Milwaukee, WI, June 28, 2019 – 2018 will go down as an outstanding year for third-party logistics (3PL) in the U.S. The two main growth drivers were an extraordinary inventory build as shippers’ imported products to beat the implementation of Trump’s import tariffs and solid domestic economic expansion. Coupled with tight domestic carrier capacity driving up rates, increasing fuel surcharge revenue, and expanding e-commerce business, the 2018 3PL market realized extraordinary growth over 2017.
Armstrong & Associates, Inc. estimates that U.S. 3PL market net revenues (gross revenues less purchased transportation) grew 12.1% to $86.4 billion and overall gross revenues increased 15.8%, bringing the total U.S. 3PL market to $213.5 billion in 2018. The last time the U.S. saw this level of 3PL gross revenue growth was in 2010 when the 3PL market bounced back 19% from its 16% decline in 2009 during the great recession.
The non-asset-based Domestic Transportation Management segment (DTM), which primarily consists of freight brokerage services and to a lesser extent managed transportation, and digital freight matching companies/digital freight brokers (DFMs), led all other 3PL segments with overall gross revenue increasing a whopping 20.7% to $86.5 billion. DTM providers’ top-line revenues benefited from heavy port to warehouse and warehouse to warehouse moves, the strong domestic economy, rising carrier rates, increased fuel surcharge revenue, and continued outsourcing amongst shippers. To find a better growth year, we have to go back to 2005 when the DTM segment had year-over-year growth of 21.2%.
The DTM market is also seeing emerging competition from new digital freight brokers (DFBs) such as Uber Freight, Convoy and Transfix. One thing digital freight brokers have done is place an emphasis on “digitalizing” DTM operations replacing manual carrier sales/procurement and back office processes.
The other non-asset-based segment, International Transportation Management segment (ITM), consisting of air and ocean freight forwarding and complementary value-added services, posted 15.4% gross revenue growth in 2018 to $61.9 billion. This was ITM’s best showing since 2010 when the segment bounced back over 30% from the great recession. 2018 ITM net revenues grew 12.1% to $22.1 billion.
2018 Dedicated Contract Carriage (DCC) segment net revenues grew an estimated 15.8% to $17.8 billion. The domestic segment leader J.B. Hunt Dedicated Contract Services (DCS) with 10,115 power units in dedicated, posted outstanding net revenue growth of 25.9% to $2.2 billion pushing its DCC market share over 12% on a net revenue basis.
Even with the import tariff inventory builds, Value-added Warehousing and Distribution (VAWD) had the lowest rate of growth in 2018 compared to its transportation management related brethren. However, VAWD’s gross revenue growth of 8% to $43.3 billion was the best the segment has realized since 2011 when it posted an 8.3% increase. In terms of year-over-year net revenue growth, VAWD net revenues grew 6.3% to $33.1 billion.
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ABOUT ARMSTRONG & ASSOCIATES, INC.
Armstrong & Associates, Inc. (A&A) was established in 1980 to meet the needs of a newly deregulated domestic transportation market. Since then, through its leading Third-Party Logistics (3PL) market research and history of helping companies outsource logistics functions, A&A has become an internationally recognized key resource for 3PL market information and consulting.
A&A’s mission is to have leading proprietary supply chain knowledge and market research not available anywhere else. As proof of our continued work in supporting our mission, A&A’s 3PL market research is frequently cited in media articles, publications, and securities filings by publicly traded 3PLs. In addition, A&A’s email newsletter currently has over 62,000 subscribers globally.
A&A’s market research complements its consulting activities by providing continually updated data for analysis. Based upon its unsurpassed knowledge of the 3PL market and the operations of leading 3PLs, A&A has provided strategic planning consulting services to over 30 3PLs, supported 20 closed investment transactions, and provided advice to numerous companies looking to benchmark existing 3PL operations or outsource logistics functions.
Armstrong & Associates, Inc.
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Milwaukee, WI 53227 USA
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