The global spare parts logistics (SPL) market, which includes automotive parts, currently stands at $52.7 billion a year, representing approximately 6.9 percent of total third-party logistics (3PL) revenue. That represents a 2008-2016 compound annual growth rate (CAGR) of 5.5, according to new research from Armstrong & Associates.
Armstrong recently released a new report, "Keep it Running: The Quintessential Spare Parts Logistics Report."
The automotive industry accounts for $18.1 billion (34.3 percent) of total SPL revenue. The technology segment comes in second ($17.7 billion, or 33.5 percent), while the industrial market accounts for $10.9 billion (20.7 percent) of total SPL revenue. Elements and healthcare make up smaller portions of the total at $3.9 billion (7.4 percent) and $2.1 billion (4 percent), respectively.
The SPL market is growing right along with the rest of the logistics segment. Orbis Research estimates that the total global 3PL market will reach $925.31 billion by 2020, and experience a CAGR of 5.52 percent.
According to previous research from Armstrong, the total global 3PL market stood at 161.2 billion in 2015.
Geographically, Asia Pacific has the largest share of the SPL market (34.5 percent, or $18.2 billion), while North America accounts for $13.1 billion (24.9 percent), and Europe comes in third at $10.9 billion (20.7 percent).
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Transportation accounts for 70 percent to 75 percent of total costs, while warehousing makes up 25 to 30 percent. The transportation component is higher in North America and Asia than in Europe.
3PL specialists target automotive
The SPL market is served by large 3PLs like Schenker, Ryder, SEKO, UPS, FedEx, DHL, and CEVA.
There could be new players emerging, however, as it appears Amazon is trying to position itself as a logistics and supply chain operator. The company has opened new distribution centers and leased a new fleet of trucks and Boeing jets to speed delivery times. Recently, the company announced plans to build a worldwide air cargo hub in northern Kentucky. So far, the company is focused on fulfilling its own e-commerce orders, but the infrastructure it is putting in place could easily serve as a 3PL network.
According to the Armstrong report: “If all of Amazon’s warehouses, accounting for 100.6 million square feet of space were counted as 3PL [value-added warehousing and distribution] space, it would be the third largest global VAWD 3PL behind DHL Supply Chain & Global Forwarding with 248 million square feet and XPO Logistics with 151 million square feet. Amazon is also growing its internal freight forwarding and domestic transportation management skills, so we are awaiting the day when it truly goes to market as an integrated 3PL. It has already described itself as a transportation service provider in a recent 10-K filing.”
E-commerce is driving business for all of the major carriers. In February UPS reported that 55 percent of its fourth-quarter deliveries (and 63 percent of its December deliveries) were directly to customers.
Increasingly, 3PLs are offering services to small and mid-size businesses to help them launch e-commerce businesses. In February, FedEx Supply Chain launched FedEx Fulfillment, an e-commerce solution that helps businesses fulfill orders from multiple channels, including websites and online marketplaces.
“FedEx Fulfillment is the latest in a series of offerings designed to help our customers succeed as e-commerce continues to grow,” said Carl Asmus, senior vice president, E-Commerce, FedEx Express. “Moving goods efficiently and reliably is what we do best. By teaming up with FedEx Supply Chain and utilizing the world-renowned FedEx networks, customers can focus less on fulfillment and logistics challenges and more on growing their businesses.”
As part of its own e-commerce and omni-channel strategy, DB Schenker Logistics is implementing CarryPick, an automated guided vehicle picking system that uses self-driving robots to bring mobile racks to picking stations.
Schenker has a big presence in automotive, providing spare logistics services as an add-on to its operations supporting vehicle manufacturing plants in Europe, Asia and the Americas. Volkswagen contracted with the carrier to create a regional distribution center in Singapore, which helped the automaker improve lead times by 40 percent to 50 percent.
CEVA, likewise, offers a number of automotive-specific 3PL services including customer relationship management, distribution planning, warehousing and transportation, and reverse logistics.
The Armstrong report also provides a short case study explaining how Jaguar Land Rover leveraged SEKO’s capabilities to manage its global warranty parts returns service. The company provides end-to-end shipment tracking and routes returns to suppliers to Jaguar’s UK dealerships.
The report is available to download here.
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