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

Nov. 14, 2017
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 CAGR of 4.2 percent from 2010 to 2016. 

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.

Adding an oversized paint booth to your shop is a big investment for a potentially big return. This free whitepaper has everything you need to consider ahead of time.

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.

3PL revenues from e-commerce activity are growing faster than the overall 3PL market. Of the $802.2 billion of total 3PL revenues globally, e-commerce related revenues are expected to grow from $40.6 billion in 2016 to $72.8 billion in 2020, accounting for 5.1 percent and 7.2 percent of total 3PL revenues, respectively. E-commerce 3PL business has a CAGR of 15.7 percent, compared to overall 3PL growth of 6 percent.

Armstrong expects strong 3PL growth in Europe, where market penetration currently stands at just 25 percent and the region is emerging slowly from an austerity-driven recession. North America will also see strong 3PL growth as the U.S. economy continues to improve. The CAGR for 3PL revenue in Europe was negative 0.6 percent from 2010 to 2016, and is expected to improve to 3.4 percent through 2022. The fastest growing regions are India with a CAGR of 11 percent, China at 8.8 percent, Russia at 8 percent, Africa at 7.7 percent, and South America at 7.7 percent.

According to the report: “In 2016, the Asia Pacific 3PL market, at $305 billion, was 53 percent larger than the North American 3PL market. We estimate that it will surpass $480 billion in 2022. When we look at regions for future 3PL market growth through 2022, [our research] highlights the Asia Pacific with a projected above-average compound annual growth rate (CAGR) of 6.8 percent from 2010 through 2022.”

Based on gross revenue, the top seven 3PLs are DHL, Kuehne + Nagel, Nippon Express, DB Schenker, C.H. Robinson, DSV and XPO Logistics.

Technology is a key part of their success. Armstrong says that the competitive differentiators between 3PLs include supply chain management systems capabilities, operations process management skills and logistics engineering expertise.

According to the report: “Most tier-one 3PLs have implemented integrated systems platforms to support global transportation and warehouse management operations providing large customers with a ‘control tower’ supply chain network management approach. These platforms offer internet visibility and exception handling capabilities combined with transportation management functionality for the daily management of orders, customer inventory and the optimization of thousands of shipments across large geographical areas.”

Recent moves by large e-tailers like Amazon and Alibaba could also present some new competitive pressures on 3PLs. Ranked by warehouse space, the top five 3PLs would include DHL, Amazon.com (if it were counted as a 3PL) XPO Logistics, Kuehne + Nagel and Nippon Express.

Warehousing costs are 18 percent of transportation costs worldwide; that figure is 15 percent in the U.S. That’s an important consideration for shippers and carriers looking for ways to shave costs. According to Armstrong: “In our consulting practice, we have seen companies lose track of the transportation/inventory carrying/warehousing costs rank order. As a result, they tend to carry excessive inventory and diminish supply chain visibility.”


Subscribe to Aftermarket Business World and receive articles like this every month….absolutely free. Click here.

Take on Big Paint Jobs

GFS_Take_on_Big_Paint_Jobs_WP_Img
Get the Whitepaper

Sponsored Recommendations

ZEUS+: The Cutting-Edge Diagnostic Solution for Smart, Fast, and Efficient Auto Repairs

The new ZEUS+ simplifies your diagnostic process and guides you through the right repair, avoiding unnecessary steps along the way. It gives you the software coverage, processing...

Diagnostic Pre- and Post-scan Reports are Solid Gold for Profitability

The following article highlights the significance of pre-scans and post-scans, particularly with Snap-on scan tools, showcasing their efficiency in diagnosing issues and preventing...

Unlock Precision and Certainty: TRITON-D10 Webinar Training for Advanced Vehicle Diagnostics

The TRITON-D10 lets you dig deep into the systems of a vehicle and evaluate performance with comparative data, systematically eliminating the unnecessary to provide you with only...

APOLLO-D9: Trustworthy Diagnostics for Precision Repairs

The APOLLO-D9 provides the diagnostic information and resources you need to get the job done. No more hunting through forums or endlessly searching to find the right answers. ...

Voice Your Opinion!

To join the conversation, and become an exclusive member of Vehicle Service Pros, create an account today!