There Could Be
A Great 3PL in
BY RICHARD ARMSTRONG
Global third-party logistics had a mixed year in 2011, and 2012 could be more of the
same. But the signs are highly promising, at least in certain areas, that the industry's
fortunes are indeed looking up.
n the positive side, third-party logistics revenues in North America, driven by domestic growth, increased 11 percent in 2011.
Dedicated contract carriage, a mature segment of the industry, came back to life.
Domestic transportation management/freight brokerage also hit double digits, and value-added warehousing and distribution shook off much of its tight
inventory yoke. Admittedly, the picture for international transportation management wasn’t quite as rosy.
That’s because in the second half of 2011 ocean and
airfreight volumes slumped.
So what’s the expectation for 2012? Armstrong &
Associates sees more modest, single-digit growth—
more than 5 percent—as the U.S. economy improves
by 2. 5 percent to 3 percent.
Perversely, third-party logistics and transportation spend will gain in the U.S. because of the "hold"
put on the Keystone XL Pipeline project that would
link oil-sands production in Canada to refineries in
the southern United States. Rail and truck activity will
increase as substitutes as they have with the Bakken
Shale petroleum deposits of North Dakota and the
natural gas recovery from the Marcellus Shale wells
in New York and Pennsylvania. Rail and truck equipment is already in short supply in these areas.
Outside of the U.S., activity in Asia Pacific, or
APAC, is still the main global story. APAC has the
largest ocean freight market with 25 million TEUs—
40 percent of global volume, according to Morgan
Stanley. Also, the International Air Transport Association estimates that APAC has 41 percent of airfreight
tonnes. The upside potential is huge for India, China
and Southeast Asia. The largest opportunities are
domestically in China and India. China has to manage and liberalize while avoiding hyperinflation.
India needs to make dramatic structural changes to
open its markets and cut corruption. Unfortunately,
major reform of corruption recently failed in India.
Indonesia, Vietnam, Cambodia and Thailand are
moving. As a sign of the times, we have been
recently dealing with 3PL situations in China, India,
Pakistan and Sri Lanka.