Track 1 Session 4 - IT Solutions | B2B Marketplace | News ...€¦ · Transplace, Plano, TX 2. Non-asset based International Transportation Management (ITM): 3PLs providing value-added

Third-Party Logistics Market Trends And Solutions

Track 1 Session 4

Evan ArmstrongPresident

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Phone: +1-414-545-3838Website: www.3PLogistics.com

©Copyright 2009 Armstrong & Associates, Inc.

Abstract

A growing number of companies are relying on third-party logistics providers (3PLs) to manage some or all of their supply chain networks. This presentation includes the results of recent research that quantifies 3PL market trends, major providers, and requisite capabilities to help you evaluate outsourcing functions to 3PLs.

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Founded in 1980Supply Chain Market Research and Consulting ServicesCurrent Research:

Who's Who Logistics and Supply Chain Management – AmericasWho's Who in Logistics and Supply Chain Management – InternationalWarehousing in North America – 2009 Market Size, Major 3PLs, Benchmarking Costs, Prices and PracticesTargeted 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 JournalConsulting Services: Benchmarking, Expert Witness, Logistics Outsourcing, Logistics Provider Contracting & Negotiation, M&A, Supply Chain Network Analysis & Design, Transportation Analysis, Systems Evaluation & SelectionGlobal Resources: U.S. Organization; Eric Xiang, Shanghai China; Latin America, Japan and South Korea Alliance Partners

About Armstrong & Associates, Inc.

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http://www.3plogistics.com/Site_Visits.htm

Click on the links below to view case studies completed in previous years.

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Drivers of Logistics Outsourcing3PL Services and Capabilities3PL/Customer Trends3PL Market Trends and LeadersNorth American Warehousing Market Trends3PL Technology Trends

Agenda

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Drivers of Global 3PL Market Growth

3PLs provide 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

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Value-Added Services & CapabilitiesDomestic and Int’l Transportation Management

Cargo InsuranceCarrier Contracting/Brokering/Freight Payment

Customs Brokerage/ACE/C-TPAT/FASTDuty Drawback Processing

Incoterms Management – EXW to DDPLetters of Credit/Negotiable BOLs

Merge-In TransitNVOCC

Project LogisticsProject Management

Transportation ExecutionTransportation Network Planning/Optimization

Warehousing/Cross-dockingBonded Warehouses

Home DeliveryInstallation/Removal

JIT/KanbanKitting/Pick & Pack

Light Manufacturing/AssemblyReverse Logistics

Small Package/FulfillmentEasily Deployable WMS

Both – 3PL/4PL4PL/Lead Logistics Provider

Call CentersConsolidation/Deconsolidation

Consulting/Process ReengineeringEDI Handling

Financial ServicesFood Grade/Temperature Controlled

Hazmat SkillsPurchase Order Management

Internet Supply Chain VisibilityInventory/Vendor Management

ISO CertificationPool Distribution/Cross-docking

Radio Frequency/RFIDSecurity Processes

Sourcing Skills

Tier 1 GSCM’s provide these services and capabilities in global markets.8


• Assembly Accounts• Import/Export Services• Labeling and Printing• General Packing• Export Packing

• Proof of Delivery issued/checked• Receiving and put away• Shrink Wrapping• Tracing• Trucking

IntegratedLogisticsServices

Complexity level of services

Basic LogisticsServices

Freight Forwarding/Transit Warehouse/

Cross-Docking

• Light Assembly• Customization• Display Building• Distribution• Inspections• Just-in-Sequence• Just-in-Time

• Kitting• Network Development• Postponement• Quality Control• Reverse Logistics• Systems Development• Vendor Managed Inventory

• Consolidation/Deconsolidation

• Filling• Loading• Palletizing/Re-Palletizing

• Inbound and Outbound ofgoods within short timeframe

• No value-adding activities• No permanent storage

Hierarchical Conceptualization of Logistics Services

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2008 Global Logistics Cost & 3PL Revenue

Global 3PL Market = $501 Billion

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Top Global Fortune 500 Buyers of 3PL Services

49

37

32

37

2726

42

23

30

29

29

23

31

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http://upload.wikimedia.org/wikipedia/en/0/03/Gm2.jpg

http://upload.wikimedia.org/wikipedia/en/3/3d/Wal-Mart_logo.svg

http://upload.wikimedia.org/wikipedia/en/a/a0/Ford_Motor_Company_Logo.svg

http://upload.wikimedia.org/wikipedia/en/4/4c/VW-Logo.png

http://upload.wikimedia.org/wikipedia/en/e/e4/Unilever.svg

http://upload.wikimedia.org/wikipedia/en/a/a5/GE_Logo.png

http://upload.wikimedia.org/wikipedia/en/0/01/Pepsico-top_r1_c1.gif

http://upload.wikimedia.org/wikipedia/en/c/cf/Procterandgamble.svg

http://upload.wikimedia.org/wikipedia/en/1/12/Hewlett-Packard.svg

http://en.wikipedia.org/wiki/File:Daimler_AG.png

http://en.wikipedia.org/wiki/File:Nestl%C3%A9.svg

http://upload.wikimedia.org/wikipedia/en/e/e7/Toyota.svg


Trends in 3PL/Customer Relationships

% of Domestic Fortune 500 Companies using 3PLs

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Frequency of 3PL Services

3,936 3PL customer relationships; 11,521 individual types of services

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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

2008$200

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Trends in 3PL/Customer RelationshipsFY2007 3PL Revenue by “Technological” Industry Sub Segments for the

Fortune 500 – Global ($ Millions)

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2008E 3PL Revenue by “Healthcare” Industry Sub Segments for theFortune 1000 – Domestic ($ Millions)

3PL Revenue by Industry

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Logistics Cost for ABC Company

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Overall 3PL Market Trends

3PL Growth Drivers are Still in PlaceRecession:

Reduced Transportation VolumesIncreased Procurement Activities – Especially TMWarehousing Square Footage NeedsContract Re-pricing

3PL Consolidation Continues:IBM “Carve Out” with GeodisAcquisitions – Strategic Emphasis without International Borders M&A Bargains – Rationalized Multiplies

Asian Issues:Growing Intra-Asia / DomesticP.O. Management / Supply Chain Management by Asians

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Overall 3PL Market Trends

Dedicated Contract Carriage:Bifurcation Continues

Value-Added Warehousing & Distribution:Multi-client vs. Dedicated FacilitiesCustomer Building OwnershipCheap Leases / Real Estate

Global Supply Chain Management:One Stop Shop

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GENCOHydrogen Fuel Cell Tow Motors, ROI – 10 yearsLighting Retrofits, ROI – 1.5 to 3 YearsUtility Bill ManagementCorrugated Plastics, Barrel, Pharma Recycling / DisposalReturns – 50% to Secondary Markets, 45% to Vendors, 4% Recycled

UTi / JohnsonDiverseyLeed, NC Building, 550,000 Sq. Ft. – Racine, WILift Truck Batteries Charged in StagesDouble Wide Lift TrucksDock Levelers, Shelter & Lights – Controlled SequencesDock Doors Open Only When Trailer is Present

Green Initiatives

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OthersTransportation Management – LTL, Mode Shifts, End-to-End, Capacity MaximizingCalifornia Air Resources Board Tow Motor RequirementsReusable ContainersEnergy Efficient Conveyor Systems

Green Initiatives

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Kuehne + NagelDHL Logistics UPS SCS

FedEx SCS/TN CEVA LogisticsSchenker/BAX CAT Logistics

Major MarketsFreight

C.H. RobinsonExpeditors

PenskeRyder

DSV

GeodisAgility

UTi Worldwide

Hellmann Worldwide

Nippon Express

Kintetsu World Exp

NYK LogisticsAPL LogisticsPanalpina

Forwarders

Global Supply Chain ManagersTier 1 3PLs

Menlo

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Top 10 in Ocean TEUs – 2008

Third-Party Logistics Provider (3PL) Total AnnualOcean TEUs (Thousands)

DHL Supply Chain & Global Forwarding 2,882

Kuehne + Nagel 2,618

DB Schenker 1,456

Panalpina 1,278

Expeditors International 897

DSV Solutions 850

Sankyu 715

UPS Supply Chain Solutions 700

SDV International Logistics 680

NYK Logistics 600

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Top 10 in Airfreight Metric Tons – 2008

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

Yusen Air & Sea

CEVA

Expeditors

Kuehne + Nagel

Nippon

Panalpina

Kintetsu

DB Schenker

DHL SC&GF

FedEx SCS&TN

530

536

678

835

897

901

1,118

1,230

4,291

7,200

Thousands of Airfreight Metric Tons – FY2008

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Global 3PL LeadersAutomotive Customer Relationships (10 or more)

Third-Party Logistics Provider (3PL)

Number of Customer Relationships

Logwin 35Rudolph 23CEVA 23DHL 19ARS Altmann 18Cat Logistics 15TRADISA 15Egerland 13De Rooy 12UTi Worldwide 12Menlo 12GEFCO 11Kuehne + Nagel 11Ryder 10

As of July 13, 2009

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Global 3PL LeadersRetail Customer Relationships (10 or more)



Wincanton Logistics 29YRC 26DHL 19Transplace 19BNSF 19IDS Group 18Maersk 17Kuehne + Nagel 17Logwin 14J.B. Hunt Dedicated 13Cargo Services Far East 12Performance Team 12C.H. Robinson 12APL 11UTi Worldwide 11UPS SCS 11FedEx 10OHL 10Greatwide 10Werner Enterprises 10ADI 10

As of July 13, 2009

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Global 3PL LeadersTechnological Customer Relationships (10 or more)



DHL 36UPS SCS 25Menlo 23FedEx 21Brightpoint 20Logwin 19New Breed 16CEVA 15Ryder 15Kuehne + Nagel 14UTi Worldwide 13Integrated Logistics Berhad 12ATC 12CTSI 11SDV 11NAL Worldwide 10PFSweb 10Almacenar 10

As of July 13, 2009

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Tier 2 3PLs

Landstar Kenco

NFI GENCO

Ozburn-Hessey

APL Logistics

Fiege

Wincanton

Norbert Dentressangle

Rudolph Logistik

Kerry Logistics

Mainfreight

Toll / Sembcorp

Cargo Services Far East

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http://www.traveldocs.com/images/europe_b.jpg

http://www.traveldocs.com/images/asia_b.jpg

http://www.traveldocs.com/namer-map.htm


Tier 3 3PLs Niche Players

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Select 3PL Acquisitions

Target Buyer YearPrice

($ Millions) MultipleAmerican 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

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2008 Logistics Cost & 3PL Revenue – North America($ Billions)

Logistics Cost = $1,633

3PL Revenue

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U.S. 3PL Market 1996 – 2010E($ Billions)

¹CAGR: 1996-2008

CAGR 12.5%¹-7%

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3PL versus GDP Growth Rates 1997 – 2008

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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.

• BNSF Logistics, Springdale, AR

• C.H. Robinson Worldwide, Eden Prairie, MN

• Transplace, Plano, TX

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.

• CEVA/EGL, Jacksonville, FL

• Panalpina, Basel, Switzerland

• 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.

• Penske Logistics, Reading, PA

• Ryder Dedicated, Miami, FL

• Werner Dedicated, Omaha, NE

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

• Menlo Worldwide, Redwood City, CA

• UTi Contract Logistics, Columbia, SC

Four Major 3PL Segments

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Revenues & Profitability by 3PL Segment – 2008

3PL Segment

Gross Revenue

(US$ Billions)

NetRevenue

(US$ Billions)

NetRevenue Growth 2007-08

Domestic Transportation Management 37.4 5.9 6.7%

International Transportation Management 46.0 18.0 6.9%

Dedicated Contract Carriage 11.2 11.0 0%

Value-Added Warehousing & Distribution 29.4 23.5 5.1%

Total1 124.0 58.4 4.7%1Gross revenue (turnover) for the 3PL/Contract Logistics industry in the U.S. is estimated at $127 billion. $3 billion is included for the logistics software segment.

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Recessionary Impact by 3PL Segment – 2009E

3PL SegmentGross

RevenueNet

RevenueNet

Income

DTM ‐10% ‐2.5% ‐2.5%

ITM ‐12% ‐4.5% ‐7.5%

DCC ‐9% ‐9% ‐2.5%

VAWD ‐3% ‐3% ‐3%

Overall ‐7% ‐4.5% ‐4%

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3PL Market Momentum

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3PL Market Momentum – High Profit, High Growth

8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25Net Revenue Growth (%)

302928272625242322212019181716151413121110 9876

Afte

r-ta

x N

et In

com

e M

argi

ns (%

)

C.H. Robinson

BNSF

Expeditors

DHL Global

Kuehne + Nagel

FedExUTi

Jacobson/Arnold

Kenco CatGENCO

NFI

High ProfitHigh Growth

TM

VAWD

DCC

Verst

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3PL Market Momentum – High Profit, Low Growth

-8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 Net Revenue Growth (%)

302928272625242322212019181716151413121110 9876

Afte

r-ta

x N

et In

com

e M

argi

ns (%

)

Kuehne + Nagel

FedEx

Jacobson/Arnold

High ProfitLow Growth

TM

VAWD

DCC

Hub

Landstar

AmeriCold J.B. HuntSchneider Werner

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3PL Market Momentum – Low Profit, High GrowthA

fter-

tax

Net

Inco

me

Mar

gins

(%)

Low ProfitHigh Growth

TM

VAWD

DCC

8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25Net Revenue Growth (%)

5

4

3

2

1

0

Transplace

DHL/Exel

Ryder

Menlo

Schenker

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3PL Market Momentum – Low Profit, Low GrowthA

fter-

tax

Net

Inco

me

Mar

gins

(%)

Low ProfitLow Growth

TM

VAWD

DCC

5

4

3

2

1

0

Ryder

DSC Schenker

-8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 Net Revenue Growth (%)

CEVATLC APL

Penske

Schneider

SwiftCardinal

Pacer

YRC

UPS UPS

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3PL Most Recognized Brands

DHL/Exel UPS SCS

C.H. Robinson Ryder Schneider

Menlo Ozburn-Hessey Penske

UTi Kuehne + Nagel GENCO NFI

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Expected Operating Profit Margins (%)

3PL Function %

Domestic TM – System 9.3

Domestic TM – Transactional 12.6

International TM 14.9

Freight Forwarding 18.5

SCM – Network 17.0

DC Management 16.0

VAWD 17.5

Return Logistics 19.0

Dedicated Contract Carriage 10.0

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3PL Business Development Sources

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Largest Commercial Warehousemen in North America

Rank Company # of Warehouses

Square Feet (Millions)

1 Exel Logistics 441 86.02 GENCO 95 37.03 CEVA Logistics, N. A. 164 33.04 UTi Worldwide Inc. 266 29.05 Jacobson Companies 133 28.36 Caterpillar Logistics Services, Inc. 107 27.07 Ozburn-Hessey Logistics 105 24.08 VersaCold 125 23.09 AmeriCold Logistics, Inc. 102 23.010 Kenco Logistic Services 95 23.011 Ryder System, Inc. 202 22.812 Supply Chain Solutions 100 20.013 MBX Logistics, LLC 51 20.014 NAL Worldwide LLC 29 19.015 Menlo Worldwide 100 16.0

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Largest Commercial Warehousemen in North America

Rank Company # of Warehouses

Square Feet (Millions)

16 Penske Logistics 149 15.017 Warehouse Specialists, Inc. 47 15.018 DSC Logistics 37 15.019 NFI 70 14.520 Kuehne + Nagel, N. A. 61 14.221 Total Logistic Control 32 11.022 Saddle Creek Corporation 41 10.323 syncreon ( Logistics) 50 10.024 New Breed Logistics 53 7.025 WOW Logistics 26 7.0

Totals 2,681 550.1

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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”

Years

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Types of Warehouses

Case/PalletPicking/Shipping

Piece Picking

Manufacturing &Product Support

High VolumeLow Margin

RelatedTransportation

NumerousSkilled Employees

& Value Adds

CombinedServices

Skilled Labor, IT& SCM

Labor IntenseValue Adds

Labor IntenseValue AddsJIT/Kanban

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Avg. Whse.180,000 Sq. Ft.Avg. Contract

$3.6 MillionPrice / Sq. Ft.

$20.59



$14.31



$19.75

Regional Variation in Contract Warehouse Pricing



$14.45



$19.04

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Frequency of Contract Value-Added ServicesValue-Added Services Responses % of Services

Kitting/pick & pack/labeling 172 23.0%Pick & pack 60Kitting 72Labeling 40

Customization/subassembly/sequencing 125 16.7%Sequencing 42Subassembly 47Customization 36

Reverse logistics/repair/refurbish/returns processing 113 15.1%Repair/refurbish 41Reverse logistics 38Returns processing 34

Inventory control/VMI 100 13.4%Inventory control 67VMI 33

Specialty packing/repack 98 13.1%Specialty packing 63Repack 35

Transportation management 68 9.1%Direct store delivery 32Transportation 27Import/export services 9

Cross-docking 42 5.6%Temperature control 12 1.6%Governmental compliance 9 1.2%WMS 7 0.9%RFID 3 0.4%

Total 749 100.0%

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©Copyright 2009 Armstrong & Associates, Inc.52

Commodity/Industry Vertical Actual Operating Margins

Industry Vertical Actual (%)Chemicals 22.5Telecommunications 20.2Apparel 18.7High-tech/Computers 18.2Healthcare/Cosmetics 15.8Retail/Consumer Products 13.9Industrial (non-automotive) 13.9Building Materials 12.9Automotive 12.5Food/Beverage 12.4


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 (Proviamodified), Menlo VIEW (Viewlocity) Penske: i2 Technologies, Infor/EXE, Proprietary LMS, RT Systems, MARCC.H. Robinson: Proprietary ExpressTMS, CAPS, HighJump

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ERP

WMSTMS

Manifest

BOL

Shipping Docs

FB Payment Co.

SMS

Carrier Rates

Orders

Transportation Planning and Optimization

Transportation Execution

Mode Selection, Carrier Routing & Rating

CarrierLoad Tender &

Acceptance

Transit Statuses & Invoices

Shipments for Picking

Pack Out/Order Verification

Pick/Pack/Ship

Assigned Carrier & Rates

Sample World Class Supply Chain Systems Configuration

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236 3PLs Surveyed, TMS with 2 or More 3PL Users


TMS Brand TotalProprietary TMS 132No TMS 24i2 Technologies 18TMW 13Oracle (OTM) 12MercuryGate 8Infor 6Innovative Computing 4RedPrairie 4Creative Systems 3Manugistics 3McLeod 3Descartes 2IES 2LeanLogistics 2Manhattan 2Pinnacle (FreightLogic) 2Prophesy 2Sterling Commerce 2

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236 3PLs Surveyed, WMS with 2 or More 3PL Users


WMS Brand TotalProprietary WMS 105No WMS 44Infor 23RedPrairie 15Manhattan Associates 14Cadre Technologies 9FourSite 6HighJump 6SAP 6Maves 5Zethcon (Synapse) 5Argos (ABECAS Insight) 3HK Systems 3ICS (Logimax) 3Oracle 3Codeworks (WDLS) 2Hardis (Reflex) 2SCA 2

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Thank You!

Stoughton Wisconsin OfficeRichard Armstrong

Armstrong & Associates, Inc.100 Business Park Circle

Suite 202Stoughton, WI 53589 USA

608-873-8929

Milwaukee Wisconsin OfficeEvan Armstrong

Armstrong & Associates, Inc.10401 West Lincoln Avenue

Suite 207West Allis, WI 53227 USA

414-545-3838

Documents

Track 1 Session 4 - IT Solutions | B2B Marketplace | News ...€¦ · Transplace, Plano, TX 2. Non-asset based International Transportation Management (ITM): 3PLs providing value-added