CSCMP's Supply Chain Quarterly
October 16, 2018
Forward Thinking

Third-party logistics CEOs report improvements in growth, profitability

Respondents to the 21st Annual Survey of Third-Party Logistics Provider CEOs appear confident about their current and future prospects.

Despite continuing challenges like margin pressures and capacity and talent shortages, respondents who participated in the 21st Annual Survey of Third-Party Logistics Provider CEOs appear confident about current business opportunities and prospects for future growth.

About 75 percent of the 27 CEOs in North America, Europe, and Asia-Pacific who participated in this year's survey said their companies were profitable in 2013, and CEOs in all three regions predicted that they would achieve considerably higher growth over the next three years than they have in recent years. Respondents in North America forecast growth of 10.77 percent, while those in Asia-Pacific foresee a 16.2-percent increase during that time. Even in Europe, where a lingering recession has contributed to a pessimistic outlook for the past few years, CEOs were predicting their companies would grow by 8.33 percent on average.

The annual study was conducted by Dr. Robert Lieb of Northeastern University's D'Amore-McKim School of Business and Dr. Kristin Lieb of Emerson College and was sponsored by Penske Logistics. The survey results were released last month at the Council of Supply Chain Management Professionals' (CSCMP's) annual global meeting in San Antonio, Texas.

Underpinning the CEOs' positive projections are their views on near-term opportunities. Respondents in all three regions mentioned the substantial growth of e-commerce to date as well as its long-term growth potential and the opportunities there for 3PLs. Almost all of the respondents said they already support some e-commerce customers. But aggressively expanding e-commerce business presents some risks, said Robert Lieb in an interview. "Many customers in e-commerce retail are small, and that segment has a high mortality rate," he noted. It can also be labor-intensive and seasonal, and the pricing structure of warehouse-based services in e-commerce may not reflect actual costs, he added.

CEOs in North America also mentioned the return of some manufacturing from Asia. It's more than just talk: Although the volumes are small, more than 75 percent of those CEOs said that some of their customers had shifted some manufacturing operations from China to Mexico. "Sourcing points are moving more quickly today than they ever had in the past," commented Penske Logistics Vice President Joe Carlier in an interview, adding that his company expects to hire some 700 additional workers in Mexico by the middle of 2015. European respondents, meanwhile, saw growth potential in life sciences and retail, especially in Eastern Europe, but expressed concern that political turmoil in places like Russia could limit those opportunities. In Asia-Pacific, respondents highlighted the expanding intra-Asian trade and the growing but fragmented emerging markets.

Still, the CEOs have plenty of concerns. In North America, finding and keeping management talent, continuing margin pressures, and coping with transportation capacity shortages were all top of mind. Respondents there said those shortages were leading to higher rates, longer transit times, and difficulty meeting on-time service goals. Some CEOs reported that customers are paying lump sums to reserve capacity, Lieb said. Europeans worried most about intense competition in a still-slow economy, inadequate forecasts, and labor issues. In Asia-Pacific, the biggest problems were poor infrastructure and transportation services in emerging markets, growing competition, and low margins.

The watchword in the 3PL industry for the next few years is "change," according to Carlier. "I've never seen a more dynamic state in this industry as there is now," he said.

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