Survey: Logistics CEOs Project Growth Despite Slow Economy

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The CEOs of third-party logistics companies in North America, Europe, and the Asia-Pacific regions are generally optimistic about growth opportunities over the next three years, according to a survey sponsored by Penske Logistics, part of Penske Corp. in Bloomfield Hills.

The 20th Annual Survey of Third-Party Logistics Provider CEOs found that 3PL CEOs in North America had the highest confidence, projecting a 14.6 percent increase in revenue over the next three years, while European CEOs projected 10.3 percent growth during that time. Asia Pacific CEOs forecast 11.6 percent growth, down from 12.5 percent in 2012. The CEOs also projected average regional revenue growth rates of 8.3 percent in North America, 5.9 percent in Europe, and 8 percent in the Asia-Pacific region.

The survey revealed some manufacturing activity is leaving China, impacting both Asia-Pacific and North American regions significantly. Within the Asia-Pacific region, 78 percent of CEOs claimed that rising wage costs in China have caused companies to shift some manufacturing and export consolidation to Thailand, Vietnam, Indonesia, and Sri Lanka.

In North America, migration toward near-shoring continues with some key 3PL accounts moving from Asia-Pacific to Mexico. In particular, companies in the automotive, technology, and pharmaceutical industries have moved some sourcing and manufacturing activities to Mexico. Eighty-seven percent of the North American CEOs involved in the survey reported providing third-party logistics services in Mexico, generating an average of 9.3 percent of their revenues in the U.S. The number is projected to increase to an average of 12.5 percent in three years. 

“As companies begin shifting their product origins to local regions, they will look for a third-party logistics provider that can strategically navigate through the new normal in the supply chain industry,” says Joe Carlier, senior vice president of sales for Penske Logistics. “This includes the shift in supply chain length, changes in speed and demand for warehousing, and transportation along trade corridors.”

Globally, 52 percent of companies surveyed either met or exceeded their revenue projections in 2012, down from 63 percent in 2011. More than two-thirds of these logistics companies were profitable during 2012. The continued instability of the euro-zone economy and migration of some manufacturing out of China meant lower profitability in the Europe and Asia-Pacific regions (50 and 56 percent experienced moderate profitability, respectively). However, regional opportunities are instilling confidence in the industry.

“Despite Euro-zone challenges and some slowing of manufacturing activity in China, opportunities to expand services geographically have both regions poised for growth,” says Robert Lieb, the survey’s author and professor of supply chain management at Northeastern University’s D’Amore-McKim School of Business. “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.”

Other trends noted in the survey include:

  • Talent Management: Finding and keeping talent, specifically managers, has ranked as one of the most significant market challenges in each regional response over the past 20 years. Third-party logistics providers must be competitive across multiple dimensions when it comes to hiring, and they must try to understand what the new generation of employees is looking for in an employer.
  • Forecasting Revenue: With slow economic growth continuing over the next year, North American third-party logistics CEOs expect there to be a greater emphasis on developing new financial and economic indicators to provide more accurate revenue projections. 
  • Sustainability: The third-party logistics industry continues to get “greener,” with 56 percent of companies launching new sustainability initiatives during 2012. However, the initiatives have not yet been linked to attracting new customers or keeping current customers. 
  • Retail/E-commerce: Shifting dynamics in the global retail economy toward omnichannel retailing has led to an expansion of reverse logistics activities in North America and increased popularity of e-commerce and e-fulfillment in the Asia-Pacific region.
  • Health care: Twenty-eight of the 34 companies provide third-party logistics services to customers in the health care industry, and many cited increasing regulations of the industry as being a major challenge in their efforts to grow business in the sector.

The survey analyzed responses from 34 major third-party logistics company CEOs across North America, Europe, and Asia-Pacific that generated some $50 billion in combined revenue in 2012.

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