Third-party Logistics Market Surges 7%, Outpaces Economy

For the eighth year in a row, growth in outsourced logistics outstripped U.S. economic growth in 2002, reports a new study from supply chain management consulting firm Armstrong & Associates. The 3PL sector enjoyed a revenue increase of 7%, net income growth of 3%, and a 6.9% rise in turnover. By contrast, the U.S. economy grew just 1.4% in the fourth quarter of last year, slowing from a 4% growth rate in the third quarter, according to Bureau of Economic Analysis estimates.

3PL performance was not uniformly strong, however, notes the Armstrong study. For example, FedEx Services saw a 40% shrinkage in contract logistics, whereas UPS Logistics went up 39% in net revenue. The researchers speculate that this may be because UPS emphasizes non-package operations, while FedEx continues to focus on shipments that travel exclusively through its trucks and airplanes.

By far the strongest 3PL segment is transportation. C.H. Robinson, Expeditors, and Landstar Logistics all reported double-digit after-tax net margins last year and continue to show net revenue growth in 2003. Value-added warehousing 3PLs, such as Exel, CAT Logistics, and UPS Logistics, also posted stellar performance in 2002, with net revenue growth of 10.4%. This sector is another fast-growing segment of the third-party logistics market, expanding 11.5% in 2001 and improving net income margins from 0.7% to 1.7% in 2002.

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