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International trade, e-commerce demands drive expanding use of 3PLs

Tuesday, November 14, 2017 - 09:00
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Armstrong & Associates projects that global spending on third-party logistics (3PL) will reach $1.1 trillion in 2022, up from $802 billion in 2016. The total cost of logistics in 2016 was $8.2 trillion.

3PL revenues in the automotive space have grown from $41 billion in 2010 to $52.5 billion in 2015, and should reach $54.9 billion by 2018. That represents a compound annual growth rate (CAGR) of 4.2 percent from 2010 to 2016. The growth from 2010 through 2018 averages slightly slower with a CAGR of 3.7 percent.

According to Technavio’s “Global Automotive Spare Parts Logistics Market 2016-2020” report, aftermarket parts may see higher logistics spending than the overall automotive market. Their forecast shows the global automotive spare parts logistics market will grow at a CAGR of 6.12 percent over the next several years.

Spare parts demand has spiked because of the aging vehicle fleets in Europe and North America. Technavio’s report indicates that logistics providers need to scale up and improve their stock planning and inventory management capabilities in China and other emerging markets as those country’s vehicle fleets continue to age. In China, more than a quarter of vehicles were six years or older in 2012; by the end of last year, that figure was expected to have increased to more than 36 percent.

Technavio expects to see market consolidation among logistics providers in the space. “Competition is intensifying, and vendors are seeking an edge by adapting to the changing marketplace. The industry is becoming more competitive because of the disorganized nature of the market, which includes local truck and warehouse owners. The market is capital-intensive and requires advanced technologies,” says Shakti Jakhar, logistics research analyst at Technavio.

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China is the largest logistics market by country in the world at $1.7 trillion according to Armstrong’s “Global and Regional Infrastructure, Logistics Costs and Third-Party Logistics Market Trends and Analysis” report. The overall Asia Pacific region is also the largest logistics market, accounting for 39 percent of total logistics costs and 38 percent of total 3PL revenues.

Logistics costs as a share of GDP varies by region, with the United States having the lowest ratio at 8.2 percent and Russia the highest at 16 percent.

Companies are using 3PLs more frequently because of the complexity of international trade and the demands of e-commerce. E-commerce customers in the Asia Pacific region spent $22 billion with 3PLs in 2016, and will spend as much as $40.2 billion in 2022. U.S. e-commerce customers spent $8.7 billion with 3PLs last year, and will spend $17.6 billion in 2022.

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