Third-Party Logistics Market Will Be Worth $925.31 Billion By 2020
Increased concentration on core competencies and outsourcing of secondary business activities such as logistics is expected to drive the third-party logistics market to reach $925.31 billion by 2020, according to a new study by Grand View Research.
Difficulties in managing geographically dispersed supply-chain operations as a result of increased globalization has led to several companies outsourcing their logistics function. Emerging trends such as big data and the availability of industry-tailored 3PL services are also expected to drive the market over the forecast period. Lack of internal controls for addressing logistical challenges has also led to increased 3PL outsourcing by wholesalers and retailers.
The study found that dedicated contract carriage is expected to be a fast growing segment of the trucking and distribution industry, with several prominent retailers such as Walmart, Target, and Kroger using this type of service in order to increase truck capacity and reduce costs. Domestic transportation management, which involves value-added transportation management services and freight brokerage, is expected to grow consistently throughout the forecast period. Refrigerated grocery and pharmaceutical applications are expected to emerge as the major growth areas for value-added warehousing services.
Asia Pacific accounted for over 30 percent of the 3PL market share in 2013, which can be primarily attributed to a surge in warehousing and distribution facilities in China, India, Indonesia, Singapore, and Thailand. The North American 3PL market is expected to witness high growth throughout the forecast period owing to gradually reducing labor and transportation costs in the U.S. and Mexico coupled with technological advancements in logistics software in the U.S. The Eurozone crisis has considerably dampened Europe’s transportation and logistics industry which has a direct bearing on the regional 3PL industry. Automotive and life science industries are expected to lead the rejuvenation of the European 3PL market.
The 3PL market is moderately fragmented due to a blend of new entrants and established players. However, several factors, ranging from overpriced companies, negative acquisition experiences, economic uncertainties, and the lack of attractive targets, have all dampened the mergers and acquisitions activity in the industry.
The development and evolution of the latest IT and automation systems for enhancing material tracking, value addition, flexibility, and security is expected to emerge as a key differentiating factor selecting a logistics partner. Leading logistics providers such as FedEx and Kuehne + Nagel continuously incorporate new features in their transportation management systems to enhance their supply chain operations.