Penske Releases Annual 3PL CEO Survey

Logistics Insight Asia - Technology & Market Trends, 23/10/2009

Key findings from the 2009 Third Party Logistics (3PL) Provider CEO Perspective survey have been 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 US$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.

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 percent for North America (12.6 percent in 2008), -3.3 percent for Europe (10.8 percent in 2008) and 12.9 percent for Asia Pacific (21.4 percent in 2008). The average three-year company growth projections were 11.8 percent for North America (13.4 percent in 2008), 8.7 percent for Europe (10.0 percent in 2008) and 16.7 percent for Asia Pacific (23.1 percent in 2008)

· One-year industry revenue growth projections averaged 3.5 percent for North America (9.0 percent in 2008), -1.4 percent for Europe (7.3 percent in 2008) and 10.7 percent for Asia Pacific (11.2 percent in 2008). The average three-year industry growth projections were 7.9 percent for North America (9.8 percent in 2008), 4.9 percent for Europe (6.5 percent in 2008) and 11.7 percent for Asia Pacific (12.9 percent 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 nine percent 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 percent of European customers and 13 percent 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 percent 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.

Companies participating in the annual survey included: Cardinal Logistics, DSC Logistics, DHL Exel Supply Chain, Genco Supply Chain Solutions, Kuehne+Nagel Logistics, Landstar, Menlo Logistics, Panalpina, NYK Logistics, Penske Logistics, Pittsburgh Logistics, Ryder Integrated Logistics, Schenker, Schneider Logistics, Transplace, UPS Supply Chain Solutions, UTi Integrated Logistics, Caterpillar Logistics Services, Ceva Logistics and Wincanton.

Penske, www.PenskeLogistics.com

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