Third Party Logistics (3PL) Market Report

Third Party Logistics (3PL) Market Analysis By Service (Dedicated Contract Carriage, Domestic Transportation Management, International Transportation Management, Warehousing And Distribution, Software) And Segment Forecasts To 2020

Published: February 2015  |  189 Pages  |  Format: PDF  |  Report ID: 978-1-68038-346-1

Industry Insights

The global Third Party Logistics (3PL) market has evolved at a steady pace over the last five years due to increased outsourcing of logistic operations by companies in order to focus on their core business competencies. 3PL providers help manage inventory, reduce CAPEX, provide market opportunities, mitigate risk, and assist firms in seasonal business activities.

Warehousing, inventory management, cross docking, transportation, and freight forwarding are typically the activities outsourced to a logistics provider; these logistics providers help comprehend a business’s future needs and challenges by leveraging their expertise in supply chain processes while exhibiting agility and flexibility. Globalization has led to several companies outsourcing their logistics function due to the infeasibility of managing worldwide supply chain operations on their own. Availability of industry-centric 3PL services and advent of Big Data are emerging trends in the 3PL service industry which are expected to drive the market over the forecast period. 

Increasing instances of outsourcing by retailers and wholesalers due to lack of internal control to address logistic challenges is expected to provide a fillip to the 3PL market. Retailers have increasingly focused towards implementation of Omni-Channeled distribution strategies by catering the service of 3PL providers, which can be primarily attributed to the increased popularity of online retailing. Retailers relying on traditional brick and mortar channel have evolved their distribution systems to address consumer demand. Using their expertise, 3PL providers assist their retail partners to promptly locate and deliver products to the consumer, irrespective of the channel. 3PL vendors strive to minimize their lead times to achieve customer satisfaction.

Several automotive and healthcare companies have spun off their existing internal logistics departments and turned towards 3PLs for cutting down distribution costs. Automobile manufacturers catering to the services of 3PL providers have managed to considerably reduce their operational costs.

Service Insights

The 3PL market has been segregated into five services, namely Dedicated Contract Carriage (DCC), Domestic Transportation Management (DTM), International Transportation Management (ITM), warehousing & distribution, and software.

DCC involves supplying trucks, trailers, tractors, drivers and managing multiple elements involved in a supply chain. DCC is a high growing segment of the trucking and distribution industry. Prominent companies such as Kroger, Target, andWal-Mart use DCC for reducing costs and increasing truck capacity. Several major corporations requiring a truck fleet have moved away from ownership towards DCC for their trucking operations. 

DTM includes value-added transportation management services performed in conjunction with freight brokerage, which deals with shipments originating in and destined to a particular point or hub. ITM is similar to DTM, the only difference being that it deals with international shipments. Warehousing and distribution include long-term contract warehousing or distribution center operations with several value-adds. Pharmaceutical and refrigerated grocery applications constitute the major growth areas for value-added warehousing services.

Regional Insights

Asia Pacific accounted for a significant proportion of market share owing to increased growth prospects for warehousing and distribution facilities in countries such as India, China, Thailand, Indonesia, and Singapore. Indonesia is expected to offer new avenues for 3PL service markets by virtue of its considerable stability on the political front.

In North America, the U.S. and Mexico are poised for high growth as a result of decreasing transportation and labor costs. Technological advancements in logistics software have spurred the U.S. 3PL market to a great extent, with increased deployment of cloud computing and TMS. 3PLs in Mexico are expected to witness significant business gains owing to the continuation of nearshoring from China to Mexico and narrowing wage gap between the two countries.

Europe’s growth prospects have subsided owing to the negative effect of the Eurozone crisis on the regional market, which has significantly affected the transportation and logistics industry in Europe and ultimately the 3PL market. Life science and automotive industries have exhibited notable rebound and are expected to drive the rejuvenation of the European 3PL market.

Competitive Insights

The 3PL market is moderately fragmented with the arrival of several new entrants, which may pose a challenge to the established players. Merger and acquisition (M&A) activity has considerably dampened in the industry owing to reasons such as lack of attractive targets, risks pertaining to economic uncertainties, negative experiences with previous acquisitions, and overpriced companies. 

Continuously evolving and developing latest IT and automation systems for better material tracking, motivated workforce, security, flexibility, and value addition, is expected to emerge as a key differentiating parameter of judgment while selecting a logistics partner. Since cloud computing has garnered significant importance in logistics and transport business by enabling real-time data accessibility, logistics providers have increasingly adopted cloud-based remote data management services to reduce their IT and overhead costs in a bid to maintain competitiveness. Leading players such as Kuehne + Nagel and FedEx have continuously worked on incorporating new features in their transportation management systems for enhancing their supply chain operations. Key players in the 3PL market include C.H. Robinson Worldwide, UPS Supply Chain Solutions, J.B. Hunt, Kuehne + Nagel, DHL, and FedEx.


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