Third Party Logistics (3PL) Market Report

Third Party Logistics (3PL) Market Analysis Report By Service, By End Use (Retail, Manufacturing, Automotive), By Transport (Roadways, Railways, Waterways), And Segment Forecasts, 2019 - 2025

  • Published Date: Jun, 2019
  • Base Year for Estimate: 2018
  • Report ID: 978-1-68038-346-1
  • Format: Electronic (PDF)
  • Historical Data: 2014 - 2017
  • Number of Pages: 219

Industry Insights

The global third party logistics market size was valued at USD 728.6 billion in 2018 and is expected to register a CAGR of 7.5% from 2019 to 2025. Service providers have emphasized on enhancing their supply chain activities to address the growing demand for shopping. They are also harnessing the benefits of automated freight payment and audit services for minimizing costs.

Companies who outsource their logistics to specialized 3PL players have managed to considerably reduce their capital expenditure (CAPEX), mitigate risks, and more importantly, focus on the core competencies of their business operations, which helps them gain a high degree of competitive advantage.

U.S. third party logistics market

Demand for efficient inventory management and improved working capital is expected to increase the dependence on 3PL providers. Growth of the e-commerce industry across several regions has increased freight transportation, thus creating new opportunities for 3PL providers.

Lean inventories, time-sensitive deliveries, and shorter product lifecycles demand effective supply chain management. The emergence of new technologies in the 3PL market makes the supply chain more relevant. An integrated cloud-based platform enhances the value and adds flexibility to the outsourcing process. Incorporating technologies such as Transportation Management Systems (TMS) for route optimization and Radio Frequency Identification (RFID) for shipment tracking are expected to play pivotal roles in differentiating service providers.

Provision of effective logistics services tailored as per specific industries is emerging as a differentiating factor among 3PL service providers, which plays a pivotal role in determining their competitiveness. Prominent service providers are also making strategic use of Big Data to enhance their supply-chain management processes. Big Data aids in reduction of manpower costs by making use of predictive analysis on routing, thereby eliminating delays in shipments.

It has been observed that manufacturers as well as customers in developing countries do not possess the necessary amount of internal control needed to tackle logistical challenges, which has increased their dependence on 3PL service providers. Key vendors have adopted cloud-based Customer Relationship Management (CRM) solutions to enhance shipper-vendor rapport and minimize supply chain complexities by increasing process visibility.

Automation of logistics services and growing popularity of IoT-based services are expected to provide new growth avenues over the next few years. Implementation of automatic systems has led to improved logistics performance and increased efficiency. For instance, intelligent warehouse automation enhances efficiency, reduces errors, and improves logistics process. As providers seek ways to maximize their throughput, they are increasingly adopting automation solutions.

Service Insights

The Domestic Transportation Management (DTM) segment held the largest market size in 2018. International, as well as domestic trade, has increased significantly due to globalization, which has resulted in customers demanding efficient logistics operations to satiate their need for timely delivery. Service providers are striving to reduce the complexity and costs of their supply chain by improving the control over it, in order to accomplish effective management of a purchased transportation process.

Increased supply chain management and continued growth in global economic activity and have led to a substantial increase in demand for international transportation management services. Moreover, introduction of trade liberalization policies has boosted international trade, thereby propelling demand for these services. Increase in cross-border logistics activities is further expected to provide significant growth opportunities.

The Value-Added Logistics Service (VAL) segment is expected to witness the fastest growth from 2019 to 2025. VAL comprises sub-assembly, labeling, packaging, postponement, sequencing, and kitting services. These services are becoming attractive opportunities for companies to reduce their spending on transportation and back-office functions such as order taking, warehousing, and packaging.

Dedicated Contract Carriage (DCC) is a fast-growing segment of the trucking and distribution industry. Prominent companies, such as Kroger, Target, and Wal-Mart, use DCC to reduce costs and increase truck capacity. Several major corporations requiring a truck fleet have stepped down from ownership for their trucking operations.

Healthy growth of global economies and rise in demand for e-commerce products have tightened the airfreight capacity and fueled the growth of International Transportation Management (ITM). Free Trade Agreements (FTAs) across several countries are propelling the demand for outsourced logistics services. The EU-Japan FTA and the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) are two recent examples of the same. FTAs have increased merchandise trade between partner countries, thus driving demand for 3PL services.

Transport Insights

The roadways segment captured the highest revenue share in 2018, being valued at well over USD 400.0 billion. Increasing emphasis on developing a logistics infrastructure and a public-private partnership model for highway construction is boosting the growth of 3PL services through road transportation. Growing number of government initiatives and increasing investments to develop road transport networks to boost freight forwarding have led vendors to adopt road transportation modes. A cohesive aim to develop logistics infrastructures and growth in new road-concession models are propelling the growth of 3PL services through roadways.

Airways is anticipated to be one of the fastest growing segments over the forecast period, supported by rise in global investment, demand for shorter shipping lead times, and increased per capita income of developing countries. As per data released by the International Air Transport Association (IATA), there was a 2.3% increase in air freight volumes from January 2018 to August 2018 as compared to the same period in 2017. Over the next few years, IATA expects the demand for air freight services to witness further growth.

End-use Insights

The manufacturing sector held the largest revenue share in 2018. The buyout manufacturing sector in Mexico, U.S., and India witnessed considerable demand for outsourcing of logistics activities. Tax reform policies by the U.S. government and other government initiatives are helping the local manufacturing sector in U.S. Tax reform repatriated several projects to the country, giving a major push to “Made in USA” initiative. Mexico is one of the major exporters of manufacturing goods that include electrical machinery and equipment, automobile parts, and medical apparatus. The United States-Mexico-Canada Agreement (USMCA) is expected to have a profound impact on Mexico’s automotive industry.

The retail sector is expected to grow at the highest rate over the forecast period. Since the past few years, dedicated logistics service providers for the retail industry are entering the 3PL market with a technology-centric approach. Retailers are adopting 3PL services for data-driven analytical solutions for predictive analytics to manage their fleet, design, and distribution strategies and reduce their inventory management costs. E-retailing has gained momentum as a direct consequence of the growth in the e-commerce industry. This has helped companies cater to semi-urban regions, thus expanding their geographical reach.

Global third party logistics market

Demand for 3PL services in the automotive sector is also expected to witness considerable growth. Automotive manufacturers are spinning off their internal logistics departments and distribution networks in the wake of adopting these services. Moreover, manufacturers with unused warehouse spaces are establishing their in-house 3PL businesses to maximize the use of assets and cope with increasing outsourcing trends.

Regional Insights

The Asia Pacific third-party logistics market was the largest revenue generator in 2018, capturing over 35.0% of the industry that year. Economic growth in India and China is augmenting regional growth. Economic revival, Goods and Services Tax (GST) implementations, and rising e-commerce penetration are key factors contributing to the industry growth in India.The GST is expected to reduce logistics cost significantly, thereby increasing the competitiveness of the Indian economy.

Increasing ongoing investments in railways, roads, and airways across emerging economies of the region are expected to bolster warehousing and logistics demand over the forecast period. Furthermore, continued retail formalization and establishment of low-cost manufacturing units in the region are offering new growth opportunities for third-party service providers.

The North America market is expected to exhibit noteworthy growth, which is attributable to growing demand for logistics software. Increased investments to enhance route optimization and visibility are expected to drive demand for 3PL services in the region. Additionally, need for tailored transportation and supply chain services for ensuring coordinated movement of goods is boosting regional growth. Stringent product tracking requirements, coupled with rising need for cold chains, is expected to drive the industry.

Europe is anticipated to witness sluggish growth over the next few years owing to ongoing apprehensions pertaining to labor shortage and talent management. There is heightened need for more efficient logistics operations, with U.K. spearheading the uptake of these services. However, the sector is expected to be revived on account of strong investor and tenant demand in the regional 3PL industry. Restructuring of supply chain activities and an expanding e-commerce sector is expected to positively impact industry growth over the next few years.

Third Party Logistics Market Share Insights

DHL International GmbH; Kuehne + Nagel International AG; C.H. Robinson Worldwide Inc.; UPS Supply Chain Solutions Inc.; and FedEx Corporation are some of the leading players maneuvering the dynamics of the market. These companies are providing technology-driven services such as real-time tracking of shipments and route optimization. Moreover, features such as inventory tracking and online documentation for internal flights are attracting shippers to opt for third-party logistics solutions. 3PL providers are collaborating with regional players owing to their knowledge of local markets and higher profit margins to lower overhead costs. Key providers are sub-contracting services to these players to maintain their competitiveness.

The market is highly competitive with several large companies strategically forming alliances with mid-sized or small-sized companies to leverage their regional capabilities in logistics. Many e-commerce companies are strengthening their logistics activities through strategic acquisitions or alliances for a higher profit margin and lower overhead costs. Alibaba Group Holding Limited, an e-commerce and specialized retail company based in China, holds several minority stakes in YTO Express, Singapore Post, and ZTO Express.

Report Scope

Attribute

Details

Base year for estimation

2018

Actual estimates/Historical data

2014 - 2017

Forecast period

2019 - 2025

Market representation

Market revenue in USD Billion & CAGR from 2019 to 2025

Regional scope

North America, Europe, Asia Pacific, Latin America, and MEA

Country scope

U.S., Canada, U.K., Germany, France, Poland, Hungary, China, India, Japan, Thailand, Vietnam, South Korea, Australia, Brazil, and Mexico

Report coverage

Revenue forecast, company share, competitive landscape, growth factors, and trends

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Segments Covered in the Report

This report forecasts revenue growth at global, regional, and country levels and provides an analysis of latest industry trends in each of the sub-segments from 2019 to 2025. For the purpose of this study, Grand View Research has segmented the global third party logistics market report on the basis of service, transport, end use, and region:

  • Service Outlook (Revenue, USD Billion, 2014 - 2025)

    • Dedicated Contract Carriage (DCC)/Freight forwarding

    • Domestic Transportation Management (DTM)

    • International Transportation Management (ITM)

    • Warehousing & Distribution (W&D)

    • Value Added Logistics Services (VALs)

  • Transport Outlook (Revenue, USD Billion, 2014 - 2025)

    • Roadways

    • Railways

    • Waterways

    • Airways

  • End-use Outlook (Revenue, USD Billion, 2014 - 2025)

    • Manufacturing

    • Retail

    • Healthcare

    • Automotive

    • Others

  • Regional Outlook (Revenue, USD Billion, 2014 - 2025)

    • North America

      • U.S.

      • Canada

    • Europe

      • Germany

      • U.K.

      • France

      • Poland

      • Hungary

    • Asia Pacific

      • China

      • India

      • Japan

      • Australia

      • Thailand

      • Vietnam

      • South Korea

    • Latin America

      • Brazil

      • Mexico

    • MEA

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