3PLs Recover Some in 2010
Half a loaf is better than none,
but don’t be fooled by those
large revenue increase percentages shown by leading
3PLs for 2010. Third-party
logistics in the U.S. got back to
2007 revenue levels, but the
industry needs another year to
reach the levels of the peak
year of 2008 when revenues
—Dick Armstrong, chairman of
Armstrong & Associates
hile final results for 2010 will be adjusted, our estimate is
that 3PL revenues were $121bn. That’s an important 13-
percent increase over 2009, but that year is aberrant as a
base for any long-term comparative purposes.
The speed of recovery from 2009 for most 3PLs follows individual company
asset relationships. Asset-based third-party logistics companies are taking
longer to expand and reach 2008 levels. For example, J.B. Hunt Transport’s
dedicated contract carriage should end 2011 with revenues 5 percent higher
than 2008, according to Jon Langenfeld/Baird estimates. The same projections,
however, show 2010 was 11 percent lower than 2008.
Similarly, value-added warehousing was hurt by excess capacity starting in
2008. By mid-2010, a slow recovery had begun.
The most exciting development of the year was GENCO’s acquisition of ATC
followed by a minority private equity investment in GENCO by Greenbriar
Equity. GENCO paid $512m for the highly profitable fulfillment/returns specialist. Among the four largest VAWD 3PLs only the largest, Exel, does not now
have a significant private equity investor. GENCO, Jacobson and OHL have private equity investors. All three have expanded rapidly in the last five years.
Non-asset transportation managers have recovered more quickly from 2009
than asset-based 3PLs. In general, transportation managers saw 15 percent to 20
percent drops in gross revenues in 2009 but took much smaller hits on gross
margins (net revenues after purchased transportation is paid). The strongest
U.S.-based TMs exceeded their 2008 net revenues in 2010.
International transportation manager Expeditors International ended 2010
with net revenues of $1.7bn, 6 percent ahead of 2008. Expeditors’ major Euro-pean-based competitors, DHL, Panalpina, Kuehne + Nagel and DB Schenker,
all had major increases primarily due to large airfreight gains. On a calendar-year basis, U.S.-based UTi ended 2010 at its 2008 revenue level. UTi is 45 percent contract logistics and 55 percent freight forwarding.
On the non-asset, domestic TM side, C.H. Robinson’s net revenues were 7 percent ahead of 2008. CHR continues to make money in European freight brokerage
while planning to do the same in China. CHR is dominant in U.S. domestic transportation management, amassing over 40 percent of sector profits.
U.S. third-party logistics should grow about 7 percent a year in 2011 and 2012, following a pattern of growing 2- to 3-times GDP. 3PL growth should be fastest in
Asian segments where there are significant new opportunities in China, India and
other industrial economies. Intra-European business will be the biggest laggard
and companies like CHR will need to continue to take market share to grow.