3PL Services Market Intelligence

Industry Outlook & Drivers

Global Market Outlook on 3 PL services

• Air freight shippers with global operations, on an average, have engagements with 6–10 freight forwarders for their annual volume (85–90 percent of volumes). It is considered to be the benchmark for a highly consolidated supplier base
• Ocean freight shippers with global operations engage directly with shipping liners as well as with freight forwarders, based on the volume movement in different regions
• The key dependent variables/factors are the number of lanes, supplier capabilities, volume per lane, and physical presence of the shipper

The general practice while contracting for freight forwarding and customs brokerage services

• The general practice of all the major shippers is to bundle the freight forwarding and customs brokerage services to reduce the complexity of the supply chain
• This practice assists the freight forwarders to understand more about the shipper's international flow of goods, major lanes of operation, and other transportation need

The preferred contract model for engaging with the freight forwarder

• The freight forwarders prefer a short-term contract model, due to its transparency and lack of risk by the shippers, freight forwarders, and the suppliers

3PL Industry - Market Overview

• The global 3PL industry is estimated to grow at a CAGR of 5–5.5 percent, due to the increase in e-commerce and trade activities. Government regulations are also increasing the 3PL demand across industries
• In 2018, the global 3PL industry size is estimated to be about $865 billion, with APAC, North America, and EU contributing to ~85 percent of the market

Freight Forwarding - Market Overview

Demand from the manufacturing & retail sectors has forced the freight forwarders to consolidate their services and functions by sharing logistic facilities and centralizing management facilities to provide efficient services

Growth Rate until 2020

• The market has witnessed many change in the last five years, and the main industry, such as automobile and retail, are expecting more technology-enabled delivery

• The freight forwarding industry is expected to grow by 4–4.5 percent until 2020. However, the sea freight market is expected to grow at 2–2.5 percent CAGR until 2025, as there is a cyclic trend between air freight and sea freight based on peak volume

Factors Influencing the Growth Rate of Freight Forwarding Marke

• Excess capacity in the sea freight market, the continued introduction of mega-ships, and falling rates have resulted in volume gain for many forwarders, but was not able to realize a return
• To boost the air freight revenue and tonnage, forwarders are focusing more on industries, such as perishables and pharmaceuticals, and for sea freight, it is oil & gas, retail, and e-commerce

Cost Structure - Freight Forwarding

• Freight forwarders operate at a relatively low margin of 1–4 percent and are highly sensitive to decline in profitability, as the business model is highly dependent on cargo trade, carrier costs, and revenue management.
• A disproportionate change in revenue and carrier costs will lead to transistor effect in profitability, hence, the freight forwarders should have matured revenue management strategies by appropriate cost cutting actions with a view to operational costs

Factors Impacting Customs Brokerage Services Cost

• Hidden cost components play a vital role in customs brokerage charges. It is found that corruption is the major hidden cost parameter that adds to the cost of customs clearance and customs visit charges
• When the variety of goods is more, a single declaration is not enough. Additional charges are levied for every additional declaration made for customs clearance. This would further add to the total cost of customs clearance