TIA report paints a bright picture for 3PL sector

The most recent results from the Transportation Intermediary Association’s (TIA) 3PL Market Report indicate that the third-party logistics sector is regaining its financial footing following the depths of the recession.

The report first came out in April 2009 and focuses on 3PL industry trends and practices, with an objective to provide a representative understanding of what is happening in the 3PL industry.

Data for the report is based on confidential feedback from 43 TIA member companies, whom answer questions on various topics, including: number of shipments by mode, total billing, and gross margins. Other data collected are customer-based forecasts to offer up expectations of near-term business volume. Participating TIA member companies are broken up into the following categories for comparison to avoid anti-trust issues, according to the TIA. The categories are: under $500,000 in gross billing; $500,000 to $1 million in gross billing; $1 million to $3 million in gross billing; $3 million to $10 million in gross billing, and more than $10 million in gross billing.

According to the report, total dollars billed for all study participants was up 13 percent compared to the first quarter of 2010, with all five categories showing growth in total dollars billed.

And with billings up, an increase in volume took place as well, according to the TIA, with total loads shipped in the second quarter up by at least five percent in the second quarter compared to the first quarter for every category with the exception of the $1 to $3 million grouping. The report also noted that average profit margins for all participating 3PLs were at about 15 percent compared to 16 percent in the first quarter even though average revenues and volumes were up across the board, according to TIA officials.

“The fact that every single category saw growth is a big positive,” said Joe Hannah, Ph.D., chair and professor of supply chain management at Auburn and one of the report’s authors. “I am little bit cautious with this data, though, because the second quarter typically outpaces the first quarter and there is more activity in general because of the seasonality of a lot of items.”

Even with the seasonality component at play, Hannah admitted that the overall data points to a much stronger second quarter on an annual basis, with positive indications and a cause for cautious optimism warranted.

According to the report, all 3PL categories, except for the $10 million and above one, generated 80 percent or more of total billings from truckload activity. 3PL’s above $10 million attributed truckload activity accounting for about two-thirds of total billings. Some of these companies drive significant revenues from rail and intermodal services, and companies in this category tend to have more diverse service offerings said the report. The total number of truckload loadings for the quarter came in at roughly 865,000, ahead of about 800,000 in the first quarter.

Looking outside of truckload, rail represented 85 percent of non-truckload activity and rail shipments accounted for 80 percent of non-truckload revenue.

Another driver for a strong second quarter is related to inventory re-building as evidenced by strong import demand and careful inventory management planning by manufacturers and retailers.

“The scars from being stuck with too much inventory [in early 2009] are still pretty fresh,” said Hannah, “and we are seeing a lot more caution going forward with inventory restocking. There are some good indications the economy has stabilized and is starting to grow a little bit. It is likely more than seasonality and could be viewed as a cautious rebound.”

For more information on the TIA’s 3PL Market Report, go to www.tianet.org.