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THE TOP 40 3PLs 2009

A survey of North American 3PLs in August show 3PLs’ gross revenues were down over 12 percent. Seventy-two percent of the companies said gross revenues were down for the year. Twenty-four percent said their revenues were up. Net revenues were reported as down by 5.9 percent. Here’s an overview of 2009 and where 3PLs are forecast to develop in the future.

By Richard Armstrong

3PL MARKET SEGMENTS VARY SIGNIFICANTLY. Value-added warehousing (contract logistics) revenues declined by 2.8 percent. Indeed, some well-known VAWD 3PLs are reporting increased revenues for the year. GENCO’s business is up over 10 percent for the year. Chicago-based DSC is up seven percent. Companies with a heavy VAWD presence in automotive logistics have fared worse than most VAWDs.

3PL Survey Revenue 
Estimated Results – 2009 
Vertical Industry March August 
Automotive -37.5% -18.5% 
Consumer Goods -7.3% -3.7% 
Healthcare -2.3% -2.0% 
Industrial -7.0% -6.3% 
Hi-Tech -6.7% -7.2% 
Retail -8.1% -11.3% 
Food and Beverage -.1% -1.2%

Companies in the transportation management segments have uniformly seen reductions in revenue. Domestic transportation managers (including freight brokers) reported gross revenues down by nearly 13 percent. International transportation management (including freight forwarding) is down 16 percent. Especially hard hit has been air freight where volumes are running 20 to 25 percent less. Bucking the trend has been C.H. Robinson. CHR is expected to have a net revenue increase of three percent this year with a slight increase in net income. CHR dominates North American domestic transportation management with more than 20 percent of total revenue and 40 percent of EBIT.

Expeditors International, the leading freight forwarder in North America, reported gross revenues down 35 percent for the first six months of 2009. Net revenues were down 14 percent and net income was down by 18 percent. Peter Rose, Chairman of Expeditors has made a point of saying that no employees had been laid off. Salaries were down by just over 10 percent. Many top layer Expeditors’ personnel have compensation packages heavily loaded to bonuses. Much of the salary reduction has come from a drop in those bonuses.

Dedicated contract carriage has dropped by 15 percent for 2009 compared to 2008. Forecasts for industry leader J.B. Hunt are for 2009 DCC revenues to be down 17 percent.

Results by industry verticals indicate improvement in the second quarter over the first quarter. Automotive logistics improved to negative 18.5 percent in Q2 from negative 37.5 percent in the first quarter. These numbers reflect the collapse of GM and Chrysler as well as the reduced sales of other automakers. Michigan and Ontario and several of their “old line” 3PL operations have been hit particularly hard.

Automotive vertical leaders Penske Logistics and Ryder SCS both experienced large drops in revenue. Ryder SCS’s gross and net revenues were down by over 25 percent for the first half of the year.

Estimates are that Penske and Ryder’s reduced volumes will hold for the year. Food and beverage, as expected, has not been affected significantly. People gotta eat. Switching to generic brands doesn’t reduce the volumes transported and stored.

Retail and hi-tech have not shown any significant improvement through the first eight months. Most industry watchers expect volume improvements through the second half of 2009 but no significant rise in retail volumes for a normal consumer Christmas rush.

When asked how they expected their revenues to do for the 2009 fiscal year, the 3PL responses were primarily negative. The averages were for gross revenues to be down 8.1 percent and net revenues to be down 2.6 percent versus 2008.

With regard to fiscal year 2009, most 3PLs are ready to say, “I am glad that’s over.”

Top 20 in Asia to United States Ocean TEUs – 2008
Total Asia Rank NVOCC/Freight Forwarder to U.S. TEUs
1 Expeditors International of Washington, Inc. 406,520 
2 Blue Anchor Line/Kuehne + Nagel Inc. 165,766 
3 Orient Express Container Co., Inc. 152,908 
4 Schenkerocean 148,000 
5 Pantainer (Panalpina Inc.) 145,000 
6 Apex Shipping Co. 141,458 
7 Topocean Consolidation Service Inc. 107,949 
8 Phoenix International Freight Services, Ltd. 106,309 
9 Danmar Lines/DHL Exel 104,768 
10 Scanwell Logistics (HK) Ltd. 100,000 
11 Summit Logistics International, Inc. 98,985 
12 De Well Container Shipping Corp. 95,139 
13 UPS Ocean Freight Services, Inc. 91,957 
14 Hecny Shipping Ltd. 83,160 
15 China Container Line USA Inc. 80,352 
16 Honour Lane Shipping Ltd. 78,280 
17 China International Freight Co., Ltd. 66,452 
18 ANR Inc. 63,666 
19 Christal Lines/C.H. Robinson 56,299 
20 Translink Shipping, Inc. 49,259

The Big Get Better
A small group of global supply chain managers (GSM) continue to expand their size and scale advantages, particularly in information technologybased solutions. For example, CEVA now has more than one dozen standardized global supply chain solutions. DHL’s Global Customer Solutions and Kuehne + Nagel’s Lead Logistics Solutions have developed along the same lines. Panalpina’s Panlogic Suite is a high powered tool for GSM. All of these 3PLs having increasing name brand recognition in search of the industry leader UPS SCS. Typically 4PL/LLP solutions designed by the major 3PLs cover trans-global order and inventory management from factories in Asia to customers in Europe and North America. Usually, supply chain design and management as practiced by the GSM will include control towers whose life blood is EDI and email messages covering transportation events, cross-docking, customs issues and warehouse management. That is, more supply chains are being managed by 4PLs who never see the freight.

Because of their size and scale development, the major 3PLs are increasingly more capable of being the sole lead logistics providers for medium size companies with less than $5 billion in revenue, the 4PL for Fortune 500 companies, or the LLP for a division of a Fortune 500 company. Often company divisions are structured on a continental basis. LLPs may vary by continent with LLP/3PL roles reversed in North America, Europe and Asia.

The biggest story of the year among GSM is the “carve out” purchase of IBM’s in-house supply chain management activities. The purchase price was $423 million. Seven hundred fifty IBM employees transferred to Geodis, the new 4PL. Geodis is a large French 3PL with $7 billion in turnover. It is owned by SNCF, the French railway which is owned by the government. Geodis now manages IBM’s $1.4 million logistics spend. Geodis in North America operates as a non-asset player and 4PL. As a result, ironies of coopertition result.

In July, Geodis issued a press release that DHL and Apple Express, in partnership acquired the warehouse logistics handling of the Geodis (IBM) service parts operations. Nineteen parts inventory locations are now being managed by Apple. DHL is managing two distribution center locations in Markham. The deal is multi-year and the transfer took place on October 3. Geodis employees were outsourced to Apple and DHL. The outsourcing from inception to completion took 18 months.

We expect outsourcing of major logistics operations to increase over the next few years as more companies fall behind the expanded capabilities of GSM.

Another major shift in the North American market has been the redesign of Ryder’s SCS. John Williford, president, led a significant expansion in Canada through the purchases of CRSA Logistics and Transpacific Container Terminal. Williford also led Ryder’s exit from Europe and South America. An expanded Asia base is in the works with plans to be more involved in Asia-North America retail supply chains.

Ryder will have significant established competition in the Asia-North America markets. Expeditors is the leading air and ocean forwarder and customs broker in this lane. Also there are a host of Chinese competitors, especially in ocean forwarding, who are interested in expanding to the United States. They are interested in buying American companies and controlling purchase order management.

What’s Next?
Economic recovery in North America should continue throughout 2010. By year end, 3PL activity should be close to 2008 levels.

Outsourcing to 3PLs should proceed at two to three times the increase in GDP. Watch for more big company “carve outs” like the IBM/Geodis deal.

Global supply chain solutions can be expected to become more frequent. The top 10 3PLs will grow stronger with these scale-based solutions. Smaller companies will find it increasingly hard to compete.

Security modifications should become a more accepted practice by year end. Perhaps technology will bring back quicker border crossings between Canada, the United States and Mexico.

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