A survey of chief executive officers at 3PLs finds them optimistic about growth despite the slow economy.
The survey, conducted by Robert Lieb of Northeastern University and Kristin Lieb of Emerson College, and sponsored by Penske Logistics, found that 3PL CEOs in North America, Europe and the Asia-Pacific (APAC) are generally optimistic about company and industry growth prospects over the next three years.
Key findings in the executive summary of the report include:
- Six of 33 companies exceeded their revenue projections during 2012, while 11 met projections. Sixteen failed to meet their projections.
- Twenty three of the companies reported their companies were profitable during 2012. Two broke even, and five reported that their companies were unprofitable.
- Twenty seven CEOs believed the 3PL industry in the geography in which they operated had been profitable during 2012, while four estimated
- it had broken even, and two estimated that it had registered a loss.
- CEOs in all three regions are generally optimistic about company and industry growth prospects over the next one- and three-year periods. But the authors said it was worth noting that one- and three-year projections were both down in the APAC.
- From a company standpoint, the one-year revenue growth projections: 11.5 percent for North America (10 percent in 2012), 6.4 percent for Europe (7.2 percent in 2012), and 9 percent for APAC (11 percent in 2012).
- The average three-year company growth projections: 14.6 percent for North America (10.4 percent in 2012), 10.3 percent for Europe (9 percent in 2012), and 11.6 percent for APAC (12.5 percent in 2011).
The CEOs were also asked to project regional 3PL industry revenue growth rates for the next three years in all three regions. For the three-year period, the CEOs projected average regional revenue growth rates of 8.29 percent in North America, 5.9 percent in Europe and 8 percent in the Asia-Pacific. Only six of the 33 companies in the survey were involved in significant merger/acquisitions during 2012, and the CEOs generally believe that revenue growth through acquisitions will be very modest over the next three years — 8.13 percent in North America, 11.67 percent in Europe and 3.7 percent in APAC.
25 of the companies introduced new service offerings in 2012.
Lieb told the Penske Move Ahead Blog
, "That means 3PLs are entering new service verticals they haven’t served
before, particularly health care. Twenty eight of the
companies in the survey now provide services to clients in healthcare — up
from 23 last year.
“Within health care, the investments they’re
making are in full-chain facilities and handling drugs that need to be
refrigerated until use,” she said.
In addition to health care, Lieb said,
some of the companies are focusing on the energy sector due to increased
U.S. production of oil and natural gas. Companies are also
seeing automotive business come back that was lost during the downturn.
The companies surveyed said they are heavily committed to environmental sustainability issues, with 11 companies beginning new green initiatives during the year and 19 expanding existing sustainability programs.
The CEOs surveyed said there are signs that private equity companies are again showing interest in 3PL acquisitions.
“The related potential capital infusion and consolidation of the industry were seen as the most important positive impact that those companies might bring to the 3PL industry,” according to the executive summary of the report.
The executives said the global movement toward near-shoring continues, with two-thirds of the North American CEOs indicating that some of their key accounts were moving in that direction; most of the movement happened from APAC to Mexico. The industries most interested in nearshoring are automotive, high technology and consumer goods.
In contrast, only one of the European 3PL CEOs indicated that any of their key accounts have participated in nearshoring, and only three of nine APAC 3PL CEOs indicated some key accounts had moved toward nearshoring. But seven of nine CEOs reported customer manufacturing shifts from China to other Asian locations, most commonly Vietnam. Those shifts have been primarily driven by rising wage costs in China.
"Despite Eurozone challenges and some slowing of manufacturing activity in China, opportunities to expand services geographically have both regions poised for growth,” commented Lieb. “Expansion into eastern Europe and Russia and an increased focus on servicing domestic consumption within China provide 3PLs with the opportunity to strengthen and stabilize their operations in those regions by filling out the services offered and customer base.”