Global 3PL market revenue rose 14.5% over 2021, Armstrong & Associates says

Global supply chain shocks and ongoing uncertainty over the past three years have stressed many companies, but a report from consulting firm Armstrong & Associates Inc. finds that many shippers have managed those hurdles by forging tighter relationships with their third-party logistics providers (3PLs).

Companies increasingly rely on 3PLs to cope with challenges like pivoting manufacturing, navigating port congestion, and meeting surging demand in the post-Covid boom, Armstrong & Associates said in a report titled “Co-Managing the Turbulence: Trends in 3PL-Customer Relationships – 2023.”

Those companies have tapped into 3PLs’ flexible operations to scale up and down to meet extraordinary changes in demand. And that increased bond has paid off, with the global 3PL market reaching $1.47 trillion in 2022, an increase of 14.5% over 2021 revenues and nearly double the 2016 level, the report said.

But even as the market has grown, it has also seen some fundamental shifts. One factor is a significant increase in 3PL use by mid-sized and small customers, not just enterprise corporations. A major impact of that change is that 3PLs today provide an average of 2.60 services per customer relationship—often a combination of transportation management, warehouse management, and/or value-added services. That number has steadily decreased from the 2008 average of 2.98, because the new crowd of small clients tend to have less complex supply chain service needs, Armstrong & Associates said.

A second change in the sector is the continued expansion of major 3PLs, which frequently acquire other firms to integrate new operational capabilities and thus expand their global scope, the report said. Armstrong & Associates found that approximately 18 3PLs have built the network scale required to offer single-source global solutions to large multinational companies. Those “global supply chain managers” (GSCMs) can be expected to become increasingly dominant over the next few years.

According to Armstrong & Associates, some 3PLs have used that approach to build catalogs of dozens of value-added services that differentiate them from transactional transportation companies and basic warehousing operations. The report cited eight large 3PLs as examples, including CEVA Logistics, CJ Logistics, DB Schenker, DHL Supply Chain & Global Forwarding, DSV A/S, Kuehne + Nagel, GEODIS, and UPS Supply Chain Solutions.

A third trend in the 3PL sector is that large multinational corporations such as Fortune 500 companies have launched initiatives to consolidate and reduce the number of 3PLs they work with. Although those companies typically use more services from 3PLs than smaller ones, they increasingly prefer to favor 3PLs with multinational operations and integrated solutions offerings.

That transition could major consequences, since some of the world’s largest companies have relationships with dozens of 3PLs. The Armstrong & Associates report said that retail giant Walmart is linked with 69 separate 3PLs, followed closely by Volkswagen (66), Nestlé (65), Procter & Gamble and Unilever (53 each), PepsiCo (47), General Motors (46), Ford Motor (42), and General Electric, Samsung Electronics, and Siemens (39 each).