Penske Sponsored Survey: Top Supply Chain Industry Trends
Trends include more vigilant business practices, industry restructuring and continued commitment to sustainability
SAN DIEGO, Sept. 27, 2010 – Today, key findings from the 17th Annual Survey of Third-Party Logistics Providers are being presented at the Council of Supply Chain Management Professionals Annual Global Conference by survey author, Dr. Robert Lieb, Professor of Supply Chain Management at Northeastern University, and Joe Gallick, Senior Vice President of Sales for Penske Logistics. The findings, sponsored by Penske Logistics, analyze responses from 31 third-party logistics company CEOs across North America, Europe and Asia-Pacific whose companies were responsible for generating approximately $37 billion in revenue in 2009.
The global economy continued to pose a challenge in 2009, with 48 percent of companies surveyed failing to meet revenue growth projections, while 80 percent of them still managed to be profitable. Pressure on 3PLs to share risk with their clients increased in 2009, with 28 of the 31 CEOs reporting that their companies now have performance-based contracts with many of their clients. Only five of the companies were involved in significant merger or acquisition activity in the year.
Eighty-seven percent of CEOs noted that some of their manufacturing customers have begun to move toward near-shoring options in the past year, a trend that is expected to trickle down to 3PLs in the years to come. Labor numbers imply an upturn for 3PLs, with 87 percent of the companies beginning to rebuild their workforces in 2009. CEOs revealed that green practices are still a major priority in the 3PL market and 80 percent of the companies surveyed now have formal sustainability groups within their companies.
"The CEOs involved in this year's surveys are more optimistic about growth prospects than they were last year, but appear to be more cautious about how growth will be achieved," commented Lieb. "They are likely to spend more time qualifying' new accounts, while devoting less attention to accounts in industries that are more cyclical in nature."
"The last few years have caused global third-party logistics providers to reconsider the structure of their businesses within a shifting industry," said Gallick. "Many of the CEOs reported adopting new strategies that are more conservative in nature with respect to both market expansion and new service offerings."
Further insights into this year's research findings are outlined in additional detail below:
Improved Revenue Projections
The CEOs in all three regions were considerably more bullish about future revenue growth prospects of not only their companies, but also the regional 3PL industry, than they were last year.
- One-year company revenue growth projections were 10.4% for North America (6.9% in 2009), 7.2% for Europe (-3.3% in 2009), and 22.5% of APAC (12.9% in 2009). The average three-year company growth projections were 10.6% for North America (11.8% in 2009), 8.3% for Europe (8.7% in 2009), and 19.5% for APAC (16.7% in 2009).
- One-year regional 3PL industry revenue growth projections averaged 7.3% for North America (3.5% in 2009), 4.8% for Europe (-1.4% in 2009), and 15.4% for APAC (10.7% in 2009). The average three-year regional 3PL industry growth projections were 7.8% for North America (7.9% in 2009), 5.4% for Europe (4.9% in 2009), and 12.9% for APAC (11.7% in 2009).
- Twenty-five of the 31 CEOs surveyed reported their companies were profitable during 2010, with three reporting they broke even, and three reporting their companies were unprofitable.
Reorganization of 3PL Industry
- Only five of the 31 companies were involved in significant mergers or acquisitions during 2009, and the CEOs generally believe that revenue growth through acquisitions will be very modest over the next three years. A continued restructuring of the industry through mergers or acquisitions and failures ranked first in changes expected to occur in their markets over the next three years.
- Fifteen CEOs indicated long-term strategy changes within their companies as a result of the recession, and eleven said the long-term prospects in the regional 3PL industries has changed as a result of the recession.
- Twenty-seven of the 31 CEOs noted that some of their manufacturing customers have begun to move toward "near-shoring" options during the past year.
More Vigilant Business Practices
- Eighteen of the CEOs reported that their companies had put new risk management programs in place during the past year. Increased pressure to share risks with customers is a major factor in the industry.
- Twenty-nine of the 31 companies have business continuity plans at the corporate level and 20 have them at the regional level.
- Twenty-eight of the 31 CEOs reported that their companies have performance-based contracts with many of their clients.
- Twenty-four of the companies sell logistics services to the supply chain partners of their existing customers. Moving forward, 3PLs are expected to place greater emphasis on "qualifying" customers.
Commitment to Sustainability
In the aftermath of the recession, these companies are still heavily committed to environmental sustainability issues.
- Fourteen of the 31 companies began new green initiatives during the year.
- Eighteen of the companies expanded existing sustainability programs.
- Twenty-five of the companies now have formal sustainability groups within their companies.
- Twelve of the 31 CEOs believe that their sustainability capabilities differentiate them from their competitors.
Opportunities and Issues
- In terms of industry opportunities, CEOs in all three regions ranked the overall growth of the market for outsourcing services as the most important opportunity.
- Ranking second and third respectively in North America were opportunities related to potential differentiation based upon the companies' environmental sustainability capabilities and opportunities related to expansion of service offerings.
- In terms of problems facing the industry, a shortage of managerial and operational talent was ranked one or two in all three regions.
- Among the other important problems mentioned were price compression and procurement's growing role in the North American survey, the slow economic recovery and decreasing margins in Europe, and managing increased costs and dealing with "unrealistic competition" were highlighted by the APAC CEOs.
Thirty-one CEOs completed surveys via an Internet-based questionnaire during the summer of 2010. Companies participating in the annual survey included: Cardinal Logistics, DSC Logistics, DHL Exel Supply Chain, Genco Supply Chain Solutions, Kuehne+Nagel Logistics, Landstar, Menlo Logistics, Panalpina, NYK Logistics, Penske Logistics, Ryder Integrated Logistics, Schenker, Schneider Logistics, Transplace, UPS Supply Chain Solutions, UTi Integrated Logistics, Caterpillar Logistics Services, CEVA Logistics and Wincanton.
About Northeastern University's College of Business Administration
Northeastern University College of Business Administration, established in 1922, provides its students undergraduate, graduate and executive with the education, tools and experience necessary to launch and accelerate successful business careers. The College credits its success to expert faculty, close partnerships with the business community, and is emphasis on rigorous academics combined with experiential learning. The college also offers graduate and undergraduate concentrations in supply chain management, as well as graduate certificates in supply chain management.
The College is highly ranked by several prestigious publications. BusinessWeek ranks the undergraduate program 32th in the U.S., #1 in internships, and #19 in the student survey in its 2010 "Best Undergraduate B-schools." U.S. News & World Report ranks the College's Bachelor of Science in International Business program #13 in the country. Princeton Review and Entrepreneur magazine ranked the undergraduate business program 14th most entrepreneurial in the U.S.
About Penske Logistics
Penske Logistics is a wholly owned subsidiary of Penske Truck Leasing. With operations in North America, South America, Europe and Asia, Penske Logistics provides supply chain management and logistics services to major industrial and consumer companies throughout the world. Penske Logistics delivers value through design, planning and execution in transportation, warehousing, and international freight forwarding and carrier management. Visit www.penskelogistics.com to learn more.