STOUGHTON, Wis., March 23 /PRNewswire/ -- Third-party logistics service providers (3PLs) had a great year in 2004. Total revenues for the U.S. 3PL market rose to $89.4 billion, an increase of 16.3%. The compound annual growth rate for U.S. third-party logistics is 14.2% since 1996. Leading the way was international transportation management (ITM), the core component for global supply chain management. ITM increased 34% for U.S. 3PLs. This significant growth reflected a large increase in global product movements to the U.S., particularly from China. Tight vessel, airfreight and truck capacities allowed for significant price increases. Better net revenues and income margins followed suit.
Net revenues (gross margin) for U.S. market international transportation supply chain managers (ITM) increased 17.2% for 2004 to $7.8 billion. After- tax profit margins improved to 7.1%, three percentage points better than the previous year. These margins are similar to 1998. If current trends continue for another year, the ITM segment will return to its traditional after-tax net income margins of 9-10%. Leading the way in ITM are Expeditors International, UTi, DHL Danzas and Kuehne & Nagel. All of these companies have more than $1 billon in U.S. turnover. Their after-tax income margins range from over 17% (Expeditors) to 9% (Kuehne & Nagel).
Major growth and even better profitability occurred in U.S. domestic transportation management (DTM). Leading the DTM segment is C.H. Robinson, one of the most profitable companies in the U.S. Robinson's net revenue increased to $661 million and its after-tax margin was 20.8%. Turnover for DTM increased to $25 billion, a 16.8% increase. After-tax net income margin improved to 11.6%. Other leaders in this segment include Landstar and Schneider Logistics.
Table 1. Revenues and Profitability by Segment - 2004 Turnover (Gross Revenue) Net Revenue Net Revenue 3PL Segment ($ Billions) ($ Millions) Growth Net Income Domestic Transportation Management 25.0 3.3 15.8% 11.6% International Transportation Management 31.5 7.8 17.2% 7.1% Dedicated Contract Carriage 8.7 8.5 12.3% 4.4% Value Added Warehouse Distribution 21.2 17.3 11.8% 2.8% 86.4(1) 36.9 13.5% 5.0% (1) Total turnover for the 3PL industry in the U.S. is estimated at $89.4 billion. $3 billion is included for the logistics software segment.
Dedicated contract carriage (DCC) reached a new high of $8.7 billion in 2004. The previous best year for DCC was 2000. Revenues contracted for 2001 and 2002. Tight trucking capacity in the U.S. helped this segment. Cardinal Logistics, NFI, Penske and Werner had increases of over 20%. Schneider Dedicated and J.B. Hunt, the largest players, had double-digit growth.
Value-added warehousing and distribution (VAWD) increased by 7% in 2004. Since 1999 this segment more than doubled with a compound annual growth rate of 15.3%. VAWD continued to grow solidly during the economic malaise of 2001- 2002. The downside for VAWD is that its profit margins, though they improved in 2004, are still meager compared to transportation management. The net income after tax percentage improved from 2.7% last year, to 2.8%.
The complete report for 2004 can be obtained by contacting Armstrong & Associates. Armstrong & Associates' Extended Information Service subscribers will receive the report next week.
About Armstrong & Associates: Armstrong & Associates, Inc. is a supply chain management consulting firm specializing in market research, mergers and acquisitions and outsourcing. Armstrong & Associates publishes Who's Who In Logistics? Armstrong's Guide to Global Supply Chain Management. Recent research papers include An Overview of Warehousing in North America -- Market Size, Major 3PLs, Benchmarking Prices and Practices and Trends in Third-Party Logistics Provider Supply Chain Systems Purchasing, Deployment and Use. In addition, Armstrong & Associates maintains databases of warehousemen, freight forwarders and third-party logistics and distributing companies.
