Third-Party Logistics Celebrates 2017 Revenue Grown and Predicts 2018 Trends

2017 was a good year for third-party logistics in the United States. According to Armstrong & Associates, Inc., estimates that net revenues expanded 5% to $77.1 billion and gross revenues increased 10.5% to $184.3 billion.
Dedicated Leads the U.S. Third-Party Logistics Market
Tight carrier capacity pushed shippers to dedicated contract carriers in 2017. Dedicated Contract Carriage (DCC) revenues increased 10.2% over 2016 – significantly higher than its compound annual growth rate (CAGR) of 7% since 1995. Overall, U.S. third-party logistics (3PL) market revenues were up 10.5% to $184.3 billion.
Tight truck capacity and increasing truckload carrier rates are also driving overall growth in the Domestic Transportation Management 3PL segment. Domestic Transportation Management (DTM) gross revenues increased 16% over 2016 to $71.7 billion and net revenues were up 6.4% to $10.9 billion. The difference in growth rates reflects some gross profit margin compression due to quickly tightening truckload capacity in Q3 and Q4 of 2017, requiring freight brokers to pay rate increases to carriers faster than they can negotiate increases with shippers. With carrier supply and demand smoothing out somewhat, 2018 looks like a strong year. In Q1 2018, C.H. Robinson had increases of 14.9% and 10.1% in overall gross revenues and net revenues, respectively. C.H. Robinson accounts for approximately 14% of the DTM segment's gross and net revenues.
International Transportation Management (ITM) is benefiting from tight air freight capacity due to the global growth in e-commerce and an overall strengthening of global economies. ITM gross revenues increased 10.5% in 2017. Net revenues, reflecting capacity pressure, increased 4.3%. However, Q1 2018 has seen better growth for Expeditors, Kuehne + Nagel and DHL. Expeditors' gross revenue was up 9.7% and net revenue grew 9.9% in the U.S. Like other major ITM providers, Expeditors has tightened operations to improve gross margins.
While most 3PL providers are reporting tight warehouse capacity, Value-Added Warehousing and Distribution (VAWD) or Contract Logistics was the laggard in 2017. Gross revenue and net revenue increased 2.5% about 60% of U.S. gross domestic product (GDP) growth.
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