After a couple of tough years, most third-party logistics providers (3PLs) got back on track in 2010, and business is looking even better in 2011 for the four 3PL segments that Armstrong & Associates follows: domestic transportation management, international transportation management, dedicated contract carriage, and value-added warehousing and distribution. Overall, 3PLs' U.S. gross revenues jumped 18.9 percent in 2010 to US $127.3 billion, slightly exceeding 2008's market results. We are forecasting that gross revenues will rise to an estimated US $141.2 billion this year.
This strong performance reflects a long-term growth trend. Since we began tracking results in 1995, the 3PL market has experienced negative growth just once, in 2009. Even with that dip, the market's compound annual growth rate (CAGR) for net revenue from 1995 through 2010 was 12.7 percent. Moreover, the increase in net revenue from 2009 to 2010 was 4.7 times the growth rate of the U.S. gross domestic product (GDP) during that same period.
Both revenues and profitability increased in all four 3PL segments in 2010. Gross revenue increases ranged from 12.9 percent for value-added warehousing and distribution to 30.1 percent for international transportation management and were up 19.4 percent overall. Overall net revenues (gross revenue minus purchased transportation) were up 13.2 percent. Net revenues are a better indicator of true business improvement since fuel-related costs have minimal impact. Overall, net income increased 23.4 percent from 2009's levels.
One of the most important factors in 3PL growth was world trade volumes, which increased 12.4 percent in 2010.1 That increase, together with continued economic globalization, helped 3PLs involved in international transportation management grow the fastest among the four segments, achieving a 30.1-percent increase in gross revenue (turnover) and a 19.2-percent increase in net revenue (gross margin) in 2010. Growth rates for domestic business segments trailed far behind.
Blurring lines
The four different 3PL segments are derived from the regulatory history of the United States. After trucking deregulation in 1980, dedicated con- tract carriage rapidly developed from the practice of single-source leasing of tractors and drivers. Thanks to that same deregulation, brokers' operating authority licenses became widely available, which spurred the expansion of domestic transportation management. The international trans- portation management segment developed in response to loosened Federal Maritime Commission regulations and the elimination of the Civil Aeronautics Board.
Since 1980, the lines between 3PL segments have become blurred as companies have expanded and integrated different types of offerings. Major service providers have consolidated to become global supply chain managers. These multifaceted giants typically conduct business in all four segments and have developed extensive global operating networks. Similarly, nearly all companies whose core businesses were value-added warehousing now have domestic transportation management capability and often engage in dedicated contract carriage. Meanwhile, the leaders in dedicated contract carriage, such as Penske and Ryder, also have large warehousing and transportation operations.
The basic pattern is that non-asset-based transportation management 3PLs are more profitable than are providers of asset-based dedicated contract carriage and value-added warehousing. Many warehousing providers, in fact, have turned to leasing warehouses to avoid the asset-ownership stigma applied by financial analysts. However, such a change normally involves carrying long-term leases, which do not improve profitability.
All of the large domestically based transportation management companies are expanding geographically and developing broader service portfolios. Over time, survival in a consolidating global mar- ket may cause them to suffer diminishing margins. What is certain is that the market is and will remain dynamic, and these companies must continue to grow and change if they are to survive.
The international transportation management and value-added warehousing and distribution segments have grown rapidly since 2000. In contrast, dedicated contract carriage and domestically based transportation management have seen slower net revenue growth. Currently, however, the former is experiencing a short-term rebirth because of growing concerns about driver and truck capacity.
Meanwhile, about one in nine truckloads in the United States today is handled by a domestic transportation management 3PL. The ratio of loads handled by domestic transportation management 3PLs to those handled by dedicated services providers, however, should continue to increase. This growth is driven by non-asset 3PLs, which have the ability to optimize transportation for customers without having to worry about utilizing their own assets or being limited by a specific transportation mode.
Modest but steady growth
Figure 1 illustrates our projections for 2011. On average, the first quarter was strong for all markets. Value-added warehousing and distribution is expected to achieve modest growth of 8 percent for the year, while the domestic transportation management and dedicated contract carriage segments should benefit from a reviving economy. Accordingly, we forecast that U.S. 3PL revenues overall will grow 10.9 percent in 2011. This estimate is 3.5 to 4 times that for U.S. GDP and reflects our expectation that in the last three quarters of 2011 the 3PL market will realize smaller increases than it did in the very robust first quarter.
So, even in a sluggish economy with growth decelerating from the first-quarter highs, we anticipate that 3PLs are back on track to have a historically average growth year in 2011. When you compare 2011 to 2009, most 3PLs will be quite happy with average.
Endnote: 1. "Tension from the Two-Speed Recovery," World Economic Outlook, International Monetary Fund, April 2011, www.imf.org.
Businesses engaged in international trade face three major supply chain hurdles as they head into 2025: the disruptions caused by Chinese New Year (CNY), the looming threat of potential tariffs on foreign-made products that could be imposed by the incoming Trump Administration, and the unresolved contract negotiations between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX), according to an analysis from trucking and logistics provider Averitt.
Each of those factors could lead to significant shipping delays, production slowdowns, and increased costs, Averitt said.
First, Chinese New Year 2025 begins on January 29, prompting factories across China and other regions to shut down for weeks, typically causing production to halt and freight demand to skyrocket. The ripple effects can range from increased shipping costs to extended lead times, disrupting even the most well-planned operations. To prepare for that event, shippers should place orders early, build inventory buffers, secure freight space in advance, diversify shipping modes, and communicate with logistics providers, Averitt said.
Second, new or increased tariffs on foreign-made goods could drive up the cost of imports, disrupt established supply chains, and create uncertainty in the marketplace. In turn, shippers may face freight rate volatility and capacity constraints as businesses rush to stockpile inventory ahead of tariff deadlines. To navigate these challenges, shippers should prepare advance shipments and inventory stockpiling, diversity sourcing, negotiate supplier agreements, explore domestic production, and leverage financial strategies.
Third, unresolved contract negotiations between the ILA and the USMX will come to a head by January 15, when the current contract expires. Labor action or strikes could cause severe disruptions at East and Gulf Coast ports, triggering widespread delays and bottlenecks across the supply chain. To prepare for the worst, shippers should adopt a similar strategy to the other potential January threats: collaborate early, secure freight, diversify supply chains, and monitor policy changes.
According to Averitt, companies can cushion the impact of all three challenges by deploying a seamless, end-to-end solution covering the entire path from customs clearance to final-mile delivery. That strategy can help businesses to store inventory closer to their customers, mitigate delays, and reduce costs associated with supply chain disruptions. And combined with proactive communication and real-time visibility tools, the approach allows companies to maintain control and keep their supply chains resilient in the face of global uncertainties, Averitt said.
Progress in generative AI (GenAI) is poised to impact business procurement processes through advancements in three areas—agentic reasoning, multimodality, and AI agents—according to Gartner Inc.
Those functions will redefine how procurement operates and significantly impact the agendas of chief procurement officers (CPOs). And 72% of procurement leaders are already prioritizing the integration of GenAI into their strategies, thus highlighting the recognition of its potential to drive significant improvements in efficiency and effectiveness, Gartner found in a survey conducted in July, 2024, with 258 global respondents.
Gartner defined the new functions as follows:
Agentic reasoning in GenAI allows for advanced decision-making processes that mimic human-like cognition. This capability will enable procurement functions to leverage GenAI to analyze complex scenarios and make informed decisions with greater accuracy and speed.
Multimodality refers to the ability of GenAI to process and integrate multiple forms of data, such as text, images, and audio. This will make GenAI more intuitively consumable to users and enhance procurement's ability to gather and analyze diverse information sources, leading to more comprehensive insights and better-informed strategies.
AI agents are autonomous systems that can perform tasks and make decisions on behalf of human operators. In procurement, these agents will automate procurement tasks and activities, freeing up human resources to focus on strategic initiatives, complex problem-solving and edge cases.
As CPOs look to maximize the value of GenAI in procurement, the study recommended three starting points: double down on data governance, develop and incorporate privacy standards into contracts, and increase procurement thresholds.
“These advancements will usher procurement into an era where the distance between ideas, insights, and actions will shorten rapidly,” Ryan Polk, senior director analyst in Gartner’s Supply Chain practice, said in a release. "Procurement leaders who build their foundation now through a focus on data quality, privacy and risk management have the potential to reap new levels of productivity and strategic value from the technology."
Businesses are cautiously optimistic as peak holiday shipping season draws near, with many anticipating year-over-year sales increases as they continue to battle challenging supply chain conditions.
That’s according to the DHL 2024 Peak Season Shipping Survey, released today by express shipping service provider DHL Express U.S. The company surveyed small and medium-sized enterprises (SMEs) to gauge their holiday business outlook compared to last year and found that a mix of optimism and “strategic caution” prevail ahead of this year’s peak.
Nearly half (48%) of the SMEs surveyed said they expect higher holiday sales compared to 2023, while 44% said they expect sales to remain on par with last year, and just 8% said they foresee a decline. Respondents said the main challenges to hitting those goals are supply chain problems (35%), inflation and fluctuating consumer demand (34%), staffing (16%), and inventory challenges (14%).
But respondents said they have strategies in place to tackle those issues. Many said they began preparing for holiday season earlier this year—with 45% saying they started planning in Q2 or earlier, up from 39% last year. Other strategies include expanding into international markets (35%) and leveraging holiday discounts (32%).
Sixty percent of respondents said they will prioritize personalized customer service as a way to enhance customer interactions and loyalty this year. Still others said they will invest in enhanced web and mobile experiences (23%) and eco-friendly practices (13%) to draw customers this holiday season.
The practice consists of 5,000 professionals from Accenture and from Avanade—the consulting firm’s joint venture with Microsoft. They will be supported by Microsoft product specialists who will work closely with the Accenture Center for Advanced AI. Together, that group will collaborate on AI and Copilot agent templates, extensions, plugins, and connectors to help organizations leverage their data and gen AI to reduce costs, improve efficiencies and drive growth, they said on Thursday.
Accenture and Avanade say they have already developed some AI tools for these applications. For example, a supplier discovery and risk agent can deliver real-time market insights, agile supply chain responses, and better vendor selection, which could result in up to 15% cost savings. And a procure-to-pay agent could improve efficiency by up to 40% and enhance vendor relations and satisfaction by addressing urgent payment requirements and avoiding disruptions of key services
Likewise, they have also built solutions for clients using Microsoft 365 Copilot technology. For example, they have created Copilots for a variety of industries and functions including finance, manufacturing, supply chain, retail, and consumer goods and healthcare.
Another part of the new practice will be educating clients how to use the technology, using an “Azure Generative AI Engineer Nanodegree program” to teach users how to design, build, and operationalize AI-driven applications on Azure, Microsoft’s cloud computing platform. The online classes will teach learners how to use AI models to solve real-world problems through automation, data insights, and generative AI solutions, the firms said.
“We are pleased to deepen our collaboration with Accenture to help our mutual customers develop AI-first business processes responsibly and securely, while helping them drive market differentiation,” Judson Althoff, executive vice president and chief commercial officer at Microsoft, said in a release. “By bringing together Copilots and human ambition, paired with the autonomous capabilities of an agent, we can accelerate AI transformation for organizations across industries and help them realize successful business outcomes through pragmatic innovation.”
That challenge is one of the reasons that fewer shoppers overall are satisfied with their shopping experiences lately, Lincolnshire, Illinois-based Zebra said in its “17th Annual Global Shopper Study.” While 85% of shoppers last year were satisfied with both the in-store and online experiences, only 81% in 2024 are satisfied with the in-store experience and just 79% with online shopping.
In response, most retailers (78%) say they are investing in technology tools that can help both frontline workers and those watching operations from behind the scenes to minimize theft and loss, Zebra said.
Just 38% of retailers currently use artificial intelligence-based prescriptive analytics for loss prevention, but a much larger 50% say they plan to use it in the next one to three years. Retailers also said they plan to invest in self-checkout cameras and sensors (45%), computer vision (46%), and RFID tags and readers (42%) within the next three years to help with loss prevention.
Those strategies could help improve the brick-and-mortar shopping experience, as 78% of shoppers say it’s annoying when products are locked up or secured within cases. Part of that frustration, according to consumers, is fueled by the extra time it takes to find an associate to them unlock those cases. Seventy percent of consumers say they have trouble finding sales associates to help them during in-store shopping. In response, some just walk out; one in five shoppers has left a store without getting what they needed because a retail associate wasn’t available to help, an increase over the past two years.
Additional areas of frustrations identified by retailers and associates include:
The difficulty of implementing "click and collect" or in-story returns, despite high shopper demand for them;
The struggle to confirm current inventory and pricing;
Lingering labor shortages; and
Increasing loss incidents.
“Many retailers are laying the groundwork to build a modern store experience,” Matt Guiste, Global Retail Technology Strategist, Zebra Technologies, said in a release. “They are investing in mobile and intelligent automation technologies to help inform operational decisions and enable associates to do the things that keep shoppers happy.”
The survey was administered online by Azure Knowledge Corporation and included 4,200 adult shoppers (age 18+), decision-makers, and associates, who replied to questions about the topics of shopper experience, device and technology usage, and delivery and fulfillment in store and online.