Economic conditions appeared to slightly improve for third-party logistics companies surveyed in 2010 in North America, according to the 18th Annual Survey of Third-Party Logistics Providers. Companies experienced improved economic conditions in 2010, with 88% of companies surveyed in North America meeting or exceeding their revenue projections, as compared with only 50% in 2009.
All of the companies surveyed were profitable and none of the CEOs believed the regional third-party logistics industry operated at a loss for the year. The findings analyze responses from 36 third-party logistics company CEOs across North America, Europe and Asia-Pacific whose companies were responsible for generating approximately $58 billion in revenue in 2010. The survey was underwritten by Penske Logistics.
In Europe, economic conditions continued to be challenging for third-party logistics companies with only 55% of companies surveyed meeting or exceeding their revenue growth projections for the year, as opposed to 90 percent of companies surveyed in Asia-Pacific. Growth projections are most optimistic in Asia, with companies expecting to grow 15.8% in the next year, as compared to 10.8% expected in North America and 8.4% in Europe.
"CEOs continue to grapple with industry dynamics such as a stagnating economy, pricing pressures, rising costs and the impact of regulatory changes," commented Dr. Robert Lieb, Professor of Supply Chain Management at Northeastern University and author of the study. "These are similar to the trends we've been seeing in years past, and we are confident that the industry can adapt."
With few exceptions, the CEOs are more bullish about the financial prospects of their companies over the next one and three year periods.
- One-year company revenue growth projections were 10.8% for North America (10.4% in 2010), 8.4% for Europe (7.2% in 2010), and 15.8% for APAC (22.5% in 2010). The average three-year company growth projections were 10.3% for North America (10.6% in 2010), 9.1% for Europe (8.3% in 2010), and 14.6% for APAC (19.5% in 2010).
- One-year regional 3PL industry revenue growth projections averaged 6.8% for North America (7.3% in 2010), 6.1% for Europe (4.8% in 2010), and 9.0% for APAC (15.4% in 2010). The average three-year regional 3PL industry growth projections were 8.0% for North America (7.8% in 2010), 6.3% for Europe (5.4% in 2010), and 10.3% for APAC (12.9% in 2010).
- Twenty-eight of the 36 CEOs surveyed reported their companies were profitable during 2010, with three reporting they broke even, and three reporting their companies were unprofitable.
Outlook for Logistics Mergers and Acquisition Activity (M&A)
- Only five of the 36 CEOs reported their companies were involved in significant M&A activity in their regions during the past year.
- Most believed the 3PL consolidation movement will continue in their regions.
- CEOs in all regions expect less than 9% of their companies average annual revenue growth to come from M&A over the next three years.
Disruptions from Japan Tsunami and Earthquake Cause Rethinking
- 25% of the North American 3PL CEOs reported that some of their customers had experienced a loss of sales in Japan. Thirteen percent of the European CEOs reported similar experiences, as did 50% of the CEOS surveyed in the APAC region.
- 88% of the 3PL CEOs included in the North American and European surveys reported that some of their customers had experienced a disruption of supply. 80% of the CEOS in the APAC region also reported that that was the case.
- 31% of the North American 3PL CEOs reported that some of their customers had experienced supplier failures as a result of the tsunami/earthquake. 50% of the CEOs involved in the European survey and 30% of those involved in the APAC survey also reported that to be the case.
- Nineteen CEOs reported expanding existing sustainability projects.
- The percentage of existing customers asking third-party logistics providers to analyze their supply chains in terms of environmental impact/cost were 8% for North America (15% in 2010), 8% for Europe (7% in 2010), and 7% APAC (9% in 2010).
- "Green" capability is 'infrequently' a major factor in attracting and retaining clients, according to 86% of CEOs surveyed.
Social Media Plays a Growing Role
The third-party logistics providers are generally optimistic about the value of social media activities moving forward, despite the impact of these activities having been limited to date.
- 69% of companies believe social media will become increasingly important in 3PL industry
- 64% of companies have LinkedIn accounts
- 47% of companies have Facebook pages
- 36% of companies have Twitter accounts
- 28% of companies post videos on YouTube
- 17% of companies surveyed have blogs