current state of third-party logistics · frequency of 3pl services 3,936 3pl customer...
TRANSCRIPT
Current State ofThird-Party Logistics
Phone: +1-608-873-8929Website: www.3PLogistics.com
©Copyright 2009 Armstrong & Associates, Inc.2
� Founded in 1980
� Supply Chain Market Research and Consulting Services
� Current Research:
� Who's Who Logistics and Supply Chain Management – Americas
� Who's Who in Logistics and Supply Chain Management – International
� Warehousing in North America – 2009 Market Size, Major 3PLs,
Benchmarking Costs, Prices and Practices
� Targeted in-depth market research papers
� Articles & Press Coverage: American Shipper, Global Logistics & Supply Chain Strategies, Journal of Commerce, Logistics Management, Logistics Quarterly, Modern Materials Handling, Traffic World, Transport Topics, Wall Street Journal
� Consulting Services: Benchmarking, Expert Witness, Logistics Outsourcing, Logistics Provider Contracting & Negotiation, M&A, Network Analysis & Design, Transportation Analysis, Systems Evaluation & Selection
� Global Resources: U.S. Organization; Eric Xiang, Shanghai China; Latin America, Japan and South Korea Alliance Partners
About Armstrong & Associates, Inc.
©Copyright 2009 Armstrong & Associates, Inc.3
http://www.3plogistics.com/Site_Visits.htm
Click on the links below to view case studies completed previous years.
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Third-Party Logistics (3PL) Value-Added Services
4PL/Lead Logistics Provider Consulting/Process Re-Engineering
Inventory/Vendor Management JIT Kanban
Light Manufacturing/Assembly Kitting/Pick & Pack
Call Center Management Reverse Logistics
Pool Distribution/Cross Docking WMS Deployment
Radio Frequency and Barcoding Deployment Small Package/Fulfillment
Food Grade/Temperature Controlled Hazmat Handling
Installation/Removal Home Delivery
ISO Certification Order Management
Transportation Network Planning and Optimization Transportation Execution/Freight Bill Payment
Carrier Contracting and Freight Brokerage Internet Supply Chain Visibility
Transportation and Event Management Systems Bulk Materials Handling
Customs Brokerage/ACE/C-TPAT/FAST Project Management
“The total number of value-added services and capabilities offered by a 3PL distinguish it from being just a trucking or public warehousing company and can provide the 3PL with a significant a competitive advantage over other 3PLs.”
©Copyright 2009 Armstrong & Associates, Inc.5
Drivers of Global 3PL Market Growth
3PLs are providing the infrastructure necessary to support increasingly complex supply chains involved in global trade.
Low-Cost Country Sourcing
Off-Shoring & Outsourced Mfg.
Need Regional & Local Market Expertise
Focus on CoreCompetencies
Expanding IT Requirements
Cost Reductions
Operational Efficiencies
Regulatory Compliance
Sample A&A 3PL Market Research
©Copyright 2009 Armstrong & Associates, Inc.7
2007 Global Logistics Costs & 3PL Revenue
Global 3PL Market = $487 Billion
3PL Revenue
Logistics Costs$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
North AmericaEurope
Asia PacificLatin America
Other Countries
$ B
illi
on
s
North America Europe Asia Pacific Latin America Other Countries
3PL Revenue $143 $170 $113 $15 $46
Logistics Costs $1,613 $1,696 $1,524 $247 $1,224
©Copyright 2009 Armstrong & Associates, Inc.
$30.8$34.2
$39.6$45.3
$56.6
$65.3$71.1
$76.9
$89.4
$103.7
$113.6
$122.0$128.7
$134.5
$145.3
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
$110
$120
$130
$140
$150
$160
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008E 2009E 2010E
Gro
ss R
even
ue/T
urn
over
YearYearYearYear
8
U.S. 3PL Market 1996 – 2010E($ Billions)
¹CAGR: 1996-2007
CAGR 13.3%¹
©Copyright 2009 Armstrong & Associates, Inc.
3PL versus GDP Growth Rates 1997 – 2007
9
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
3PL Growth GDP Growth
Average 2.7%
Average 11.9%
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Four Major 3PL Segments
1. Non-asset based Domestic Transportation Management (DTM): 3PLs providing value-added transportation management services dealing with shipments originating in and destined to North American points. Services are usually performed in conjunction with freight brokerage and are often contractual.
• C.H. Robinson Worldwide, Eden Prairie, MN
• Landstar Global Logistics, Jacksonville, FL
• Schneider Logistics, Green Bay, WI
2. Non-asset based International Transportation Management (ITM): 3PLs providing value-added international transportation management services dealing with shipments originating in or destined to North American points usually performed in conjunction with freight forwarding, often contractual.
• Expeditors Int'l of Washington, Seattle, WA
• Phoenix International Freight Services, Wood Dale, IL
• UTi Worldwide, Rancho Dominguez, CA
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3. Asset-based (U.S.) Dedicated Contract Carriage (DCC): 3PLs providing dedicated contract carriage services supplying tractors, drivers and management. Trailers are normally included, contract terms are 1-7 years.
• Cardinal Logistics Management, Concord, NC
• J.B. Hunt Dedicated Contract Services, Lowell, AR
• Schneider Dedicated, Green Bay, WI
4. Asset-based Value-Added Warehousing & Distribution (VAWD): 3PLs normally providing long term contract warehousing or distribution center operations with a host of value-adds.
• Caterpillar Logistics Services, Morton, IL
• GENCO, Pittsburgh, PA
• Menlo Worldwide, Redwood City, CA
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Four Major 3PL Segments
©Copyright 2009 Armstrong & Associates, Inc.12
Estimated Revenues & Growth Rates by 3PL Segment
4.5%5.5%125.7Total1
2.0%4.0%28.7Value-Added Warehousing & Distribution
0.0%0.0%11.6Dedicated Contract Carriage
7.0%7.5%48.6International Transportation Management
5.0%6.5%36.8Domestic Transportation Management
GrossRevenue Growth 2009E
GrossRevenueGrowth
2007-08E
Gross Revenue
(Turnover)(US$ Billions)3PL Segment
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Trends in 3PL/Customer Relationships
93%
80%
75%
71%
65%
91%
78%
73%
66%
61%
81%
66% 66%63%
54%
82%
65% 65%
54%52%
80%
58%55%
49%
35%
73%
53%
47%
33%
24%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1-100 101-200 201-300 301-400 401-500
Fortune Ranking
2008 2007 2006 2005 2004 2001
% of Domestic Fortune 500 Companies using 3PLs
©Copyright 2009 Armstrong & Associates, Inc.14
Frequency of 3PL Services
3,936 3PL customer relationships; 11,521 individual types of services
457
364
382
561
633
834
1,338
2,199
2,232
2,521
4.0%
3.2%
3.3%
4.9%
5.5%
7.2%
11.6%
19.1%
19.4%
21.9%
0 500 1,000 1,500 2,000 2,500 3,000
Other
Lead Logistics Provider
Intermodal
Supply Chain Management
Dedicated Contract Carriage
International
Integrated Solutions
Value-Added TM or WM
Warehousing
Transportation Management
Frequency
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Top Global Fortune 500 Buyers of 3PL Services
49
37
32
37
27
26
42
23
30
29
29
23
31
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Trends in 3PL/Customer Relationships3PL Revenue by Industry from 2005 – 2008E for the Fortune 500 Global ($ Billions)
2005
$149
2006
$167
2007
$187
2008E
$200
©Copyright 2009 Armstrong & Associates, Inc.17
Trends in 3PL/Customer RelationshipsFY2007 3PL Revenue by “Technological” Industry Sub Segments for the
Fortune 500 Global ($ Millions)
©Copyright 2009 Armstrong & Associates, Inc.
2009 – 2010 Financial TrendsDeep Recession – No Recovery
.5%-7%Express
1%-12%Truck
0%-13%Rail
2010 Growth2009 GrowthMode
-7%J.B. Hunt Dedicated
0%Expeditors
-1%C.H. Robinson
2009 Growth3PL
15 to 20%15 to 20%Air
-10 to -15%Truck
-15 to -20%Intermodal
5 to 10%-10 to -15%Container
2009 Growth – Global2009 Growth – U.S.Traffic
18
1Q09
V-Shaped Recovery
1Q09
L-Shaped Recovery
2Q09 1Q09
Long & Slow Recovery
4Q10
Sources: U.S. Dept. of Commerce, Baird (John Langenfeld), Wolfe Research, Merrill Lynch
©Copyright 2009 Armstrong & Associates, Inc.
3PL Trends
� Continental M&A
� Intra-Asia
� Chinese / NA Investments
� P.O. Management by Asians
� DCC Bifurcation – Lease Based VS. TL Based
� VAWD – ERP VS. WMS
� Customer Ownership / Leases of Buildings
� Cheap Leases – 1 to 2 Years VS. Buying by 3PL
� Limited Packaging Options
� Equipment Investment – Long Running Projects – Utilization
� Short Run Projects
� Limited Growth Opportunities?
� Retail Apparel – GOH
� Single Stop Model – GSCM, Continental Tier 1, Niche Providers
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Green Initiatives
� GENCO
� Hydrogen Fuel Cell Tow Motors, ROI – 10 years
� Lighting Retrofits, ROI – 1.5 to 3 Years
� Utility Bill Management
� Corrugated Plastics, Barrel, Pharma Recycling / Disposal
� Returns – 50% to Secondary Markets, 45% to Vendors, 4% Recycled
� UTi / JohnsonDiversey
� Leed, NC Building, 550,000 Sq. Ft. – Racine, WI
� Lift Truck Batteries Charged in Stages
� Double Wide Lift Trucks
� Dock Levelers, Shelter & Lights – Controlled Sequences
� Dock Doors Open Only When Trailer is Present
� Others
� Transportation Management – LTL, Mode Shifts, End-to-End, Capacity Maximizing
� California Air Resources Board Tow Motor Requirements
� Reusable Containers
� Energy Efficient Conveyor Systems
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©Copyright 2009 Armstrong & Associates, Inc.21
Tier 1 3PLs
Kuehne + NagelDHL Logistics UPS SCS
FedEx SCS/TN CEVA Logistics
Schenker/BAX CAT Logistics
Major MarketsFreight
C.H. Robinson
Expeditors
Penske
Ryder
DSV
Geodis
Agility
UTi Worldwide
Hellmann Worldwide
Nippon Express
Kintetsu World Exp
NYK Logistics
APL Logistics
Panalpina
Forwarders
Global Supply Chain Managers
©Copyright 2009 Armstrong & Associates, Inc.
Tier 2 3PLs
Menlo Landstar
Kenco NFI GENCO
Ozburn-Hessey
APL Logistics
Fiege
Wincanton
Norbert Dentressangle
Rudolph Logistik
Kerry Logistics
Mainfreight
Toll / Sembcorp
Cargo Services Far East
22
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Tier 3 3PLs Niche Players
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3PL Market Momentum – High Profit, High Growth
24
8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Net Revenue Growth (%)
302928272625242322212019181716151413121110 9
8
7
6
Aft
er-
tax N
et
Inco
me M
arg
ins (
%)
C.H. Robinson
BNSF
Expeditors
DHL Global
Kuehne + Nagel
FedEx
UTi
Jacobson/Arnold
Kenco Cat
GENCO
NFI
High Profit
High Growth
TM
VAWD
DCC
Verst
©Copyright 2009 Armstrong & Associates, Inc.25
3PL Most Recognized Brands
DHL/Exel UPS SCS
C.H. Robinson Ryder Schneider
Menlo Ozburn-Hessey
UTi Kuehne + Nagel GENCO NFI
©Copyright 2009 Armstrong & Associates, Inc.26
3PL Most Recognized Brands
Dedicated
Contract CarriageTransportation Management
Ryder Ryder
J.B. Hunt Penske
Penske UPS
Schneider Menlo
Ruan Schneider
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Types of Warehouses
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Case/PalletPicking/Shipping
Piece Picking
Manufacturing &Product Support
High VolumeLow Margin
Labor IntenseValue Adds
Labor IntenseValue AddsJIT/Kanban
RelatedTransportation
NumerousSkilled Employees
& Value Adds
CombinedServices
Skilled Labor, IT& SCM
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Warehousing Contract Lengths
Source: Armstrong & Associates, Inc. Report “Warehousing in North America – 2009 Market Size, Major 3PLs, Benchmarking Cost, Prices and Practices”
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0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
<1 1 2 3 4 5 >5
% o
f C
as
es
Years
©Copyright 2009 Armstrong & Associates, Inc.
Avg. Whse.
180,000 Sq. Ft.
Avg. Contract
$3.6 Million
Price / Sq. Ft.
$20.59
Avg. Whse.
260,000 Sq. Ft.
Avg. Contract
$3.7 Million
Price / Sq. Ft.
$14.31
Avg. Whse.
272,000 Sq. Ft.
Avg. Contract
$5.4 Million
Price / Sq. Ft.
$19.75
Regional Variation in Contract Warehouse Pricing
Avg. Whse.
249,000 Sq. Ft.
Avg. Contract
$3.6 Million
Price / Sq. Ft.
$14.45
Avg. Whse.
252,000 Sq. Ft.
Avg. Contract
$4.8 Million
Price / Sq. Ft.
$19.04
Source: Armstrong & Associates, Inc. Report “Warehousing in North America – 2009 Market Size, Major 3PLs, Benchmarking Costs, Prices and Practices”
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©Copyright 2009 Armstrong & Associates, Inc.30
3PL Information Technology Trends
� I.T. is a top reason for companies outsourcing logistics.� Solid I.T. is critical to remain competitive and strengthen a 3PLs
brand.
� 3PLs are striving for an integrated “base” systems backbone.� Menlo: TTMS, Infor/CAPS, Proprietary LMS, WMS (Provia
modified), Menlo VIEW (Viewlocity)
� Penske: i2 Technologies, Infor/EXE, Proprietary LMS, RT Systems, MARC
� C.H. Robinson: Proprietary ExpressTMS, HighJump
Integration Layer
Customer
ERP/OMS
Transportation
Mgt. System
(TMS)
Warehouse
Mgt. System
(WMS)
Visibility /
Track & Trace
Accounting/
Financials
Yard Mgt.
System
(YMS)
©Copyright 2009 Armstrong & Associates, Inc.31
Select 3PL Acquisitions
Target Buyer YearPrice
($ Millions) Multiple
American Backhaulers C.H. Robinson 1999 100 cash/36 stock 10.5*
Circle Int’l EGL 2000 543 12.6*
Fritz UPS 2001 437 19.3*
USCO Kuehne + Nagel 2001 300 13.0*
Standard Corporation UTi Worldwide 2002 48.8 6.1*
Tibbett & Britten Exel 2004 598 6.8**
GeoLogistics PWC Logistics 2005 454 14.1*
Exel Deutsche Post 2005 6,660 10.6*
BAX Global Deutsche Bahn 2006 1,210 10.7*
TNT Logistics Apollo Management 2006 1,884 10.2*
EGL Apollo Mgmt./CEVA 2007 2,200 14.5**
Cougar Holdings Menlo Worldwide 2007 33.9 10.0***EBIT, **EBITDA
View our latest M&A tracking list at: http://www.3plogistics.com/3PL_M&A.htm
Thank You!
Stoughton Wisconsin OfficeRichard Armstrong
Armstrong & Associates, Inc.100 Business Park Circle
Suite 202Stoughton, WI 53589 USA
1-608-873-8929
Milwaukee Wisconsin OfficeEvan Armstrong
Armstrong & Associates, Inc.10401 West Lincoln Avenue
Suite 207West Allis, WI 53227 USA
1-608-268-5860