Third Party Logistics Market Size, Share & COVID-19 Impact Analysis, By Mode of Transportation (Railways, Airways, Roadways, and Seaways), By Service Type (Dedicated Contract Carriage (DCC), Domestic Transportation Management, International Transportation Management, and Value Added Warehousing & Distribution), By Industry (Technological, Automotive, Retailing, Manufacturing, and Logistics), and Regional Forecasts, 2021-2028

The global third party logistics market size was USD 961.8 billion in 2020 and is projected to grow from USD 976.2 billion in 2021 to USD 1,701.2 billion in 2028 at a CAGR of 8.26% during the 2021-2028 period. The global impact of COVID-19 pandemic has been unprecedented and staggering, with witnessing a negative demand shock across all regions amid the pandemic. Based on our analysis, the global market exhibited a growth of 1.50% in 2021. The slow growth in CAGR is attributable to this market’s demand and growth, returning to pre-pandemic levels once the pandemic is over.

Third party logistics service is a business process where companies outsource their distribution and logistics functionality to the expert logistics service providers that are actively involved in and specialized in handling operations such as assembly services, warehousing, transportation, freight & forwarding. Third party logistics provides greater flexibility by reducing overall costs related to the distribution and warehousing of goods. Moreover, this is the most common business model in the logistics industry, enabling customers to focus on their core businesses.

Owing to the increasing consumer demand, some logistics companies offer value added services, including door-to-door delivery, cross-docking, procurement & production of products, packaging, and inventory management. Moreover, the availability of custom-made, industry specific third-party services from the reputed logistics service providers is the key factor propelling the global market growth.  

Lockdowns, Trade Tensions, And Shipping Restrictions Imposed Due To COVID-19 To Hamper Third Party Logistics Market Growth

The global outbreak of the COVID-19 disease has had drawn global attention to the supply chain. Nationwide disruptions occurred throughout the supply chain, which negatively affected the logistics industry. As per the survey from NTT data, 3PLs faced bottlenecks and backlogs in all areas of the supply chain, and more than 50% of the 3PL providers said that the pandemic had negatively impacted their operation, financial condition, and volume capacity. Moreover, the areas of the 3PL that were majorly impacted include workforce management (30-35%), international transportation & logistic service (20-25%), and manufacturing (24%). However, as per the analysis of Cathy Morrow Roberson, founder, and head analyst for Logistics Trends & Insights LLC, major 3PL businesses are not affected by the trade tensions in China and the U.S. Furthermore, the third party service provider companies, which didn’t have a balanced portfolio were more negatively affected due to the pandemic.

The U.S. economy is affected due to COVID-19 and trade tension as the United States is tightly interconnected with China, import tariffs have been a continued drag on international trade, the growth of 3PLs and other U.S. businesses, and the overall U.S. economy. The major company has seen extra demand within the food & grocery, consumer, Internet retailing, and technological vertical industries as products were hoarded & purchased to adhere to stay-at-home rules. But, in second-quarter has seen about a 15% drop in domestic transportation management (DTM) and 3PL segment gross revenues as volumes have dropped off across all modes.

In addition, in mid-2021, companies analyzed the condition and showed their readiness and continuity in planning. Recently, companies have stated that they are currently working to improve approved/assigned projects on labor management and scheduling, warehouse distribution and operations, domestic transportation and logistics, data analysis and visibility, and many others.

LATEST TRENDS

Increased Use Of Emerging New Game-Changing Technologies In 3PL Business to Set a Positive Trend For Market Growth

Technology plays an important role for shippers as well as service providers. The shippers are majorly seen depending on third party logistics for costly & sophisticated technology solutions. Users also increasingly rely on their logistics providers, who are experts in supply chain event management (SCEM), transportation management systems (TMS), international trade logistics systems (ITLS), and warehousing management systems (WMS). Moreover, third party service logistics providers can also purchase these technologies/software and implement them in their operation to avail the most productivity. Moreover, using this advanced technology software helps achieve powerful savings in operational efficiencies. For instance, the company can benefit from 80% of cost-cutting using this supply chain management (SCM), cloud ERP, TMS, web-based s/w, fully automated systems. In addition, warehouse management and web-based transportation systems also help 3PL companies to reach smaller customers. For instance, Schneider Logistics uses a Web-based SUMIT system to serve a much broader range of customers in a cost-effective manner. Thus, recent innovations in 3PLs technologies and systems to ease the overall operation will lead to a global market growth rate in the forecast period.

DRIVING FACTORS

Rise In E-Commerce Business and Policy support to Drive The Market Growth

The e-commerce business during the pandemic has seen a drastic rise in some regions. The customers' demand witnessed changes related to the timely delivery. Customers are more inclined toward same-day and one-day delivery. As a result, major retailers started affording logistics services to meet the customers' expectations. Moreover, continuous development in e-commerce will surge the demand for logistics services in areas such as express delivery & inventory management. The demand for 3PL service providers will significantly rise in tier 3 to 5 cities where demand for logistics services has increased. Furthermore, China’s Belt and Road Initiative is also expected to invest heavily in the logistics services infrastructure, especially in the railway system between Europe and China. The agreement and infrastructure development will drive more trade activities, eventually driving the demand for third party logistics definition services in the future. 

RESTRAINING FACTORS

Infrastructure Limitation, Shortage of Logistics Experts, And Regulatory Issues Can Restrain The Growth Of The Market

The development of logistic services in developing countries is continuing to lack behind compared to developed countries. This development is due to limited number of highly trained professionals available in the industry. The lack of logistics experts with experience further limits the growth of this market. Similarly, the current infrastructure condition in developed countries, including China is insufficient to meet the demand for advanced logistics services. Some of the warehouse in countries uses/operates with outdated equipment. The ground infrastructure fails to meet efficient connection with the logistic hub, which prevents the establishment of advanced intermodal logistics operations. In addition, majority of the industry operation is controlled/governed by the Ministry of Transportation, National Development and Reform Commission, and others. The differences in policies among multiple government authorities require that logistics service providers employ additional administrative and management resources. As a result, the regulatory discontinuity may slow down the pace of development of the global logistics services industry. Thus, all such factors, including lesser manufacturers' control on logistics & delivery services hinder the global market growth.

SEGMENTATION

By mode of transportation

Roadways Segment Dominates the Market

Mode of transportation is segmented into roadways, railways, seaways and airways.

The largest share in held by the roadways segment and is expected to maintain its position in the market in the upcoming years. The need for roadways as a mode of transport in 3PL industries has been witnessed to increase considerably owing to improvement of road infrastructure and increase in cross border trades between landlocked countries across the globe. Moreover, 3PL service providers adopt the latest IT solutions such as WMS and transport management systems (TMS) to provide innovative delivery solutions to first-party companies. For instance, in September 2018, NEXT Future Transportation INC., a fully integrated logistics solution, introduced an automated ground vehicle and e-shuttles in on-road vehicles to operate on public roadways to provide autonomous parcel delivery solutions.

Railway serves as the fastest mode of transportation. Logistics provider companies are improving their services to offer reliability and improve efficiency. For instance, in October 2018, global leading logistics company UPS opened its 2^nd largest U.S. based network package operating facility incorporated for railway cargos.

Seaway serves as one of the most expensive modes of transport. Leading companies are entering into a joint venture to operate across various regions using seaways transport operations. For instance, in July 2018, Dutch port service provider LBH group and German 3PL Rhenus Group entered a joint venture to operate Europe using an inland seaway transport operation. Furthermore, with the rising concern of world pollution, the demand for low pollution-causing transportation mode, which is seaway, has escalated, significantly contributing to the global third party logistics market share.

Various airlines are launching flights for logistics to provide fast and urgent transportation services across countries. For instance, in August 2018, two dedicated freighter flights were launched by Ethiopian Airlines between Addis Ababa and Miami. This transportation is used to manage goods of high importance. With high cost and increasing competition, manufacturers seek speedy deliveries, increasing the demand for airways.

By Service Type

Domestic Transportation Management (DTM) Segment To Hold the Largest Market Share

The market is segmented into dedicated contract carriage (DCC), domestic transportation management, international transportation management, and value-added warehousing and distribution based on service type.

DCC service providers enable better utilization of capital and integration of transportation management to their customers, which help customers to focus on the core business issues and end-user, thereby driving the adoption of dedicated contract carrier service. Domestic transportation management consists of a flow of goods between the states of the same nation. Companies are also actively involved in expanding their domestic business. For instance, in October 2018, Transplace Inc. acquired the domestic intermodal business of Yusen logistics –a logistics service provider in America. This acquisition is expected to provide Transplace with a significantly larger domestic transportation business. Moreover, such increasing strategy and e-commerce business growth will propel the market growth.

International transportation management manages the flow of products through the supply chain to customers by crossing international boundaries. Effect transport management due to the adoption of automated technologies, increase in trading activities between nations, and improvement in logistics infrastructure are propelling to grow the International transportation management segment share.

The surge in penetration of completely automated warehousing distribution systems is extremely less which is expected to provide a remarkable growth opportunity for the key player operating in the market.

By Industry Analysis

Booming Electronic Product Sales To Favor Technological segment Market Growth

The rise in industry trend of ordering goods, products such as mobile phones, computers, and other electronic products from e-commerce websites, and increasing internet penetration dominate this segment. Many automotive manufacturers are involved in multiple strategies with service providers, and 3PL allows automobile industry players to respond more efficiently and effectively according to the increasing consumer demand across the globe. Third party logistic service providers were becoming crucial for retailers as the key priority and expected to be quick to cater to the demand. Giant Companies, including DHL, Amazon, and others have introduced a strategy of shipping goods in one to two hours in some major cities. Thus, retailers' strategy provides a remarkable growth opportunity for service providers. The manufacturing logistics industry relies on 3PL services, including raw material procurement to deliver the desired product to end customers with a complex supply chain process. Thus, it highly dominated the market and expected to grow in the future significantly.

REGIONAL INSIGHTS

The Asia Pacific region is anticipated to growth at the fastest rate during the forecast period in this market. The region has observing a sturdy growth, driven by initiatives by the e-commerce industry to incorporate warehouse projects and Its solution in the supply chain by regional companies. In addition, a collaboration of logistics service companies with transport companies is fueling the Asia Pacific third party logistics market growth.

The North America market is anticipated to show remarkable growth due to an increase in partnership among leading logistics service providers to incorporate new projects. In addition, forming a joint venture to operate in the market and incorporating new services to serve countries fuel the regional market growth.

Europe is expected to witness a boost in the market owing to the growing technology adoption in the logistics field, increasing food & groceries industry in Europe, and rising e-commerce market. These factors will offer immense growth opportunities for the market to flourish. The acquisition of logistics services by 3PL providers giants and large storage facilities will boost the market growth. Rising attention on truck platooning by logistics vendors, and growing  economy will considerably influence the market growth.

The rest of the world currently contributes less than the other region; however, it is anticipated to contribute significantly to the market's growth.

KEY INDUSTRY PLAYERS

Acquisition Strategies Of Many Third Party Logistic Market Players to Enhance Market Prospects

C.H Robinson is one of the American multimodal transportation service provider companies also engaged in third party services. The company provides freight transportation, brokerage & warehousing facility, transportation management services, and many others. In March 2020, the company announced that it has acquired prime distribution services (“Prime”), a value added service provider in North America from Roadrunner Transportation with a valuation of USD 220 million.

In September 2021, Maersk acquired a Portuguese startup specializing in logistics and planning to use its technology to benefit its business. Also, in September 2020, A.P. Moller – Maersk company acquired European customs services specialist KGH Customs Services to further enhance its logistics and services offering.

LIST OF KEY COMPANIES PROFILED:

• DHL Group (Bonn, Germany)


• Kuehne + Nagel (Schindellegi, Switzerland)


• C.H. Robinson  (Minnesota, U.S.)


• Ceva Logistics (Marseille, France)


• FedEx Corporation (Tennessee, U.S.)


• Nippon Express (Tokyo, Japan)


• DB Schenker (Essen, Germany)


• UPS (Georgia, U.S.)


• JB Hunt (Arkansas, U.S.)


• Panalpina (Basel, Switzerland)

KEY INDUSTRY DEVELOPMENTS:

• October 2021 –Nippon Express expanded its footprint in the Republic of Serbia by establishing Belgrade Branch. This expansion aims to expand logistics services to meet the diversifying logistics needs in Central and Eastern Europe.


• October 2021 –Global logistics leader DHL has done a partnership with North America-based leading company Embark, which develops autonomous technology for trucking. Based on this strategy, DHL plans to deploy these trucks into its operation once the software is commercially launched in 2024. The main aim is to gain maximum value and reap the anticipated speed, safety, and sustainability benefits.

REPORT COVERAGE

The third party logistics market report provides a detailed analysis of the market and focuses on crucial aspects such as leading companies, service types, and leading product applications. Besides this, the report offers insights into the market trends and highlights key industry developments. In addition to the factors above, the report encompasses several factors contributing to the market's growth over recent years.

Report Scope & Segmentation