Third party logistics will be worth $925.31bn by 2020

24 November 2016

The global third party logistics (3PL) market is expected to be worth $925.31bn by 2020 and will be partially driven by the outsourcing of secondary business activities, according to a new report.

Orbis Research’s study found that the challenges of managing geographically dispersed supply chain operations as a result of increased globalization has led to several companies to outsource their logistics function.

And difficulties with addressing logistical challenges has also led to increased outsourcing by wholesalers and retailers, thereby boosting the 3PL industry.

It found that emerging trends such as Big Data and availability of bespoke 3PL services are expected to drive the market over the forecast period.

One fast growing segment of the trucking and distribution industry is expected to be Dedicated Contract Carriage (DCC), which refers to vehicles, drivers, and other resources exclusively devoted to serving part of a transportation network.

Several prominent retailers such as Wal-Mart, Target and Kroger are increasingly relying on this kind of service in order to increase truck capacity and reduce costs.

Domestic transportation management (DTM), which involves value-added transportation management services and freight brokerage, is also expected to grow consistently throughout the forecast period.

Refrigerated grocery and pharmaceutical sectors are expected to be major drivers for warehousing services.

In 2013, Asia Pacific accounted for over 30% of the market share in 2013, which was largely due to a surge in warehousing and distribution facilities in China, India, Indonesia, Singapore and Thailand.

In North America the 3PL market is expected to be driven by reducing labour and transportation costs in the US and Mexico along with logistics software advances in the US.

The report found the 3PL market was moderately fragmented due to a blend of new entrants and established players.

Factors such as overpriced companies and negative acquisition experiences as well as economic uncertainties and lack of attractive potential purchases means merger and acquisition (M&A) activity in the industry is slow.

And among the most important factors customers look for when selecting a logistics partner are continuous evolution and development of latest IT & automation systems for enhancing material tracking, value addition, flexibility, and security with many providers deploying cloud-based solutions to reduce IT and overhead costs.

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