Key Takeaways from Armstrong & Associates’ 3PL Value Creation North America Summit
MILWAUKEE, Nov. 11, 2019 /PRNewswire/ -- On October 15-17th, third-party logistics (3PL), technology, and investment leaders convened at Armstrong & Associates’ 3PL Value Creation North America Summit in Chicago to discuss trends in the $951 billion global 3PL market.
Many of the 3PL panelists reported double-digit growth in 2018 followed by “good, but not great” growth in 2019. E-commerce has continued to stimulate opportunities, but uncertainty caused by trade wars and import tariffs have impacted activity, acquisitions, and decision making.
For those who missed this year’s Summit, we’ve provided a portion of the trends, below. The full list of key takeaways can be found here: https://www.3plogistics.com/3pl-market-info-resources/3pl-value-creation-chicago-key-takeaways/3plna_keytakeaways/
Tariffs and International Transportation Management The trade war with China has generated some shifts in international supply chains and conservative decision-making approaches by customers.
- The start of 2019 was soft for International Transportation Management (ITM). Both air and ocean forwarding from China to the U.S. has decreased due to increased political tensions. It has also negatively impacted intermodal rail.
- Within all ITM, conservative shipper behavior has led to an increase in air freight forwarding. Companies are waiting until the last minute possible before importing goods.
- Tariffs have led to some supply chain shifts to Southeast Asia (Vietnam, Taiwan, and India) and western Europe. Large companies like Samsung or Yeti can quickly pivot their supply chains from China to Vietnam. But heavily integrated supply chains in China, or smaller competitors are at a disadvantage. It’s harder for them to identify a new supplier and then design and test the potential supply chain.
E-Commerce & AmazonE-commerce has become a growth driver in all 3PL segments and working with or against Amazon remains a hot topic.
- Panelists agreed that e-commerce remains a strong growth driver for the third-party logistics industry, even amongst ongoing tariff concerns. Armstrong & Associates estimates 2018 U.S. e-commerce logistics costs were $141.6 billion, with no immediate signs of slow down.
- E-commerce presents many opportunities for 3PL providers. E-commerce business is also bringing omnichannel business with it. E-commerce can result in higher margins for 3PL providers, and its volatile volumes play well for non-asset-based companies.
- Manufacturers and 3PL providers strategize how to work with or against Amazon. Many are following FedEx’s challenges after its recent decision to discontinue direct business with Amazon.
FinancialTightening on the lending side and uncertainty in the market has slowed down M&A activity in 2019. Investments and acquisitions are still occurring for organizations that offer a strategic service, human capital, or technological synergy to the partnership.
- Deals are being discussed but not closed. Sellers have been looking for higher multiples because of growth in 2018, which has not been repeated. The volume slowdown in 2019 has led buyers that were looking for small to mid-sized family-owned companies to “buy and build” to push back M&A discussions until December 2019.
- Buyers are seeking out companies with acute specializations that can be used to attract new customers or cross sell to existing customers with a new service.
Technology & InnovationTechnology and innovation vary tremendously by customer need. Value can be added through systems already in use or by seeking out a new solution.
- Blockchain offers the potential value of connecting hundreds of different information systems together and in a highly secure way.
- Big data, analytics and artificial intelligence are still key areas of interest. With increasing labor, hiring, and training costs in warehousing, robots offer an even greater return on investment.
Value-Added Warehousing and DistributionA record 2018 has been followed with a “good” 2019 with fewer projects in the pipeline and pent up activity. Value-added services offer a way to differentiate.
- The industrial real estate market continues to boom. Space is becoming an issue, leading to speculation on where future growth will be – underground (seen in Tel Aviv) or up high. Major consolidation is occurring from bigger owners such as Prologis and Blackstone.
- 3PL providers are writing warehouse capacity and its impact on service levels into commercial contracts.
Domestic Transportation Management and DigitalizationWhile growth has softened compared to 2018, many feel that 2019 will finish well. Industry changes, trade wars, the looming election, and rising competition have led to a feeling of general uncertainty going into 2020 and beyond.
- Most of the growth in 2018 was in truckload domestic transportation management and spot market activity surged, 2019 has tipped to more contract business. Final mile transportation is hot.
- The final ELD deadline in December 2019, rising insurance costs, and the drug and alcohol database may result in less carrier capacity in 2020.
To learn more about future events from Armstrong & Associates, Inc., subscribe to or call +1-800-525-3915.ABOUT ARMSTRONG & ASSOCIATES, INC. Armstrong & Associates, Inc. (A&A) was established in 1980 to meet the needs of a newly deregulated domestic transportation market. Since then, through its leading Third-Party Logistics (3PL) market research and history of helping companies outsource logistics functions, A&A has become an internationally recognized key resource for 3PL market information and consulting.A&A’s mission is to have leading proprietary supply chain knowledge and market research not available anywhere else. As proof of our continued work in supporting our mission, A&A’s 3PL market research is frequently cited in media articles, publications, and securities filings by publicly traded 3PLs. In addition, A&A’s email newsletter currently has over 85,000 subscribers globally.A&A’s market research complements its consulting activities by providing continually updated data for analysis. Based upon its unsurpassed knowledge of the 3PL market and the operations of leading 3PLs, A&A has provided strategic planning consulting services to over 30 3PLs, supported 21 closed investment transactions, and provided advice to numerous companies looking to benchmark existing 3PL operations or outsource logistics functions.Armstrong & Associates, Inc. 10401 West Lincoln Avenue, Suite 207 Milwaukee, WI 53227 USA Phone: +1-414-545-3838 Fax: +1-414-545-3906
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