic Guide for Logistics Service Providers (3PLs): Industry Trends, Provider Profiles and Maturity Model."

Adrian Gonzalez, director of ARC's Logistics Executive Council and author of the study, said that it is not surprising that the logistics service provider (LSP) industry derives most of its net revenues from the manufacturing sector, but quantifying the contribution could be very helpful for strategic planning purposes. "For example, the data highlight industries that are currently underserved, such as chemicals and pharmaceutical/healthcare, which represent growth opportunities for LSPs," Gonzalez said.

LSP Strengths and Capabilities

The logistics service provider market encompasses many different types of companies, with origins ranging from trucking firms to industrial manufacturers. Terms such as third party logistics (3PL) and lead logistics providers (LLP) have also emerged in an effort to create differentiation. Briefly stated, there is no simple definition of this market, especially as its scale and scope continue to evolve, according to ARC.

The consultancy said that its clients had asked ARC to develop the strategic guide study. These clients — including manufacturers, retailers, software vendors and logistics service providers — were interested in obtaining a more granular and quantitative understanding of the market.

"Our end-user clients need help in identifying service providers who have experience in their vertical industry managing the types of services they wish to outsource," Gonzalez said. "Similarly, LSPs want to differentiate themselves from the competition and attract customers that align well with their strategy and capabilities. Other publications focused on this industry, such as 'Top 100 3PL' lists, do not provide the level of detail necessary to meet these needs."

LSP Knowledge Center Planned

The strategic guide study includes quantitative profiles of 20 logistics service providers, including some of the largest providers in the world. ARC believes that these service providers can serve as a reasonable proxy for the overall market, as they're generally recognized as market leaders or innovative by clients, the media and analysts. Collectively, these service providers accounted for over $52 billion in gross revenues in 2004.

The LSPs covered include:

  • BDP International

  • Cardinal Logistics

  • Caterpillar Logistics

  • CH Robinson

  • Choice Logistics

  • DHL Logistics

  • Exel

  • Kuehne & Nagel

  • Logistics Management Solutions

  • Menlo Worldwide

  • Meridian IQ

  • Odyssey Logistics & Technology

  • Ozburn-Hessey Logistics

  • Penske Logistics

  • Ryder Logistics

  • Saddle Creek

  • Schneider Logistics

  • TNT Logistics

  • Transplace

  • UPS Supply Chain Solutions
Each LSP profile contains revenue breakdowns by geography, sector, vertical industry and service.

ARC said that it is developing a Logistics Service Provider Knowledge Center that will contain up-to-date information about the industry and a wider selection of service providers. In addition, the consultancy said that it expects to include additional profiles in future editions of the study.


Additional Articles of Interest

— For more information on the latest trends in the logistics space, see the article "The Analyst Corner: Fulfillment & Logistics" in the October/November 2004 issue of Supply & Demand Chain Executive.

— In order to perform on a world-class level, companies must redesign the supply and service chains to meet market demands. Dramatic changes are in order. Read more in the SDCExec.com article "Leveraging Supply Chain Logistics: Get Physical and Agile."

— How can you beat the trends and lower your less-than-truckload costs, even in a seller's market? For a guide to help you get started, read the SDCExec.com article "LTL Sourcing: Success for Buyers In A Seller's Market."


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