Two weeks ago, I participated in the third annual 3PL Value Creation Summit sponsored by Armstrong & Associates. Attended by third party representatives, as well as leaders in the global investment community, it provided some valuable insights into the future of investments in the industry. Since several of these thoughts should be of interest to providers and users alike, I wanted to summarize some of them in this week’s blog. 

  1. Merger and acquisition activity in the LSP sector is showing no signs of slowing down, but 2016 is expected to be dominated by mid-sized to small deals. While non-asset based firms are still valued higher than asset based companies, that has shifted somewhat in recent years.
  2. When evaluating possible acquisitions, private equity buyers like to see solid management, revenue and earnings growth, and a solid business model.
  3. Asian providers are buying into U.S. Based firms due to their higher growth possibilities
  4. According to one strategic buyer, they prefer companies in which they can grow revenues 3 to 4 times in as many years. Cultural fit, geographic expansion, and solution expansion possibilities are all important. Those firms with overly ambitious revenue projections and those who are cost cutting to boost short term profits are frowned upon.
  5. Nearshoring to Mexico will continue in the automotive, high tech, and industrial sectors. In some areas of China wages are increasing by 20% annually.
  6. Companies that sell locally in foreign markets probably will continue to operate where they are.
  7. Most European and U.S. providers have established relationships with universities that will help develop entry level talent.
  8. Omni-channel retailing continues to grow, resulting in new delivery and inventory management challenges. Variation in retail demand is leading to “stock keeping unit proliferation” which is also complicating inventory management.
  9. Almost all the LSP executives saw future growth in the U.S. and Asia outpacing that in Europe. Most Asian growth will be to support intra-Asia trade and distribution.
  10. Finally, the group reinforced the notion that technology is fueling dramatic changes in the availability and analysis of supply chain data.

Most industry leaders believe the logistics service provider sector will continue to grow, but there seems to be little doubt that the providers will face new challenges as well as opportunities.

Written By: Julie Banker