Continued Double-digit Growth Seen for the Third-Party Warehouse Logistics Industry

3PLs' outlook upbeat, despite concerns of rising fuel costs, technology investment requirements, IWLA survey finds

Chicago — April 11, 2007 — The year ahead looks to be one of opportunity for third-party providers of warehousing and logistics services (3PLs) despite industry concerns about rising costs for fuel and potential technology investment requirements, according to the latest edition of an annual survey conducted by International Warehouse Logistics Association (IWLA).

"The U.S. economy remains strong, Fortune 500 companies are focused on core competencies, and 3PL providers continue to prove that they are able to satisfy those customers' outsourcing demands," the IWLA writes in its report on the survey. "Those three factors all add up to one thing: continued outstanding double-digit growth for the logistics outsourcing industry."

Growth Ahead

According to the survey, in 2006 just over one-fifth of third-party logistics providers reported healthy revenue increases of 20 percent or more. Another 8 percent had revenue gains of between 15 and 20 percent, while 25 percent had double-digit sales growth of between 10 and 15 percent.

Looking ahead, while 21 percent of the survey respondents said they expect either flat revenue or a sales decrease, more than three-quarters (78 percent) are anticipating that revenue will grow again this year. Forty-three percent are projecting double-digit growth of at least 10 percent.

Another indication of strong growth for outsourced warehouse logistics is the sector's employment picture. More than half of those surveyed said they would add employees this year. In addition, 61 percent of respondents said they will add warehouse space.

IWLA 3PLs see solid growth potential in the following industries:

  • Food, beverage and grocery

  • Paper and related products

  • Retail/general merchandise

  • Pharmaceuticals

  • Computers/high tech

Fuel Costs Top Concerns

Fuel costs remain a top concern for many 3PL executives, with 17 percent expecting overall fuel costs to increase substantially in 2007, and 52 percent expecting slight increases. In addition, counter to previous trends, health care costs did not top the list in terms of expected cost increases in this year's survey; although 40 percent expect a "great increase" in health care costs, another 49 percent expect only slight increases.

Elsewhere, 44 percent of respondents predicted that costs for technology will increase greatly. "It looks like a good portion of those expenditures will go to material handling providers, as 63 percent of 3PLs plan to make major material handling purchases this year," IWLA reports. Thirty-six percent have budgeted $250,000 or more for those material handling investments, according to the survey report.

Other findings in the survey include:

  • Although three-quarters of IWLA members indicate that RFID will have some impact or a large impact within the supply chain in the next five years, 79 percent of 3PL providers have no current plans for implementing the technology. Only 7 percent are using the technology currently, with another 9 percent reporting that they are piloting the technology.

  • The industry also seems to be ignoring the trend toward "going green," or finding environmentally friendly ways to reduce carbon emissions. Only 18 percent of 3PL providers report to be pursuing strategies to go green by utilizing renewable energy sources. Of that group, the vast majority (69 percent) have simply rerouted transportation trucking routes to save fuel. Only 15 percent have looked into solar power options, and another 15 percent are using hybrid vehicles. None have considered wind turbines.

  • Aside from additional technology and healthcare costs in 2007, 3PL providers expect increases in property and casualty insurance, and some big gains in security costs. Some also believe that higher wages will be a concern in 2007.

More information on the report is available at the IWLA Web site,