Current State of Third-Party Logistics · Frequency of 3PL Services 3,936 3PL customer...

Current State ofThird-Party Logistics

Phone: +1-608-873-8929Website: www.3PLogistics.com

©Copyright 2009 Armstrong & Associates, Inc.2

� Founded in 1980

� Supply Chain Market Research and Consulting Services

� Current Research:

� Who's Who Logistics and Supply Chain Management – Americas

� Who's Who in Logistics and Supply Chain Management – International

� Warehousing in North America – 2009 Market Size, Major 3PLs,

Benchmarking Costs, Prices and Practices

� Targeted in-depth market research papers

� Articles & Press Coverage: American Shipper, Global Logistics & Supply Chain Strategies, Journal of Commerce, Logistics Management, Logistics Quarterly, Modern Materials Handling, Traffic World, Transport Topics, Wall Street Journal

� Consulting Services: Benchmarking, Expert Witness, Logistics Outsourcing, Logistics Provider Contracting & Negotiation, M&A, Network Analysis & Design, Transportation Analysis, Systems Evaluation & Selection

� Global Resources: U.S. Organization; Eric Xiang, Shanghai China; Latin America, Japan and South Korea Alliance Partners

About Armstrong & Associates, Inc.


http://www.3plogistics.com/Site_Visits.htm

Click on the links below to view case studies completed previous years.


Third-Party Logistics (3PL) Value-Added Services

4PL/Lead Logistics Provider Consulting/Process Re-Engineering

Inventory/Vendor Management JIT Kanban

Light Manufacturing/Assembly Kitting/Pick & Pack

Call Center Management Reverse Logistics

Pool Distribution/Cross Docking WMS Deployment

Radio Frequency and Barcoding Deployment Small Package/Fulfillment

Food Grade/Temperature Controlled Hazmat Handling

Installation/Removal Home Delivery

ISO Certification Order Management

Transportation Network Planning and Optimization Transportation Execution/Freight Bill Payment

Carrier Contracting and Freight Brokerage Internet Supply Chain Visibility

Transportation and Event Management Systems Bulk Materials Handling

Customs Brokerage/ACE/C-TPAT/FAST Project Management

“The total number of value-added services and capabilities offered by a 3PL distinguish it from being just a trucking or public warehousing company and can provide the 3PL with a significant a competitive advantage over other 3PLs.”


Drivers of Global 3PL Market Growth

3PLs are providing the infrastructure necessary to support increasingly complex supply chains involved in global trade.

Low-Cost Country Sourcing

Off-Shoring & Outsourced Mfg.

Need Regional & Local Market Expertise

Focus on CoreCompetencies

Expanding IT Requirements

Cost Reductions

Operational Efficiencies

Regulatory Compliance

Sample A&A 3PL Market Research


2007 Global Logistics Costs & 3PL Revenue

Global 3PL Market = $487 Billion

3PL Revenue

Logistics Costs$-

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

North AmericaEurope

Asia PacificLatin America

Other Countries

$ B

illi

on

s

North America Europe Asia Pacific Latin America Other Countries

3PL Revenue $143 $170 $113 $15 $46

Logistics Costs $1,613 $1,696 $1,524 $247 $1,224

©Copyright 2009 Armstrong & Associates, Inc.

$30.8$34.2

$39.6$45.3

$56.6

$65.3$71.1

$76.9

$89.4

$103.7

$113.6

$122.0$128.7

$134.5

$145.3

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

$120

$130

$140

$150

$160

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008E 2009E 2010E

Gro

ss R

even

ue/T

urn

over

YearYearYearYear

8

U.S. 3PL Market 1996 – 2010E($ Billions)

¹CAGR: 1996-2007

CAGR 13.3%¹


3PL versus GDP Growth Rates 1997 – 2007

9

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

3PL Growth GDP Growth

Average 2.7%

Average 11.9%


Four Major 3PL Segments

1. Non-asset based Domestic Transportation Management (DTM): 3PLs providing value-added transportation management services dealing with shipments originating in and destined to North American points. Services are usually performed in conjunction with freight brokerage and are often contractual.

• C.H. Robinson Worldwide, Eden Prairie, MN

• Landstar Global Logistics, Jacksonville, FL

• Schneider Logistics, Green Bay, WI

2. Non-asset based International Transportation Management (ITM): 3PLs providing value-added international transportation management services dealing with shipments originating in or destined to North American points usually performed in conjunction with freight forwarding, often contractual.

• Expeditors Int'l of Washington, Seattle, WA

• Phoenix International Freight Services, Wood Dale, IL

• UTi Worldwide, Rancho Dominguez, CA

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3. Asset-based (U.S.) Dedicated Contract Carriage (DCC): 3PLs providing dedicated contract carriage services supplying tractors, drivers and management. Trailers are normally included, contract terms are 1-7 years.

• Cardinal Logistics Management, Concord, NC

• J.B. Hunt Dedicated Contract Services, Lowell, AR

• Schneider Dedicated, Green Bay, WI

4. Asset-based Value-Added Warehousing & Distribution (VAWD): 3PLs normally providing long term contract warehousing or distribution center operations with a host of value-adds.

• Caterpillar Logistics Services, Morton, IL

• GENCO, Pittsburgh, PA

• Menlo Worldwide, Redwood City, CA

11

Four Major 3PL Segments


Estimated Revenues & Growth Rates by 3PL Segment

4.5%5.5%125.7Total1

2.0%4.0%28.7Value-Added Warehousing & Distribution

0.0%0.0%11.6Dedicated Contract Carriage

7.0%7.5%48.6International Transportation Management

5.0%6.5%36.8Domestic Transportation Management

GrossRevenue Growth 2009E

GrossRevenueGrowth

2007-08E

Gross Revenue

(Turnover)(US$ Billions)3PL Segment


Trends in 3PL/Customer Relationships

93%

80%

75%

71%

65%

91%

78%

73%

66%

61%

81%

66% 66%63%

54%

82%

65% 65%

54%52%

80%

58%55%

49%

35%

73%

53%

47%

33%

24%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1-100 101-200 201-300 301-400 401-500

Fortune Ranking

2008 2007 2006 2005 2004 2001

% of Domestic Fortune 500 Companies using 3PLs


Frequency of 3PL Services

3,936 3PL customer relationships; 11,521 individual types of services

457

364

382

561

633

834

1,338

2,199

2,232

2,521

4.0%

3.2%

3.3%

4.9%

5.5%

7.2%

11.6%

19.1%

19.4%

21.9%

0 500 1,000 1,500 2,000 2,500 3,000

Other

Lead Logistics Provider

Intermodal

Supply Chain Management

Dedicated Contract Carriage

International

Integrated Solutions

Value-Added TM or WM

Warehousing

Transportation Management

Frequency


Top Global Fortune 500 Buyers of 3PL Services

49

37

32

37

27

26

42

23

30

29

29

23

31


Trends in 3PL/Customer Relationships3PL Revenue by Industry from 2005 – 2008E for the Fortune 500 Global ($ Billions)

2005

$149

2006

$167

2007

$187

2008E

$200


Trends in 3PL/Customer RelationshipsFY2007 3PL Revenue by “Technological” Industry Sub Segments for the

Fortune 500 Global ($ Millions)


2009 – 2010 Financial TrendsDeep Recession – No Recovery

.5%-7%Express

1%-12%Truck

0%-13%Rail

2010 Growth2009 GrowthMode

-7%J.B. Hunt Dedicated

0%Expeditors

-1%C.H. Robinson

2009 Growth3PL

15 to 20%15 to 20%Air

-10 to -15%Truck

-15 to -20%Intermodal

5 to 10%-10 to -15%Container

2009 Growth – Global2009 Growth – U.S.Traffic

18

1Q09

V-Shaped Recovery

1Q09

L-Shaped Recovery

2Q09 1Q09

Long & Slow Recovery

4Q10

Sources: U.S. Dept. of Commerce, Baird (John Langenfeld), Wolfe Research, Merrill Lynch


3PL Trends

� Continental M&A

� Intra-Asia

� Chinese / NA Investments

� P.O. Management by Asians

� DCC Bifurcation – Lease Based VS. TL Based

� VAWD – ERP VS. WMS

� Customer Ownership / Leases of Buildings

� Cheap Leases – 1 to 2 Years VS. Buying by 3PL

� Limited Packaging Options

� Equipment Investment – Long Running Projects – Utilization

� Short Run Projects

� Limited Growth Opportunities?

� Retail Apparel – GOH

� Single Stop Model – GSCM, Continental Tier 1, Niche Providers

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Green Initiatives

� GENCO

� Hydrogen Fuel Cell Tow Motors, ROI – 10 years

� Lighting Retrofits, ROI – 1.5 to 3 Years

� Utility Bill Management

� Corrugated Plastics, Barrel, Pharma Recycling / Disposal

� Returns – 50% to Secondary Markets, 45% to Vendors, 4% Recycled

� UTi / JohnsonDiversey

� Leed, NC Building, 550,000 Sq. Ft. – Racine, WI

� Lift Truck Batteries Charged in Stages

� Double Wide Lift Trucks

� Dock Levelers, Shelter & Lights – Controlled Sequences

� Dock Doors Open Only When Trailer is Present

� Others

� Transportation Management – LTL, Mode Shifts, End-to-End, Capacity Maximizing

� California Air Resources Board Tow Motor Requirements

� Reusable Containers

� Energy Efficient Conveyor Systems

20


Tier 1 3PLs

Kuehne + NagelDHL Logistics UPS SCS

FedEx SCS/TN CEVA Logistics

Schenker/BAX CAT Logistics

Major MarketsFreight

C.H. Robinson

Expeditors

Penske

Ryder

DSV

Geodis

Agility

UTi Worldwide

Hellmann Worldwide

Nippon Express

Kintetsu World Exp

NYK Logistics

APL Logistics

Panalpina

Forwarders

Global Supply Chain Managers


Tier 2 3PLs

Menlo Landstar

Kenco NFI GENCO

Ozburn-Hessey

APL Logistics

Fiege

Wincanton

Norbert Dentressangle

Rudolph Logistik

Kerry Logistics

Mainfreight

Toll / Sembcorp

Cargo Services Far East

22


Tier 3 3PLs Niche Players

23


3PL Market Momentum – High Profit, High Growth

24

8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Net Revenue Growth (%)

302928272625242322212019181716151413121110 9

8

7

6

Aft

er-

tax N

et

Inco

me M

arg

ins (

%)

C.H. Robinson

BNSF

Expeditors

DHL Global

Kuehne + Nagel

FedEx

UTi

Jacobson/Arnold

Kenco Cat

GENCO

NFI

High Profit

High Growth

TM

VAWD

DCC

Verst


3PL Most Recognized Brands

DHL/Exel UPS SCS

C.H. Robinson Ryder Schneider

Menlo Ozburn-Hessey

UTi Kuehne + Nagel GENCO NFI


3PL Most Recognized Brands

Dedicated

Contract CarriageTransportation Management

Ryder Ryder

J.B. Hunt Penske

Penske UPS

Schneider Menlo

Ruan Schneider


Types of Warehouses

27

Case/PalletPicking/Shipping

Piece Picking

Manufacturing &Product Support

High VolumeLow Margin

Labor IntenseValue Adds

Labor IntenseValue AddsJIT/Kanban

RelatedTransportation

NumerousSkilled Employees

& Value Adds

CombinedServices

Skilled Labor, IT& SCM


Warehousing Contract Lengths

Source: Armstrong & Associates, Inc. Report “Warehousing in North America – 2009 Market Size, Major 3PLs, Benchmarking Cost, Prices and Practices”

28

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

<1 1 2 3 4 5 >5

% o

f C

as

es

Years


Avg. Whse.

180,000 Sq. Ft.

Avg. Contract

$3.6 Million

Price / Sq. Ft.

$20.59

Avg. Whse.

260,000 Sq. Ft.

Avg. Contract

$3.7 Million

Price / Sq. Ft.

$14.31

Avg. Whse.

272,000 Sq. Ft.

Avg. Contract

$5.4 Million

Price / Sq. Ft.

$19.75

Regional Variation in Contract Warehouse Pricing

Avg. Whse.

249,000 Sq. Ft.

Avg. Contract

$3.6 Million

Price / Sq. Ft.

$14.45

Avg. Whse.

252,000 Sq. Ft.

Avg. Contract

$4.8 Million

Price / Sq. Ft.

$19.04

Source: Armstrong & Associates, Inc. Report “Warehousing in North America – 2009 Market Size, Major 3PLs, Benchmarking Costs, Prices and Practices”

29


3PL Information Technology Trends

� I.T. is a top reason for companies outsourcing logistics.� Solid I.T. is critical to remain competitive and strengthen a 3PLs

brand.

� 3PLs are striving for an integrated “base” systems backbone.� Menlo: TTMS, Infor/CAPS, Proprietary LMS, WMS (Provia

modified), Menlo VIEW (Viewlocity)

� Penske: i2 Technologies, Infor/EXE, Proprietary LMS, RT Systems, MARC

� C.H. Robinson: Proprietary ExpressTMS, HighJump

Integration Layer

Customer

ERP/OMS

Transportation

Mgt. System

(TMS)

Warehouse

Mgt. System

(WMS)

Visibility /

Track & Trace

Accounting/

Financials

Yard Mgt.

System

(YMS)


Select 3PL Acquisitions

Target Buyer YearPrice

($ Millions) Multiple

American Backhaulers C.H. Robinson 1999 100 cash/36 stock 10.5*

Circle Int’l EGL 2000 543 12.6*

Fritz UPS 2001 437 19.3*

USCO Kuehne + Nagel 2001 300 13.0*

Standard Corporation UTi Worldwide 2002 48.8 6.1*

Tibbett & Britten Exel 2004 598 6.8**

GeoLogistics PWC Logistics 2005 454 14.1*

Exel Deutsche Post 2005 6,660 10.6*

BAX Global Deutsche Bahn 2006 1,210 10.7*

TNT Logistics Apollo Management 2006 1,884 10.2*

EGL Apollo Mgmt./CEVA 2007 2,200 14.5**

Cougar Holdings Menlo Worldwide 2007 33.9 10.0***EBIT, **EBITDA

View our latest M&A tracking list at: http://www.3plogistics.com/3PL_M&A.htm

Thank You!

Stoughton Wisconsin OfficeRichard Armstrong

Armstrong & Associates, Inc.100 Business Park Circle

Suite 202Stoughton, WI 53589 USA

1-608-873-8929

Milwaukee Wisconsin OfficeEvan Armstrong

Armstrong & Associates, Inc.10401 West Lincoln Avenue

Suite 207West Allis, WI 53227 USA

1-608-268-5860

Current State of Third-Party Logistics · Frequency of 3PL Services 3,936 3PL customer...

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