With a few exceptions, most of the 3PLs profiled in Ti’s Global Contract Logistics 2017 report recorded revenue growth in 2016, on the back of new contracts and acquisitions. An analysis of the contract logistics capabilities and strategies of the most prominent 3PLs indicates that logistics providers continue to grow in size whilst shrinking in number, maintaining the trend of consolidation from previous years. However, while inorganic growth remains a hot topic in the industry, the level of consolidation in 2016 is estimated to have dropped compared to 2015, both in terms of total deal value and volume. The analysis also finds that providers are moving in different directions, depending mainly on their investment capacity. While the biggest players have had the financial capacity to venture into new markets via acquisitions, others have been looking to grow by nurturing organic growth opportunities.
Indeed, contract logistics providers continue to diversify their revenue streams and service portfolios to buffer against unfavourable economic conditions. Acquisitions in high-margin markets, such as those pursued by UPS and Kuehne + Nagel in the healthcare and pharmaceutical sector, are cases in point.
The rapid pace of change in the industry seems to be adding complexity to the role that logistics providers play throughout shippers’ supply chains. The report finds that 3PLs are increasingly forming deeper collaborative partnerships with shippers and taking on greater control of their supply chains. For example, in October 2016, BMW decided to outsource its spare parts operations to Kuehne + Nagel, a function which has traditionally been fiercely guarded by vehicle manufacturers. This contract to run BMW’s spare-parts ‘Global Distribution Centre’ in Wallersdorf is the latest in a string of deals that place Kuehne + Nagel at the centre of the management of BMW’s aftermarket spare parts operation.
The report also finds that following a wave of M&A in the industry, a number of contract logistics providers are focusing on post-acquisition integration. Recognising that leveraging a common structure across the globe can be devilishly difficult, XPO and DSV have put acquisitions on hold for the time being. Instead, they are focusing on integrating their acquisitions and driving organic growth. Such decisions emphasise that while contract logistics companies typically integrate well due to their asset-light nature, they still need to work on the often daunting challenge of integrating the IT systems of the acquired company.
Overall, it appears that as the industry has become characterised by greater complexity and more extensive collaboration, an increasing number of avenues for growth have transpired. Ti’s latest report highlights the differing strategies of major 3PLs, enabling readers to understand the various approaches taken and the rationale behind them.
Source: Transport Intelligence, 18th April 2017
Author: Violeta Keckarovska
For further insight into the contract logistics market, including analysis of its market size and forecasts broken down by regions and countries, strategies of the major 3PLs, analysis of technologies in the industry, and the major trends affecting the market, visit Ti’s Global Contract Logistics 2017 report page.
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)