It’s been an incredible year to be one of the many 3rd party logistics companies in the U.S. market.
Not only is the economy improving, driving natural growth, but also companies across the country are beginning to see the value of partnering with a 3PL as their businesses again expand. Revenues are up 7.4 percent, to $157.2 billion dollars across the industry, a much faster growth than the 2.8 percent growth in logistics spending overall would indicate.
Growth Means Good News Overall
The impressive growth of 3PLs is largely due to the overall growth of retail and manufacturing sectors, both of which are looking to expand to pre-recession levels. During the recession, most of these distributors minimized their operations to save overhead and many trucking companies closed due to lack of demand. Now that demand for both shipping and warehouse space are again increasing, 3PLs are helping to fill in the gaps.
With flexible storage options and the ability to hire and manage their own teams of truckers, 3PLs have been the perfect choice for many retailers as their demand began to expand again. Instead of risking their own capital by investing in facilities and employees that might still be just temporary blips on the economic radar, choosing to work with a 3PL provides warehouse space and employees trained in the fine art of order fulfillment at a fraction of the cost.
But this is only the tip of the iceberg, according to Dick Armstrong, president of Armstrong and Associates, in a recent Wall Street Journal look at this topic. His company predicts that U.S. 3PL revenues will grow another 5.7 percent to $166.1 billion next year and will see revenues of $195.8 billion by 2018. Armstrong and Associates aren’t just predicting huge growth on home soil, though — 3PLs are expected to capture a larger share of global logistics spending, up to about 8.2 percent globally and as much as 14 percent in some markets.
3PLs Bring A Lot of Value
Companies that would have handled their own warehousing and distribution at one time are now realizing the value a 3PL can bring them. Joe Carlier, senior vice president of sales at Penske Logistics, indicates that his business is growing rapidly due to expanding demand from companies that might have not used logistics services in the past.
“As business has increased, customers are saying they need to increase their warehousing as they build up their inventories,” said Carlier in the same WSJ look at the 3PL sector. “But rather than build for themselves, they’re looking to third-party providers. Rather than go through the challenges of hiring drivers, they’re outsourcing.”