A recent study by Radiant Insights, Inc. notes that the worldwide 3PL (Third Party Logistics) market will be valued at around USD 925 billion by 2020. Organizations are increasingly outsourcing their logistics functions to third parties in order to concentrate on core business operations. 3PL vendors help lower capital expenditures, alleviate risks, and manage inventory.
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Commonly-outsourced activities include transportation, consignments, warehousing, cross docking, inventory management, etc. 3PL businesses possess expertise in supply chain procedures. They provide agility and flexibility to operations.
Globalization has made in-house supply chain management unachievable. This is fuelling the demand for 3PL services. The emergence of industry-centric 3PL services and big data will drive market growth. Furthermore, rise of online retailing in addition to brick and mortar stores is attracting 3PL providers and urging them to utilize their skills.
Radiant Insights segments the overall 3PL market into services, and geographies. Key services include Dedicated Contract Carriage (DCC), Logistics Software, International Transportation Management (ITM), warehousing & distribution, and Domestic Transportation Management (DTM).
DCC is anticipated to witness high growth in the near future. Many large retailers including Target, Kroger, and Wal-Mart resort to DCC for lowering costs and increasing truck capacity. DCC encompasses the supply and management of trailers, tractors, trucks, drivers, and other supply chain components.
ITM, as the name suggests, deals with international shipments. DTM includes value-added transportation management services along with freight brokerage. Warehousing & distribution constitutes distribution center facilities including value-added services. This segment will witness high demand from refrigerated grocery and pharmaceuticals over the forecast period.
Key geographical segments of the 3PL market are North America, Europe, Asia Pacific, and ROW – Rest of the World. U.S. and Mexico are expected to drive growth in North America. Reducing labor and transportation costs in these countries will prove conducive for the North American market. The U.S. is witnessing technological advancements in logistics software, a favorable development.
The 3PL market in Europe has been adversely affected by Euro crisis. However, the ongoing resurgence of life science and automotive industry will lead to renewed demand for the region. Asia Pacific contributed revenues worth 29% in the worldwide market in 2013. This was mainly due to growth in warehousing and distribution facilities in India, China, Singapore, and Thailand. The dominating players in the 3PL market are Fedex, C.H. Robinson Worldwide, J.B Hunt, DHL, UPS Supply Chain Solutions, and Kuehne + Nagel.
Information Source: Radiants Insights