2017 was a good year for third-party logistics in the US. Armstrong & Associates, Inc. estimates that net revenues expanded five percent to $77.1 billion and gross revenues increased 10.5 percent to $184.3 billion.
Tight carrier capacity pushed shippers to dedicated contract carriers in 2017. Dedicated Contract Carriage (DCC) revenues increased 10.2 percent over 2016 significantly higher than its compound annual growth rate (CAGR) of seven percent since 1995. Overall, U.S. third-party logistics (3PL) market revenues were up 10.5 percent to $184.3 billion.
Tight truck capacity and increasing truckload carrier rates are also driving overall growth in the Domestic Transportation Management 3PL segment. Domestic Transportation Management (DTM) gross revenues increased 16 percent over 2016 to $71.7 billion and net revenues were up 6.4 percent to $10.9 billion. The difference in growth rates reflects some gross profit margin compression due to quickly tightening truckload capacity in Q3 and Q4 of 2017, requiring freight brokers to pay rate increases to carriers faster than they can negotiate increases with shippers. With carrier supply and demand smoothing out somewhat, 2018 looks like a strong year. In Q1 2018, C.H. Robinson had increases of 14.9 percent and 10.1 percent in overall gross revenues and net revenues, respectively. C.H. Robinson accounts for approximately 14 percent of the DTM segments gross and net revenues.
International Transportation Management (ITM) is benefiting from tight air freight capacity due to the global growth in e-commerce and an overall strengthening of global economies. ITM gross revenues increased 10.5 percent in 2017. Net revenues, reflecting capacity pressure, increased 4.3 percent. However, Q1 2018 has seen better growth for Expeditors, Kuehne + Nagel and DHL. Expeditors gross revenue was up 9.7 percent and net revenue grew 9.9 percent in the U.S. Like other major ITM providers, Expeditors has tightened operations to improve gross margins.
While most 3PL providers are reporting tight warehouse capacity, Value-Added Warehousing and Distribution (VAWD) or Contract Logistics was the laggard in 2017. Gross revenue and net revenue increased 2.5 percent about 60 percent of U.S. gross domestic product (GDP) growth.
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