Almost every industry expert is in agreement that the wholesale distribution industry is in a period of transformation. Technological advancements (robotics, the Internet of Things, cloud robotics) are creating massive upheavals, with industries converging, new forms of competition surfacing, and new business models emerging as never before…disruption is now the norm. The explosive growth of e-commerce has created both challenges and opportunities for differentiated fulfillment options. Today’s consumers expect a seamless purchasing experience and want to be alerted if there are any issues that arise with their purchases. Distributors need to work more collaboratively with suppliers, manufacturers and retailers to gather, utilize and share real-time order information, shipping schedules and inventory levels to make sure customers’ expectations are met.
Increasing focus on core business activities accompanied by reduced shipping cost is anticipated to drive third party logistics market size. Increasing freight rates is likely to push shippers towards discovering new ways to pull costs out of the supply chain. The advent of e-commerce along with entrepreneurial ventures is likely to fuel the industry demand for specialized logistics as well as supply chain execution capabilities.
Many distribution business owners are realizing the importance of making data-driven business decisions. As a result, the focus has shifted to implementing truly integrated software that will tie the different facets of the business, (such as order taking to warehouse management to accounting) together. The results for companies who move in this direction are systems system that provides real-time information across departments in a timely manner to facilitate effective decision making.
Global 3PL Market
The 2016 global third party logistics (3PL) market size reached approximately $800 billion, and is projected to reach over $1 billion by 2022, growing at a CAGR of 4.4%.
International Transportation Management (ITM) is the largest 3PL service segment, valued at USD $274 billion in 2016. Continued growth in the segment is expected, reaching $338.91 billion by 2022 at a CAGR of 3.7%.
The Warehousing & Distribution (W&D) was valued at $174 billion in 2016, and is likely to grow to $215 billion by 2022, at an estimated CAGR of 3.6% through the forecast timeframe.
Domestic Transportation Management (DTM) which includes freight brokerage and value-added transportation management services reached $266 billion in revenue in 2016. DTM is expected to experience continued growth and is expected to reach $364 billion by 2022.
As the move to integrate software to tie business processes together continues to grow, so does the revenue of the software segment. The latest software applications often enhance the distribution coverage and provide quality service at lower costs to the customers. Software (S/W) was valued $20 billion in 2016 and is likely to attain $30 billion by 2022, growing at CAGR of over 6% during the forecast period.
Finally, Dedicated Contract Carriage (DCC) is projected to grow at a CAGR of approximately 4.5% through 2022 and reach $85 billion from the 2016 base of $66 billion. The growth in DCC is primarily driven by the ability to reduce costs, increase trucking capacity, and the transfer of liability.
3PL Regional Analysis
Asia Pacific third party logistics market was valued around USD 298 billion in 2016. The industry is expected to grow at a CAGR of over 5% through 2022.
The Eurozone crisis is anticipated to hamper growth in Europe. However, increasing demand from automotive industries and life sciences sector is expected to drive growth over the several upcoming years. Europe 3PL market size in 2016 was approximately $175 billion in 2016 and is forecast to grow at a CAGR of 3.0% through 2022.
In North America, advancements in technology logistics software is likely to propel the industry growth across the region over the several upcoming years. North America was valued over $212 billion in 2016 and is poised to grow through 2022 at a CAGR of 4.6%.
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