16th Annual Survey of Third-Party Logistics Provider CEOs Reveals Industry Revenue Forecasts and Emerging Trends in Global Supply Chains
Global recession significantly impacts company and industry revenue growth projections; continued pricing compression, reverse globalization and a sustained commitment to “green” initiatives highlighted as key trends
CHICAGO, Sept. 21, 2009 – Today, key findings from the “2009 3PL Provider CEO Perspective” survey are being presented at the Council of Supply Chain Management Professionals Annual Global Conference by survey author, Dr. Robert Lieb, Professor of Supply Chain Management at Northeastern University, and Joe Gallick, Senior Vice President of Sales for Penske Logistics. The findings, sponsored by Penske Logistics, analyze responses from 35 third-party logistics company CEOs across North America, Europe and Asia-Pacific whose companies were responsible for generating approximately $64 billion in revenue in 2008.
While last year’s results showed some of the lowest revenue growth projections ever seen in the history of the survey, this year executives cite the global recession for becoming even more modest in their company and industry forecasts. However, in spite of these continued pricing pressures and volume volatility, more than 70 percent of third-party logistics providers reported launching new sustainability initiatives.
“This year’s survey results underscore the caution and anticipation felt by 3PL executives as they wait for signs of a global economic recovery,” commented Lieb. “Yet, despite bearish growth projections and acknowledgement that consolidation, pricing pressures and operational reductions were, and may continue to be, necessary adjustments, the opportunities for improved collaboration with customers, expansion into emerging markets and the possible addition of new management talent have many excited about the next several years.”
“The past 12 months have posed unprecedented challenges for logistics providers around the world and yet opportunities for developing collaborative partnerships with customers have never been greater,” said Vince Hartnett, President of Penske Logistics. “But in that time we have all learned a great deal and made business adjustments that have undoubtedly positioned the industry for steady growth and continued success as the economy rebounds.”
Further insights into this year’s research findings are outlined in additional detail below:
Modest Revenue Projections
The global recession’s influence has been profound, prompting very modest revenue growth projections. In fact, on average, 3PL CEOs in Europe project negative growth rates for their companies during the next year.
· One-year company revenue growth projections were 6.9% for North America (12.6% in 2008), -3.3% for Europe (10.8% in 2008) and 12.9% for Asia-Pacific (21.4% in 2008). The average three-year company growth projections were 11.8% for North America (13.4% in 2008), 8.7% for Europe (10.0% in 2008) and 16.7% for Asia-Pacific (23.1% in 2008).
· One-year industry revenue growth projections averaged 3.5% for North America (9.0% in 2008), -1.4% for Europe (7.3% in 2008) and 10.7% for Asia-Pacific (11.2% in 2008). The average three-year industry growth projections were 7.9% for North America (9.8% in 2008), 4.9% for Europe (6.5% in 2008) and 11.7% for Asia-Pacific (12.9% in 2008).
· 16 of the 35 companies surveyed failed to meet their revenue growth projections during 2008, while 33 CEOs reported their companies were at least moderately profitable during 2008, with only one reporting unprofitability.
Shortened Supply Chains and Reverse Globalization
While the scale of the shift is small at this point, many CEOs surveyed expect that the trend toward reverse globalization and the shortening of supply chains will continue during the next several years.
· CEOs surveyed in North America and Europe reported that, on average, nearly one-quarter of their customers had taken steps during the past year to shorten supply chains; the reported average was 9% in Asia-Pacific.
· 20 CEOs reported that some of their major customers had shifted manufacturing activities from Asia to North or Central America or Eastern Europe.
Commitment to Sustainability and Human Capital
Despite the global economic downturn, 3PLs have identified environmental sustainability and human capital issues among those worthy of continuing ongoing support.
· 25 of the companies involved in this year’s survey reported launching new sustainability initiatives during the past 12 months, 22 have expanded existing sustainability programs and none reported scaling back “green” programs.
· While 28 of 35 CEOs reported layoffs during the past year, 27 CEOs noted a reduction in recruiting efforts. There were 26 leaders who reported reduced executive trips to industry conferences. Only six noted a cut in employee training programs.
Business Relationships, M&A and Price Compression
· CEOs in all three regions noted more adversarial relationships with approximately one-quarter of their customers due to recession pressures; however, at the same time more collaborative relationships were reported with more than one-third of North American customers, 20% of European customers and 13% of customers in the Asia-Pacific region.
· Only nine companies were involved in significant merger or acquisition activity during 2008; but many believe that industry consolidation will continue. On average, executives in all three regions expect less than 9% of their revenue growth to come from acquisitions during the next three years.
· 33 CEOs indicated that the economic downturn has intensified price compression in the industry.