global third-party logistics market trends & analysis

Global Third-Party Logistics Market Trends & Analysis

Website: www.3PLogistics.com

Copyright © 2012 Armstrong & Associates, Inc.

Founded in 1980 Supply Chain Market Research and Consulting Services Over 19,400 Newsletter Subscribers Current Market Research:

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2

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A&A has reviewed over 100 distinct 3PL operations, some multiple times.3


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Provider profile information and 3PL customer reviews

4


Domestic and International Providers Connect the Global Supply Chain

TRANSPORTATION MANAGEMENT SERVICES Transportation Planning Transportation Execution: Freight Bill Payment: Carrier Mgmt and Contracting Contract File Maintenance Pre-Audit Inbound Shipment Planning Exception handling Post-Audit Outbound Shipment Planning Load Tendering Performed In-house End-to-End Matching Loss/Damage Claims Outsourced Mode Conversion/Optimization Tracking & Tracing

Value-Added Services Call Centers Lot Control Reverse Logistics Cross Docking Merge In Transit Store Support Customization Manufacturing Support Sequencing/Metering Inventory Control/Vendor Mgmt Pick/Pack Specialty Packaging KanBan Pool Distribution Sub Assembly Kitting Repair/Refurbish Labeling Returnable Container Mgmt

OTHER 3PL SERVICES, SKILLS & HANDLING Consulting/Process Reengineering Purchase Order Mgmt Bulk Commodities Factoring/Financial Services Project Logistics Hazardous Materials Installation/Removal Quality Control Food Grade/Sterile Order Management Union Services Temperature Controlled

Transportation Services: Air Package Delivery Brokerage Operations Ocean Shipping Dedicated Contract Carriage Rail Freight Forwarding Rail TOFC/COFC Home Delivery Small Package Just-In-time (JIT) Specialized Less-than-Truckload (LTL) Truckload

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DistributionCenters

Repair Center

Customers

Sourcing

Suppliers

Manufacturing

Carriers

Customs

Ports

3PL “Connectivity”


Top Global Fortune 500 Buyers of 3PL Services

49

30

42

36

29

53

31

35

39

42

30

41

32

51

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http://upload.wikimedia.org/wikipedia/en/a/a0/Ford_Motor_Company_Logo.svg

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http://upload.wikimedia.org/wikipedia/en/e/e4/Unilever.svg

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http://upload.wikimedia.org/wikipedia/en/0/01/Pepsico-top_r1_c1.gif

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http://upload.wikimedia.org/wikipedia/en/1/12/Hewlett-Packard.svg

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http://en.wikipedia.org/wiki/File:Nestl%C3%A9.svg


Global 3PL Market Trends by Major Geographic Region

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Region / Year 2006 2007 2008 2009 2010 2011 CAGRNorth America $ 131.5 $ 142.9 $ 148.1 $ 128.1 $ 150.5 $ 159.9 4.0%Europe $ 143.6 $ 170.1 $ 171.3 $ 162.3 $ 145.7 $ 160.4 2.2%Asia Pacific $ 94.3 $ 112.5 $ 117.9 $ 146.4 $ 165.7 $ 191.1 15.2%South America $ 10.4 $ 15.4 $ 16.2 $ 27.6 $ 33.3 $ 39.5 30.6%Remaining Countries $ 37.3 $ 45.9 $ 47.6 $ 42.7 $ 55.7 $ 65.2 11.8%

US$

Bill

ions


2011 Global Logistics Costs & 3PL Revenue (US$ Billions)

¹CIA official exchange rate GDPs

Region Country2011 GDP¹

Logistics (GDP %)

2011Logistics Cost

3PL Revenue %

20113PL Revenue

North America Canada 1,759.0 9.9% 174.2 8.4% 14.6Mexico 1,185.0 14.9% 176.6 6.5% 11.5United States 15,060.0 8.3% 1,249.8 10.7% 133.8

Region 18,004.0 8.9% 1,600.6 10.0% 159.9Europe France 2,808.0 9.2% 258.3 10.1% 26.1

Germany 3,629.0 8.3% 301.1 10.1% 30.4Italy 2,246.0 9.4% 211.2 10.6% 22.4Netherlands 858.3 8.1% 69.5 14.2% 9.9Spain 1,537.0 9.4% 144.4 9.4% 13.6United Kingdom 2,481.0 8.5% 210.9 10.0% 21.1Others 4,130.7 9.0% 371.8 9.9% 36.9

Region 17,690.0 8.9% 1,567.2 10.2% 160.4Asia Pacific Australia 1,507.0 10.5% 158.2 9.9% 15.6

China 6,989.0 18.1% 1,265.0 7.0% 88.6Hong Kong 242.4 9.0% 21.9 11.4% 2.5India 1,843.0 13.0% 239.5 5.7% 13.7Japan 5,855.0 8.7% 509.6 8.8% 44.9Singapore 266.5 9.0% 23.9 11.7% 2.8South Korea 1,164.0 9.0% 104.7 11.1% 11.6Taiwan 504.6 9.0% 45.5 11.0% 5.0Others 836.1 10.7% 89.4 7.2% 6.4

Region 19,207.6 12.8% 2,457.7 7.8% 191.1South America Argentina 435.2 12.6% 54.9 6.0% 3.3

Brazil 2,518.0 11.6% 292.1 8.2% 24.0Venezuela 315.0 11.9% 37.5 5.9% 2.2Others 909.5 14.2% 129.1 7.7% 10.0

Region 4,177.7 12.3% 513.6 7.7% 39.5Remaining Regions/Countries 11,080.7 15.9% 1,761.8 3.7% 65.2

Total 70,160.0 11.3% 7,900.9 7.8% 616.1

Adjusted for currency fluctuations, the global 3PL market grew by 4.9% from 2010 to 2011.

Most global 3PL activity is within developed and developing geographic regions where services can be readily contracted for with providers.

Physical infrastructure (roads, rail networks, shipping ports) and governmental regulation impact the logistics costs as a percent of overall economic activity in each country and region. Those countries with better infrastructure and fewer regulatory barriers have the lowest logistics costs as a percent of overall GDP.

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Top 25 Global 3PLs – 20112011 Rank Third-Party Logistics Provider (3PL)

Gross Logistics Revenue(US$ Millions)*

1 DHL Supply Chain & Global Forwarding 32,1602 Kuehne + Nagel 22,1813 DB Schenker Logistics 20,7044 Nippon Express 20,3135 C.H. Robinson Worldwide 10,3366 CEVA Logistics 9,6027 UPS Supply Chain Solutions 8,9238 Hyundai GLOVIS 8,5889 DSV 8,170

10 Panalpina 7,35811 SDV/Bolloré Logistics 6,78512 Sinotrans 6,76913 Toll Holdings 6,43214 Expeditors International of Washington 6,15015 DACHSER 5,92516 Geodis 5,89017 GEFCO 5,26718 Norbert Dentressangle 4,98019 UTi Worldwide 4,91420 Hellmann Worldwide Logistics 4,68721 Agility 4,41022 Yusen Logistics 3,88123 Wincanton 3,50724 Caterpillar Logistics Services 3,46525 GENCO ATC 3,372

*Revenues are company reported or A&A estimates and have been converted to US$ using the average exchange rate in order to make non-currency related growth comparisons.

The largest global 3PLs have operations in

geographies representing over 90%

of the world’s GDP.

3PL has been dominated by large European and U.S.-

based 3PLs. Growing Asia-Pacific 3PLs, like

Toll Holdings are experiencing above

average recent growth.

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Top 25 Global ITM/Freight Forwarders – 2011A&A Rank Provider Gross Revenue

(US$ Millions)OceanTEUs

AirfreightMetric Tons

1 DHL Supply Chain & Global Forwarding 32,160 2,724,000 2,447,0002 Kuehne + Nagel 22,181 3,274,000 1,073,0003 DB Schenker Logistics 20,704 1,763,000 1,149,0004 Panalpina 7,358 1,310,000 848,0005 CEVA Logistics 9,602 783,378 550,0006 Nippon Express 20,313 706,441 656,7977 Sinotrans 6,769 7,979,000 397,2008 Expeditors International 6,150 892,682 786,6209 SDV/Bolloré Logistics 6,785 750,000 520,000

10 UPS Supply Chain Solutions 8,923 500,000 862,00011 DSV A/S 8,170 727,861 262,36212 Kintetsu World Express 3,321 550,377 1,131,44413 Agility 4,410 550,000 490,00014 Hellmann Worldwide Logistics 3,593 672,569 439,72015 Pantos Logistics 2,412 1,625,098 216,65316 UTi Worldwide 4,914 484,000 410,00017 Toll Global Forwarding 6,432 520,000 145,00018 Damco International 2,752 750,000 110,00019 Yusen Logistics 3,881 450,000 337,13020 Geodis 5,890 420,000 210,00021 C.H. Robinson Worldwide 10,336 262,117 50,00022 Hyundai GLOVIS 8,588 466,318 17,40823 Kerry Logistics 2,060 620,000 173,00024 Sankyu 2,689 710,000 18,06025 DACHSER 5,925 321,000 50,000

*Revenues are company reported or Armstrong & Associates, Inc. estimates and have been converted to US$ using the average exchange rate. Freight forwarders are ranked using a combined overall average based upon individual rankings for gross revenue, ocean TEUs and airfreight metric tons.

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Transportation and Warehousing Services Dominate Demand

Primary 3PL services provided are led by transportation management (23.7%),warehousing (19.4%) and value-added services (18.7%).

11

519

573

729

781

969

1,358

1,675

3,237

3,358

4,095

3.0%

3.3%

4.2%

4.5%

5.6%

7.9%

9.7%

18.7%

19.4%

23.7%

0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

Lead Logistics Provider

Intermodal

Other

Dedicated Contract Carriage

Supply Chain Management

International

Integrated Solutions

Value-Added TM or WM

Warehousing

Transportation Management


3PL Gross Revenue by Industry 2005-2012E – Fortune 1000 (US$B)

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Major Industry Growth Automotive Consumer Goods Elements Food, Groceries Healthcare Industrial Retailing Technological Other

2005-2011 CAGR 0.9% 4.7% 4.1% 6.5% 8.5% 7.1% 5.2% 5.3% 2.5%

2005-2012E CAGR 1.8% 4.6% 4.6% 6.3% 8.4% 8.0% 5.1% 5.3% 2.9%


$30.8$34.2

$39.6$45.3

$56.6$65.3

$71.1$76.9

$89.4

$103.7

$113.6$119.0

$127.0

$107.1

$127.3$133.8

$142.2

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

$120

$130

$140

$150

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E

Gro

ss R

even

ue/T

urno

ver

Year

U.S. 3PL Market 1996 – 2012E (US$ Billions)

1996 – 2011 CAGR = 10.3%

The U.S. 3PL industry has experienced a strong rebound from the economic downturn in 2009. For 2011, 3PL growth has been three times the growth in U.S. gross domestic product (GDP). With Asia cooling and Europe in decline, estimated growth for 2011 is 5.1% and 6.3% for 2012.

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Trends in 3PL/Customer Relationships

% of Domestic Fortune 500 Companies using 3PLs

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Growth by 3PL Market Segment

15

1,000 3,000 5,000 7,000 9,000

11,000 13,000 15,000 17,000 19,000 21,000 23,000 25,000 27,000 29,000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012E

Value-Added Warehousing & Distribution (VAWD) - Asset Based

Dedicated Contract Carriage (DCC) - Asset Based

International Transportation Management (ITM) - Non-Asset Based

Domestic Transportation Management (DTM) - Non-Asset Based

3PL Market Segment

2011Gross Revenue(US$ Billions)

2011Net Revenue(US$ Billions)

1995-2011 CAGR

% Change 2012E vs. 2011 Net Revenue

Domestic Transportation Management 41.3 6.3 11.6% 10.0%International Transportation Management 46.1 17.7 15.0% 3.0%Dedicated Contract Carriage 11.1 10.9 7.5% 4.0%Value-Added Warehousing & Distribution 34.0 26.6 14.3% 6.0%

Total 130.8 61.0 12.3% 5.8%

(US$

Mill

ions

)

ITM has been the Highest

Growth Segment, but has cooled.

VAWD is Maturing. DCC is

Mature.

Net Revenue Growth by 3PL Segment


0%

2%

4%

6%

8%10%

12%14%

16%

18%

20%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

YearValue-Added Warehousing & Distribution (VAWD) - Asset-Based

Dedicated Contract Carriage (DCC) - Asset-Based

International Transportation Management (ITM) - Non-Asset Based

Domestic Transportation Management (DTM) - Non-Asset Based

After-Tax Net Income Margin Trends by 3PL Market Segment

2011 , 17.4%

4.5%

3.0%

7.3%

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U.S. DTM Network Transportation Managers

Robust TMS for network transportation planning and executionHeavy EDI/electronic systems interfaces Some Buy/Sell side arrangements with a lot of Freight Under

ManagementFUM = Freight Under Management, Managed Transportation

Shipper may hold contracts with core carriers Shipper contracts with a 3PL which gets a management fee (5-7%

GM)

17


Top 30 DTM/Freight Brokers Ranked by 2011 Net Revenue8,740

CHRW is 40% of the total top 30 net revenue.

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3.65 billion barrels of technically recoverable oil, 1.85 trillion cubic feet of associated/dissolved natural gas, and 148 million barrels of natural gas liquids. According to OilShaleGas.com, there are now over 6,000 active oil wells in

the Bakken Formation with most activity in Montana and North Dakota.

Bakken Formation, a Significant New Domestic Source of Oil and Natural Gas:

• According to the 2008 United States Geological Survey, the Bakken Formation of the Williston Basin Province in Montana and North Dakota has estimated average undiscovered volumes of:

3PLs – Expanding Oil & Natural Gas Business in the Bakken Formation

Source: USGS

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BNSF Logistics Bakken Operations Logistics Support Case Study Example:

• BNSFL manages up to 10 to 15 oil rig moves per month for multiple oil & gas exploration companies including Continental Resources and Brigham Oil.

Each move requires approximately 30 days to relocate a rig from one location to another.

To assemble a rig, 20 to 30 truckloads of materials and components are needed.

Overhead cranes are required to unload larger rig components.

To locally coordinate the oil rig moves, BNSFL opened an office in Williston, North Dakota last year.

• To support natural gas fracking operations, BNSFL manages inbound transportation for multiple exploration/drilling companies to the drilling sites.

Inbound materials include drilling pipe, pumping units, frac sand, and fracking chemicals.

The frac sand is sourced domestically from mines in Illinois and Wisconsin and a small amount of “ceramic” sand is imported via ocean containers from China and Brazil.

BNSFL supports frac sand moves with door-to-door ocean import services, rail to truck transload services and intermodal rail-truck deliveries.

In 2011, BNSFL transloaded sand from 528 rail hopper cars to trucks for final delivery to drilling sites.

BNSFL’s parent BNSF Railway delivered over 25,000 railcars of frac sand into the Bakken last year.

3PLs – Expanding Oil & Natural Gas Business in the Bakken Formation

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Select 3PL Acquisitions

21

Target Buyer Year Purchase Price ($M) Multiple

Jacobson Companies Oak Hill Capital 2007 500 11** EGL Apollo Management/CEVA 2007 2,200 14.5** Chic Holdings Ltd. Menlo Worldwide Logistics 2007 60 9* Christian Salvesen Norbert Dentressangle 2007 519.4 6.7** Geodis SNCF 2008 1,735 9.6* ABX Logistics DSV A/S 2008 1,160 8.5* IBM (internal global logistics ops.) Geodis 2009 423 6.6** YRC Dedicated Contract Carriage Greatwide Logistics 2009 34 13.6** Summit Logistics International Toll Holdings 2010 70.3 9.3** ATC Technology Corporation GENCO 2010 512.6 6.6** Total Logistic Control Ryder 2010 200 7**TDG Norbert Dentressangle 2011 320 5.8**Exel Transportation Services (Mode) Hub Group 2011 83 20.8*Phoenix International C.H. Robinson Worldwide 2012 635 12.5**

EBIT* or EBITDA** Multiple Source: Primary, Company Information; Secondary, A&A Estimates


Top 20 Dedicated Contract Carriage Providers – 2011Rank DCC Provider Power Units

1 J.B. Hunt Dedicated Contract Services 4,6392 Ryder Supply Chain Solutions 4,2173 Greatwide Logistics Services 4,0164 Swift Transportation 4,0005 Schneider National 3,9506 Werner Enterprises 3,4007 Ruan Transport 3,3098 Penske Logistics 2,6009 NFI Transportation 1,770

10 U.S. Xpress Enterprises 1,75011 Cardinal Logistics Management 1,62012 UPS Freight Truckload 1,44013 3PD 1,21414 Exel (DHL Supply Chain - Americas) 1,10015 C.R. England 85216 Averitt Express 82417 LINC Logistics 67318 Landair 55019 Aim Integrated Logistics 50020 CRST Dedicated Services 500

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Top North American Warehousing 3PLs by Millions Sq.Ft.

23

Rank Third-Party Logistics Provider (3PL) Warehouse Space (in MMSF)1 Exel (DHL Supply Chain - Americas) 95.0 2 GENCO ATC 37.0 3 Jacobson Companies 35.0 4 Americold 34.5 5 CEVA Logistics (The Americas) 33.0 6 OHL 30.1 7 Ryder Supply Chain Solutions 30.0 8 Caterpillar Logistics Services 29.0 9 Kenco Logistic Services 25.0

10 UTi Worldwide 23.7 11 UPS Supply Chain Solutions 20.0 12 NFI Logistics 19.0 13 Menlo Worldwide Logistics 18.0 14 DSC Logistics 17.0 15 APL Logistics (North America) 15.3 16 Kuehne + Nagel (The Americas) 15.1 17 Penske Logistics 14.9 18 WSI 14.0 19 Warehouse Services 14.0 20 Saddle Creek 14.0 21 DB Schenker Americas 12.6 22 syncreon 12.0 23 New Breed Logistics 10.2 24 Schneider Logistics 10.0 25 Kane Is Able 8.5

Most major North American value-

added warehousing and distribution

(VAWD) 3PLs have national warehousing

networks.


Source: Armstrong & Associates, Inc. “The Business of Warehousing in North America – 2012 Market Size, Major 3PLs, Benchmarking Costs, Prices and Practices”

Types of Warehouses Based on Use Profile

Type of Warehouse Examples Most Profitable Features

Required Labor Skill

Level

Case/pallet picking/shipping

Retail and pool distribution centers

Deconsolidation centers/cross-docks

Flow-through centers

Inbound and outbound transportation (LTL, TL, DSD)

Need high-volume efficiency

Low

Piece picking/shipping

Parts distribution High-value products Fulfillment Packaging

Products – number and value

Labor intensity Value-adds

Moderate

Manufacturing and production support

Sequencing centers Postponement

warehouses Repair/refurbishment

Labor intensity Value-added

opportunities Milk runs

High

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Warehousing Contract Lengths


25

Contract lengths tend to be longer for larger 3PLs. Three smaller companies reported over a third of their warehousing contracts had one year terms. For the other participants, 12.1% of contracts were one year, 57.6% were for three years, 25.3% were for five years and 5% had other terms.


Contract Warehouses by Size (n = 511)

26



Value-Added Warehousing Services

27



Annual Revenue from Contract Warehousing Customers

28

Customer Contract Highlights: Customers have one to twenty-three locations. 25% of customers have contracts involving multiple locations. The average (mean) customer utilizes 384,000 square feet of warehouse space. The average (mean) revenue is $4.9M and the median is $2.4M (from $37,000 to $47M per year.).

Yearly Contract Value Range % of Total

< $100K 1.1%$100K - $499K 12.2%$500K - $999K 12.5%$1M - $4.9M 49.1%$5M - $9.9M 11.1%$10M - $14.9M 6.8%$15M - $19.9M 1.8%$20M or > 5.4%

(Sample, n = 302)



Top 25 Mexican Motor Carriers – 2011

29

Rank Motor CarrierGross Revenue(US$ Millions)

1 Autotransportes de Carga Tres Guerras S.A. de C.V. 2202 Transportes Castores de Baja California S.A. de C.V. 2103 Auto Líneas América S.A. de C.V. 1724 Transportes Julián de Obregón S.A. de C.V. 1655 Transportistas Unidos Mexicanos Div. Nte. 1436 Transportadora Nacional S.A. de C.V. 1387 Transportes Cuauhtémoc S.A. de C.V. 1298 Frialsa Logística S.A. de C.V. 1299 Auto Líneas Regiomontanas, S.A. de C.V. 99

10 Servicio de Transportacion Jaguar 9011 Grupo TMM / Lacto Comercial Organizada S.A. de C.V. 8712 Grupo Transportes 8613 Transportes Pitic, S.A. de C.V. 8014 Express Tres Fronteras S.A. de C.V. 7215 Transportes Quintanilla S.A. de C.V. 6616 Grupo MG 6517 Transportadora Egoba S.A. de C.V. 6318 Transportes Especializados Antonio de la Torre e Hijos, S.A. de C.V. 6219 Transportes Comandos del Norte S.A. de C.V. 6020 Transportes de Nuevo Laredo S.A. de C.V. 5921 Transportes Lar-Mex, S.A. de C.V. 5422 Transportes Auto Tanques Ochoa S.A. de C.V. 5423 Transportes Fema S.A. de C.V. 5324 Fletes Internacionales Coss S.A. de C.V. 5225 Express Anáhuac S.A. de C.V. 49

Thank You!

Stoughton Wisconsin OfficeRichard Armstrong

Armstrong & Associates, Inc.100 Business Park Circle

Suite 202Stoughton, WI 53589 USA

608-873-8929

Milwaukee Wisconsin OfficeEvan Armstrong

Armstrong & Associates, Inc.10401 West Lincoln Avenue

Suite 207West Allis, WI 53227 USA

414-545-3838

global third-party logistics market trends & analysis

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