3PL Growth Spurt. Why?
The managed logistics sector thrives both in times of positive change and in times of uncertainty. We've recently had plenty of both. In today's bipolar economy, it's no wonder that U.S. 3PLs had their best-ever year in 2018.
Forty percent of 3PLs report top-line sales growth of 20% or better in our annual 3PL Perspectives market research (see page 72). An astounding 73% report net profit growth of 10% or better in the past year. The companies that shared sales info (some companies went DNR on us) reported more than $140 billion in gross logistics sales last year. What was behind this growth and will it continue in 2020?
Several unrelated factors—some good, some bad—are motivating more companies to seek outside logistics support, solutions, and a toehold on business transformation. Logistics technology is interweaving buyer and seller operations ever more tightly. Our research consistently shows companies cannot keep pace with technological developments impacting their shared business logistics operations. Consequently, they turn to logistics partners to enable better transportation, trade, and logistics control. 3PLs have the scale to invest in IT, manage implementation, and apply innovation to their customer base. They also solve application issues once and are able to share many of them.
A trend we've seen over 20-plus years of conducting our 3PL research is that when times get tough and market uncertainty looms, companies take refuge by partnering with 3PLs. When times get lean, as some such as the IMF are predicting will happen soon—think tariffs, trade wars, coming business stress due to the political calls for higher taxes and onerous regulations—companies need logistics solutions providers to drive operational efficiencies and, in some cases, drive enterprise transformation to ensure survival. On the other hand, when times are flush, companies need outside operational support to scale up without melting down or dinging their customer service KPIs.
Lastly, there is the digital transformation and the requisite commitment to demand-driven logistics to make that work. Amazon effect, once again. A recent DHL report reveals that 70% of B2C companies and 60% of B2B companies "are still working toward the full implementation of a digital strategy, even though 70% of respondents rate e-commerce as very important or extremely important." Translation: Whether your customer is the end consumer or an industrial or manufacturing company, businesses understand the driving force of growth is application of e-commerce operations. That's no easy task, so naturally they turn to those that have helped shepherd others to the digital promised land.
What does all this mean? It means that in good times or bad, world-class 3PLs will continue to solve fundamental business challenges wrapped around supply chain operations.