Dr. Bob Lieb, professor of supply chain management at Northeastern University, is author of the 21st Annual Survey of Third-Party Logistics Provider CEOs, sponsored by Penske Logistics The studies revealed that 3PL CEOs are confident about the current state and future revenue growth of their companies and the regional 3PL industries. The annual surveys, which this year included the CEOs of 27 of the world's largest 3PLs, found that approximately 75 percent of the companies involved in the surveys were profitable in 2013. North American and Asian-Pacific CEOs forecasted three-year company growth of 10.77 percent and 16.2 percent, respectively. European CEOs forecasted 8.33 percent growth over the same period.

1. North American, European and Asia- Pacific Markets for 3PL Services: 2014 3PL Provider CEO Perspective
Dr. Robert C. Lieb Professor Northeastern University
Dr. Kristin Lieb
Associate Professor
Emerson College
Joe Carlier
Senior VP of Sales
Penske Logistics

2. Discussion Topics
•Introduction to the Surveys and Findings
•Summary of Major Regional Findings
–North America
–Europe
–Asia-Pacific
•Other Key Findings
•Observations and Expectations

3. 2012 Third-Party Logistics Provider CEO Surveys
•This is the 21st iteration of these surveys.
•27 CEOs of the world’s leading 3PLs participated in the three regional surveys.
–North America, Europe, and Asia-Pacific.
•Collectively their companies generated approximately $46 billion in 3PL revenues in those markets in 2013.
•The surveys provide insights to the 3PL industry:
–Global overview from the CEO perspective.
–Regional market specifics, allowing comparisons across geographies.

4. NORTH AMERICAN
SURVEY RESULTS

5. North American Respondents CEO Participants
•Agility Logistics
•Cardinal Logistics
•DHL Exel Supply Chain
•DSC Logistics
•Kuehne + Nagel Logistics
•Menlo Logistics
•MIQ Logistics
•Penske Logistics
•DB Schenker
•Transplace
•UPS Supply Chain Solutions
•UTi Integrated Logistics
•Werner Logistics

6. North American Respondents Performance to Growth Objectives
Exceeded
Exceeded
Exceeded
Met
Met
Met
Failed to Meet
Failed to Meet
Failed to Meet
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011
2012
2013

7. North American Respondents 3PL Profitability
None of these companies reported a loss in 2013, and all CEOs believed the regional 3PL industry was profitable for the year.
Company Performance
•2 very profitable
•10 moderately profitable
•1 broke even
Industry Performance
•1 very profitable
•12 moderately profitable

8. North American Respondents Industry Dynamics
•More near shoring, particularly APAC to Mexico
•Capacity shortages in many markets
•E-Commerce growth
•Amazon effect on supply chain marketplace
•Talent management challenges
•Labor issues in trucking/maritime industries
•Regulatory changes and their impact
•Constant pressure to upgrade technology

9. North American Industry Dynamics Near Shoring
•Responses similar to last year
•10 /14 CEOs said some key NA customers moving back from China to Mexico
•Reasons:
–Chinese wages
–Mexico becoming a “better value” (incentives)
–Shorter supply chains
–Increasing transportation costs
•Nearly 1/3 reported increased revenues related to near shoring
•Industries involved:
–Automotive (5), consumer goods, telecom, high tech, and industrial products
•CEOs: near shoring will increase significantly in next three years

10. North American Respondents Regional Market Opportunities
•Expanded support of E-Commerce
•Expansion of tech support for customers
•Growth of dedicated common carriage as private fleets shrink
•Emphasis on multi-client facilities and services
•Growth in Mexico and southern border trade
•Expansion of port-related services in Mexico/Canada
•Rebuilding automotive business in U.S. and Mexico
•Development of innovative and repeatable solutions to drive improvements in customer supply chains

11. North American Respondents Most Significant Problems
•Finding and keeping management talent
–The most significant problem (8 “Top 3” mentions)
•Continuing margin pressures
•Coping with capacity shortages
•Weak balance sheets and low ROI
•Difficult to build global capabilities
•Hard to find qualified and affordable acquisition candidates

12. Most Significant Problems Transportation Capacity Issues
•Transportation capacity problems—yes—9/14
•Multiple modes involved:
–7 truckload, 4 intermodal, 2 LTL, 1 rail
•Markets most heavily impacted:
–National markets due to driver shortages
–TL in Northeast and Southeast, West Coast ports
•Impact on 3PLs and their customers:
–Higher rates
–Longer transit times
–Difficulties meeting on-time service goals and cost targets
–Shifting freight to more expensive modes

13. Most Significant Problems Capacity Issues (continued)
Steps taken to address capacity problems:
•Developed core carrier strategies to lock in capacity
•Network design enhancements supporting less reliance upon constrained modes
•Developed alternative routes and improved service agreements with carriers
•Regular dialogue with key customers on their challenges, forecasts and developing needs.
•Pushing cross-border intermodal services
•Urging customers to be “mode agnostic”
•Supporting customer moves from JIT deliveries to give more flexibility in their supply chains
•Charging customers more for unanticipated surges
•Working with customers to collaboratively fill capacity

14. North American Respondents E-Commerce
•11/14 support customer E-Commerce activities
•Two have a separate E-Commerce business unit
•Major E-Commerce opportunities
–Provide forward stocking locations
–Offer same day order processing and shipping
–Support last mile delivery services
–Expand fulfillment services
–Help small start-ups to achieve scale
–Provide real time shipment visibility (B2B)
–Offer returns, repairs, reverse logistics
–Support omnichannel activities of traditional retailers

15. E-Commerce Problems and Risks
•Many related activities are labor-intensive
•Labor requirements likely to vary significantly over time
•Significant capital cost requirements
•May be difficult to achieve scale; start up issues
•Complexity of direct to consumer B2C activities
•Requires broad range of services--security/liability issues
•B2C is very different than B2B
•Operations must be very market responsive, difficult to plan and level load activities
•Substantial risk of failure of smaller E-Commerce companies

16. North American Respondents Significant Market Developments Last Year
Most often cited…
•E-Commerce expansion—growth of fulfillment needs
•Affordable Care Act implementation—cost impact
•More customer interest in collaboration—shared warehousing and transportation
•Ongoing labor problems at West Coast ports
•Driver shortage in major sectors of trucking industry
•Rapid technological changes
•Development of better sustainability metrics

17. North American Respondents Expected Market Changes Next Year
•More 3PL consolidation
•Intensified capacity issues in some markets
•Driver shortage will worsen
•More emphasis on multi-client transportation networks and shipment collaboration
•Accelerating growth of E-Commerce, particularly B2B
•More activities closer to major markets
•More emphasis on speed of fulfillment
•More small DCs spread over larger areas
•Growing pressure to increase technology spend
•Greater impact of security measures on design and execution of supply chains

18. North American Respondents Revenue Growth Forecast
11.5%
14.6%
10.4%
10.8%
1-Year
Projection
3-Year
Projection
COMPANY LEVEL
INDUSTRY LEVEL
6.6%
8.3%
6.6%
6.5%
1-Year
Projection
3-Year
Projection
2013
2014
2013
2014
2013
2014
2013
2014

19. EUROPEAN
SURVEY RESULTS

20. European Respondents CEO Participants
•Agility Logistics
•DHL Supply Chain
•Menlo Logistics
•Neovia Logistics
•Penske Logistics
•Rhenus Contract Logistics
•UPS Supply Chain Solutions
•UTi Integrated Logistics

21. European Respondents Performance to Growth Objectives
Exceeded
Exceeded
Exceeded
Met
Met
Met
Failed to Meet
Failed to Meet
Failed to Meet
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2012
2013
2014

22. European Respondents 3PL Profitability
Two CEOs reported their companies were unprofitable in Europe in 2013; but none believed the regional 3PL industry lost money during the year.
Company Performance
•4 Moderately profitable
•1 Breakeven
•2 Moderately unprofitable
Industry Performance
•8 Moderately profitable

23. European Respondents Status of the European Economy
•European 3PL market has not rebounded significantly in past year—unanimous
•Some customer in-sourcing taking place
•Little near shoring; several CEOs believe it will become significant in longer term
•3PL growth primarily in Eastern Europe, some growth in Germany, Belgium and the Netherlands
•Some 3PL growth coming from automotive, life sciences, E- Commerce, and traditional retail sectors

24. European Respondents Russian 3PL Market
•Five 3PLs operate in Russia
•Opportunities:
–Supporting healthcare and retail industries
–Providing warehousing services
–Providing logistics services to support growth of domestic markets
•Observation: large population, and immature market
•Many risks in Russia:
–Major political risks
–Significant customs problems (frequent delays for inbound Western products)
–Lax corporate code of conduct
–Lack of good property
•Ukraine issues make it difficult to justify further investments in Russia

25. European Respondents Industry Dynamics
•Stagnant economic conditions—crisis countries
•Growth of E-Commerce
•Rising 3PL costs
•Low 3PL profitability
•Greater demand for 3PL flexibility
•Longer client decision cycles
•Shorter contracts
•Slower growth in China impacting Europe

26. European Respondents Regional Market Opportunities
•Supporting E-Commerce growth
•Growth in life sciences industry
•Transform customer fixed costs to variable costs
•Expansion of value added services
•Consolidation of existing facilities
•Grow volume in stabilizing European economies
•Support growing European trade with Africa

27. European Respondents Most Significant Problems
•Intense competition in slow/no growth markets
•Right-sizing operations in Europe
•Managing aftermath of poor forecasts
•Differentiating company services in marketplace
•Rising labor costs in some markets
•Talent development issues
•Expanded role of Purchasing in selecting 3PLs
•Customers want shorter contracts

28. European Respondents E-Commerce
•Six serve E-Commerce customers
•One has separate E-Commerce business unit
•E-Commerce accounts for 4.5% of revenues
–Forecast to grow to 12% in three years
•B2B is 59% of revenues, and B2C is 41% of revenues

29. European Respondents E-Commerce
•Services Provided
–Fulfillment services
–Warehousing
–Pick/pack
–Order preparation
–Sorting
–Shipping
–Returns management
–Parcel deliveries
–Front end web support
–Last mile delivery
–Including delivery to lock boxes and pack stations
•Opportunities
–Multi client warehousing
–Last mile delivery services
–Consulting
–Multi channel management
–Order management
–Funds and information management
–Value added services and reverse logistics
•Risks
-Small customers
-Large investment required
-Unpredictable market
-Amazon

30. European Respondents Significant Market Developments Last Year
•Increased E-Commerce activity
•Economic recovery continued to move slowly
•Growing perception of commoditization of 3PL services—less appreciation for value added services
•Increased pressure on 3PLs to be more flexible, agile
•Reduction of customer stock levels
•New security requirements
•More supplier alliances

31. European Respondents Expected Market Changes Next Year
•Slow growth
•Resumption of 3PL consolidation movement
•Emergence of greater 3PL global consistency
•Even more supplier alliances
•Increased emphasis on closer relationships with key customers and suppliers
•More customer movement toward in sourcing

32. 6.4%
10.3%
7.7%
8.3%
1-Year
Projection
3-Year
Projection
COMPANY LEVEL
INDUSTRY LEVEL
4.1%
5.9%
4.0%
4.2%
1-Year
Projection
3-Year
Projection
2013
2014
2013
2014
2013
2014
2013
2014
European Respondents Revenue Growth Forecast

33. ASIA-PACIFIC
SURVEY RESULTS

34. Asia-Pacific Respondents CEO Participants
•DHL Supply Chain
•Menlo Logistics
•Penske Logistics
•UPS Supply Chain Solutions
•UTi Integrated Logistics

35. Asia-Pacific Respondents 3PL Revenues and Profitability
Three met or exceeded regional revenue projections in 2013. One was unprofitable; one believed the regional 3PL industry was unprofitable for the year.
Company Performance
•4 Moderately profitable
•1 Moderately unprofitable
Industry Performance
•4 Moderately profitable
•1 Moderately unprofitable

36. Asia-Pacific Respondents Industry Dynamics
•Continued regional growth
•Ongoing concerns about global economy
•Substantial increase in E-Commerce activity
•Significant shifts of customer activity in region
•Infrastructure problems in emerging economies
•Uncertain political environment in the region
•Rising labor costs and related labor problems
•More discussion of near-shoring
•More intense competition with local 3PLs

37. Asia-Pacific Respondents Important Observations on China
•3PL business in China continues to become much less import/export oriented
–3PL revenues now 42% import/export activities and 58% related to domestic distribution/consumption
•Several CEOs noted some customer shifts of manufacturing within Asia and to Mexico
–Singapore, Malaysia, Vietnam, Thailand
•Two companies reported following customers from China to new locations

38. Asia-Pacific Respondents Vietnam
•Three respondents operate in Vietnam—new market
OPPORTUNITIES: provision of national transportation services, service major hypermarket chains, expanding operations from Thailand, support manufacturers with VMI, Lean, supplier management, import/export, international freight services, small package delivery
RISKS AND PROBLEMS: certain areas of logistics not fully open to foreign companies (i.e. trucking), shortage of English-speaking supply chain talent, infrastructure issues, tight regulations, compliance issues, fraud, corruption

39. Asia-Pacific Respondents Thailand
•Five respondents operate in Thailand
OPPORTUNITIES: service automotive, consumer, high tech, retail, pharmaceutical, agribusiness, and industrial markets; domestic distribution for retail and consumer sectors
RISKS AND PROBLEMS: highly uncertain political environment, potential violence, tight labor market for highly skilled managers, high employee turnover, very competitive marketplace
Only one company reported any disruptions from military coup; but, hard to make Thailand a priority with existing instability

40. Asia-Pacific Respondents Regional Market Opportunities
•Support growth of E-Commerce and fulfillment
•Focus on supporting growth of intra-Asian trade
•Provide LLP services to assist global customers in fragmented emerging markets
•Bring new logistics concepts to the region
•Market one-stop shopping capabilities
•Provide ground transportation services in emerging markets
•Offer transportation management services to new customers

41. Asia-Pacific Respondents Most Significant Problems
•Poor infrastructure in emerging markets
•Low quality ground transportation in some markets
•Too many players in the 3PL marketplace
•Depressed margins can’t justify long-term investments
•Political uncertainty in some countries
•Shortage of logistics talent
•Rising labor and real estate costs in several countries
•Many customers have short-term focus that impacts contracts/relationships

42. Asia-Pacific Respondents E-Commerce
•Four provide E-Commerce support to customers
•One has separate business unit to serve E-Commerce
•Related revenues are 3.25% of current revenue base, projected to be 14.5% in three years
•E-Commerce revenues: 78% B2B and 22% B2C
•Most frequently provided support services: managing order and delivery, warehousing, transportation between DCs, support of B2C activities through small package delivery network, contract logistics services

43. Asia-Pacific Respondents E-Commerce (continued)
•OPPORTUNITIES: order fulfillment, E-Store management, distribution/delivery, warehousing, technology, supply chain design, transportation management, backroom support, and financial services
•PROBLEMS AND RISKS: fulfillment often very capital intensive, many small customers with high risk, achieving consistent service levels, particularly during peak promotional seasons, large stakeholders with huge sums of capital entering the market—Alibaba and Rookie Network in China

44. Asia-Pacific Respondents Significant Market Developments Last Year
•Regional economic slowdown did not materialize
•3PL market conditions stabilized and opportunities increased
•Regional 3PL industry on better footing, some 3PLs have recapitalized or received new funding through IPOs
•E-Commerce expansion
•Problems in emerging markets due to poor infrastructure
•Many 3PL customers now focused on development of short term strategies
•Increased customer demand for supply chain visibility

45. Asia-Pacific Respondents Expected Market Changes Next Year
•Continued growth
•Further regional 3PL consolidation
•Asian 3PLs may lead that movement
•Many smaller 3PLs with financial problems will fail
•Logistics practices will focus on lean and flexibility
•More companies looking for alliances and joint venture partners in China
•Continued expansion of E-Commerce activity

46. 9.0%
11.6%
15.0%
16.2%
1-Year
Projection
3-Year
Projection
COMPANY LEVEL
INDUSTRY LEVEL
8.6%
8.0%
7.6%
10.4%
1-Year
Projection
3-Year
Projection
2013
2014
2013
2014
2013
2014
2013
2014
Asia-Pacific Respondents Revenue Growth Forecast

47. OTHER KEY FINDINGS

48. 2014 CEO Survey Other Key Findings
Mergers and Acquisitions
Environmental Sustainability
Is Amazon a 3PL?
Observations and Expectations
Questions

49. Other Key Findings Mergers and Acquisitions
•Only 3 of the 27 CEOs reported significant M/A activity during the past year
5%
12%
7%
NA
EU
APAC
Expected Revenue Growth from M/A, Next 3 Years

50. Other Key Findings Mergers and Acquisitions (continued)
Recent surveys: CEOs indicated M/A activity would accelerate in all three regions, but that hasn’t happened. Why not?
CEO responses:
•Increased skepticism concerning potential benefits
•Previous acquisitions had major integration problems
•Many global 3PLs now have scalable base to grow organically, don’t need acquisitions to support growth
•Few attractive M/A candidates
•Potential targets are generally overpriced
•Economic uncertainty of the 3PL marketplace increases risk
•Many regional 3PLs are privately held

51. Other Key Findings Environmental Sustainability
•3PL involvement in sustainability issues continued to expand
–15 CEOs reported expanding existing sustainability projects: measurement tools, co-loading programs, C-level sustainability executives, natural gas units, automatic transmissions, modal shifts, facilities
–10 of 27 companies launched new sustainability initiatives during 2013: carbon neutral initiatives, benchmarking, alternative fuel vehicles, solar power for facilities, new sustainability officer position, Green Freight Asia
–8 plan to launch new sustainability initiatives in 2015: facility redesigns, fleet conversions, closer alignment with customer “green” goals

52. Other Key Findings Is Amazon a 3PL?
Amazon’s Impact on Supply Chain Management
•High speed delivery programs have raised customer service level expectations
•Created buzz around same day delivery
•Its “free” two day delivery program under Amazon Prime has been a game changer
•Those programs are driven by marketing goals and do not cover the related transportation costs
•Those programs have impacted UPS, FedEx and DHL by reducing the requirements for expedited services
•Its online fulfillment services have supported entry of many new online retailers
•That has fostered much greater aggregate demand for such fulfillment services

53. Other Key Findings Is Amazon a 3PL? (impact continued)
•Amazon’s aggressive marketing has led many retailers to pursue omnichannel strategies to compete with it
•It’s driving 3PLs development of short and long-term strategies to support their B2C and B2B customers
•Its aggressive infrastructure build-out has shortened delivery cycles
•Amazon’s market clout “kills firms with low prices.”
•It has shown the power of bringing a broad range of supply chain resources under one platform
•It has demonstrated value of supply chain visibility to many new online retailers

54. Other Key Findings Is Amazon a 3PL? (CEO views)
•Ten respondents provide logistics services to Amazon
•Those services include: distribution, value added warehousing, transportation services, bulky goods fulfillment, and import/export services.
•Amazon employees work in one 3PL facility!
•Ten said Amazon has already had an impact on the 3PL industry
•Less than half would identify that impact.
•Those that did identified the following:
-many startups use Amazon instead of 3PL; Amazon driving change in supply chain practices and forcing 3PLs to rethink their service offerings; Amazon’s volume and the demands it places on carriers has caused availability and delay problems for some 3PLs; Amazon Supply threatens some B2B business now handled by 3PLs

55. Other Key Findings Is Amazon a 3PL? (continued)
•Seven CEOs believe Amazon is a 3PL!
•Six believe there is already competition between Amazon and 3PLs
•Nineteen CEOs believe Amazon is a potential competitor for 3PLs. They see potential competition in several areas.
–Its continued expansion of warehousing, distribution services, order fulfillment and transportation services might pose a threat across a broad range of 3PL services
–Amazon’s platforms support entrance of many new shippers into the marketplace—easy for it to capture their demand for supply chain services
–An Amazon fleet to support same-day delivery might also be used to compete with 3PLs that are transportation focused
–Amazon Supply could take B2B industrial customers from 3PLs
–Amazon might leverage its investment in cloud technology to become a clearinghouse for a steadily increasing share of E-Commerce business currently served by 3PLs
–It could make a committed move into the 3PL space through expansion and acquisitions

56. Other Key Findings Observations and Expectations
•Industry structure—M/A, organic growth, mobility
•Industry outlook varies by region, 2014/2015 conditions
•Revenue projections vary significantly by region
•E-Commerce—major opportunity all regions/challenges
•Amazon—customer and competitor—current NA focus
•Manufacturing in emerging countries—long term pattern
•Nearshoring—greatest impact involves China/Mexico
•Talent management—continuing problem all regions
•Environmental sustainability—continued 3PL commitment
•Capacity shortages—most significant in North America

57. Other Key Findings Questions
Audience questions for…
Dr. Robert C. Lieb
Professor of Supply Chain Management
Northeastern University
Joe Carlier
Senior VP of Sales
Penske Logistics

58. Contact Information
Dr. Robert C. Lieb » Professor of Supply Chain Management
D’Amore-McKim School of Business, Northeastern University
(617) 571-9743 r.lieb@neu.edu
Dr. Kristin Lieb » Assoc Professor of Marketing Communications
Emerson College
(617) 824-3425 kristin_lieb@emerson.edu
Joe Carlier » Senior Vice President, Sales
Penske Logistics
(610) 775 6069 joe.carlier@penske.com

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