2018 will go down as an outstanding year for third-party logistics in the U.S., according to a firm that tracks the 3PL market. The two main growth drivers were an extraordinary inventory build, as a result of shippers importing products to beat import tariffs, and solid domestic economic expansion.
“Coupled with tight domestic carrier capacity driving up rates, increasing fuel surcharge revenue, and expanding e-commerce business, the 2018 3PL market realized extraordinary growth over 2017,” according to Armstrong & Associates.
The firm estimates that U.S. 3PL market net revenues (gross revenues less purchased transportation) grew 12.1% to $86.4 billion and overall gross revenues increased 15.8%, bringing the total U.S. 3PL market to $213.5 billion in 2018.
The last time the U.S. saw this level of 3PL gross revenue growth was in 2010, Armstrong said, when the 3PL market bounced back 19% from its 16% decline in 2009 during the Great Recession.
The non-asset-based domestic transportation management segment, which primarily consists of freight brokerage services and to a lesser extent managed transportation, and digital freight matching companies/digital freight brokers, led all other 3PL segments, with overall gross revenue increasing a whopping 20.7% to $86.5 billion.
Revenues for this segment benefited from heavy port-to-warehouse and warehouse-to-warehouse moves, the strong domestic economy, rising carrier rates, increased fuel surcharge revenue and continued outsourcing among shippers.
“To find a better growth year, we have to go back to 2005 when the DTM segment had year-over-year growth of 21.2%,” Armstrong said.
However, the DTM market is also seeing emerging competition from new digital freight brokers such as Uber Freight, Convoy and Transfix. “One thing digital freight brokers have done is place an emphasis on “digitalizing” DTM operations replacing manual carrier sales/procurement and back office processes,” the firm noted.
Highlights from other segments in Armstrong’s report:
- International Transportation Management (air and ocean freight forwarding and complementary value-added services) posted 15.4% gross revenue growth in 2018 to $61.9 billion. This was ITM’s best showing since 2010.
- Dedicated Contract Carriage net revenues grew an estimated 15.8% to $17.8 billion. The leader in this segment, J.B. Hunt Dedicated Contract Services, with more than 10,000 power units in dedicated, posted net revenue growth of 25.9% to $2.2 billion, pushing its DCC market share over 12% on a net revenue basis.
- Value-added Warehousing and Distribution, even with the import tariff inventory builds, had the lowest rate of growth in 2018 compared to its transportation management related brethren. Nevertheless, gross revenue growth of 8% to $43.3 billion was the best the segment has realized since 2011.
The complete report can be purchased at 3PLogistics.com.
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