The respected industry consulting firm Armstrong & Associates finds Third-Party Logistics providers in a strong position to continue helping customers hurt by the Covid 19 pandemic, economic turmoil and the ongoing supply chain crisis.
In 2021, total 3PL segment net revenues (gross revenues less purchased transportation services) grew 27.8% to $119.4 billion, reflecting gross margin compression due to a volatile carrier sourcing market requiring transportation management 3PLs to spend more time and money to secure hard-to-find carrier capacity.
The overall gross margin for all 3PL segments declined from 40% to 35%, Armstrong said in its report: “A Roaring 2021: Demand Drives 3PLs to the Best Growth and M&A Year on Record.” There were an astounding 25 large 3PL M&A transactions with purchase prices over $100 million in 2021.
Armstrong said the Value-Added Warehousing and Distribution (VAWD) 3PL segment did very well in 2021. Gross revenue increased 17% to $54.6 billion and net revenue expanded 15.2% to $41.1 billion.
Most VAWD 3PLs have full warehouses and participated to at least some extent in the rapid growth of ecommerce fulfillment. This continues to be one of the fastest growing domestic 3PL segments, growing 24% from 2017 to 2021.
The asset-heavy Dedicated Contract Carriage (DCC) 3PL segment rounded out the 2021 growth story with more modest improvement. Gross revenue increased 15.3% to $23.1 billion and net revenue growth was 14.7% to $23 billion.
Unlike its non-asset brethren, DCC’s growth is limited by each provider’s ability to attract drivers and invest capital in equipment. Armstrong said 3PLs with freight brokerages to handle “overflow” business from DCC operations tended to do well.