Global and Regional 3PL Market

Trends and Analysis

11 April 2018

Website: www.3PLogistics.com
 About Armstrong & Associates, Inc.
 Founded in 1980 - Supply Chain Market Research and Consulting Services
 Over 59,000 Newsletter Subscribers
 Current Market Research:
 The Business of Warehousing in North America – 2018 Market Size, Major 3PLs, Benchmarking
Costs, Prices and Practices
 “Global and Regional Infrastructure, Logistics Costs, and Third-Party Logistics Market Trends”
 “Third-Party Logistics Market Results and Trends for 2017 – Including Estimates for 190
Countries”
 “Trends in 3PL/Customer Relationships”
 “Keep It Running – The Quintessential Spare Parts Logistics Report”
 “Digital Freight Matching – Capturing Technology-Based Efficiencies in the Trucking Industry”
 Who's Who in Logistics Online Guide to Global Supply Chain Management
 Over 570 Detailed 3PL Profiles; 7,800+ 3PL Customer Relationships
 rd
3 Annual 3PL Value Creation Asia Summit, Hong Kong: May 16, 2018
 6th Annual 3PL Value Creation Summit, Chicago: October 16-18, 2018
 Articles & Press Coverage: Air Cargo World, American Shipper, DC Velocity, The Economist, Global
Trade, Journal of Commerce, Logistics Management, Logistics Quarterly, Modern Materials
Handling, NPR-Marketplace, SupplyChainBrain, Transport Topics, Wall Street Journal
 Consulting Services: 3PL Mergers and Acquisitions, 3PL Operational Due Diligence, 3PL Strategic
Planning, Logistics Outsourcing, Logistics Provider Contracting & Negotiation, Systems Evaluation &
Selection, Expert Witness
 Over 30 3PL strategic planning engagements and 17 closed Investment/M&A deals.
 Global Resources: U.S. Organization; Eric Xiang, Wuhan China; Frank Lange, Chiang Mai, Thailand
2 Copyright © 2018 Armstrong & Associates, Inc.
Our Clients – An Emphasis on 3PL Expertise

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Over 100 3PL Operations Reviewed
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 Mega Trends, Trends, and Changing 3PL Requirements
 Cheap Oil, Increasing Chinese Wages and Regulations, Trade Uncertainty
 Nearshoring/Reshoring and Transition to Lower Cost Asian Countries
 TPP, NAFTA, China’s Belt and Road
 E-commerce and Omnichannel Retail
 Amazon (Is it a 3PL?), Real Estate, Wages, Transit Times, Profit Motive
 E-commerce Buy Anywhere/Return Anywhere
 Stores are Warehouses, Inventory Optimization, SKU Proliferation
 Cross Border E-commerce, Last Mile
 Robotics, Drones, Autonomous Trucks, Transportation Automation
 WM, Vision picking, Augmented Reality, Robotics/Cobotics
 YM, PINC – Drones/Flying Robots for YM and Cycle Counting
 TM, Autonomous trucks, Digital Freight Matching, Automated Processes ( Load/Carrier
Matching Algorithms, Back Office, Machine Learning, APIs)
 Big Data, Metrics and Performance Measurement
 Integrating Data from Multiple Sources (Cell, ELD, SCM)
 Business Intelligence
 Customer Relationship Management
 Blockchain
 Asset Tracking with Automated Event Management
 3D Printing
 MFG – SPL, UPS – 60 3D Printing Locations
 Forcing Flexible 3PL Operations, Systems Upgrades, Ongoing Automation and Innovation
5 Copyright © 2018 Armstrong & Associates, Inc.
 Value-Added Services & Capabilities
Both – 3PL/4PL
4PL/Lead Logistics Provider
Call Centers
Consolidation/Deconsolidation
Consulting/Process Reengineering
EDI Handling
Exception Handling
Financial Services
Food Grade/Temperature Controlled
Hazmat Skills
ISO Certification
Inventory/Vendor Management
Lean Management Skills
Order Management
Pool Distribution/Cross Docking
Radio Frequency/RFID
Security Processes
Sourcing/Procurement Skills
Supply Chain Systems
Domestic and Int’l Transportation Management
Cargo Insurance
Carrier Contracting/Brokering/Freight Payment
Customs Brokerage
Duty Drawback Processing
Freight Forwarding/NVOCC
lncoterms Management – EXW to DDP
Letters of Credit/Negotiable BOLs
Merge In Transit
Multimodal Transportation
Project Logistics
Transportation Execution
Transportation Network Planning/Optimization
Value-Added Warehousing & Distribution
Bonded Facilities
Easily Deployable IT & Work Processes
Installation/Removal
JIT/Kanban
Kitting/Pick & Pack
Light Manufacturing/Assembly
Order Fulfillment
Reverse Logistics
Subassembly

Tier 1 GSCMs provide these services and capabilities in global markets.

6 Copyright © 2018 Armstrong & Associates, Inc.
 Drivers of Global 3PL Market Growth

Regulatory
Operational Compliance Offshoring & Low-
Performance Cost Country Mfg.

Cost Focus on Core

Reductions Competencies

Supply Chain Expanding IT

Disruptions Requirements

Need Regional & Local Market Expertise

3PLs provide the infrastructure necessary to support

increasingly complex supply chains involved in global trade.
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 3PL Key Business Success Drivers

Process Information
Design/Improvement Technology

People

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 2016 Global Logistics Costs by Mode or Function (US$ Billions)

$3 552

$1 815

$905
$643 $610

$256 $255 $192

Trucking Inventory Warehousing Logistics Water & Misc. Air Rail Forwarding
Carrying Administration

Source: Armstrong & Associates, Inc. Global and Regional Infrastructure, Logistics Costs, and Third-Party Logistics Market Trends and Analysis Report
9 Copyright © 2018 Armstrong & Associates, Inc.
 2016 Global Logistics Costs & 3PL Revenues

$3 500

$3 000

$2 500
(US$ Billions)

$2 000

$1 500

$1 000

$500 Logistics Costs

3PL Revenue
$-
Asia North Europe Middle South Africa CIS/
Pacific America East America Russia
3PL Revenue $305 $200 $172 $40 $37 $26 $22
Logistics Costs $3 185 $1 856 $1 666 $467 $431 $343 $279

Global 3PL Market = US$802 Billion

Source: Armstrong & Associates, Inc. Global and Regional Infrastructure, Logistics Costs, and Third-Party Logistics Market Trends and Analysis Report
10 Copyright © 2018 Armstrong & Associates, Inc.
 Top 50 Global 3PLs
2017 2017
Gross Logistics Gross Logistics
A&A Revenue A&A Revenue
Rank Third-Party Logistics Provider (3PL) (US$ Millions)* Rank Third-Party Logistics Provider (3PL) (US$ Millions)*
1 DHL Supply Chain & Global Forwarding 27,598 26 Agility 3,500
2 Kuehne + Nagel 22,574 27 Burris Logistics 3,396
3 DB Schenker 18,560 28 Hellmann Worldwide Logistics 3,305
4 Nippon Express 17,660 29 Ryder Supply Chain Solutions 3,066
5 C.H. Robinson 14,869 30 FedEx TN/SupplyChain Systems/Supply Chain 3,014
6 DSV 11,374 31 Total Quality Logistics 2,934
7 XPO Logistics 9,506 32 Damco 2,700
8 UPS Supply Chain Solutions 7,981 33 Sankyu 2,548
9 Sinotrans 7,046 34 Coyote Logistics 2,360
10 CEVA Logistics 6,994 35 Schneider Logistics & Dedicated 2,330
11 Expeditors 6,921 36 Transplace 2,181
12 DACHSER 6,834 37 Transportation Insight 1,947
13 J.B. Hunt (JBI, DCS & ICS) 6,828 38 Echo Global Logistics 1,943
14 GEODIS 6,255 39 Landstar 1,940
15 Hitachi Transport System 5,935 40 NFI 1,910
16 Panalpina 5,621 41 Groupe CAT 1,864
17 GEFCO 4,740 42 NNR Global Logistics 1,735
18 Bolloré Logistics 4,670 43 Penske Logistics 1,700
19 Toll Group 4,660 44 Fiege Logistik 1,638
20 CJ Logistics 4,454 45 APL Logistics 1,632
21 Kintetsu World Express 4,227 46 Mainfreight 1,627
22 Hub Group 4,035 47 Wincanton 1,565
23 Kerry Logistics 3,951 48 Americold 1,536
24 Yusen Logistics 3,914 49 ID Logistics Group 1,501
25 Imperial Logistics 3,896 50 Worldwide Express/Unishippers Global Logistics 1,400
*Revenues are company reported or A&A estimates and have been converted to US$ using the annual average exchange rate.
11 Copyright © 2018 Armstrong & Associates, Inc.
Top 50 Global 3PLs – Distribution by Country Headquarters
(Number of 3PLs, Percent of Total)

China, 1, 2% Australia, 1, 2%
Denmark, 1, 2%
Hong Kong, 1, 2%
Kuwait, 1, 2%
New Zealand, 1, 2%
Singapore, 1, 2%
South Africa, 1, 2%
South Korea, 1, 2% United States, 20, 40%
United Kingdom, 1, 2%

Netherlands, 2, 4%

Switzerland, 2, 4%

France, 4, 8%

Germany, 6, 12%
Japan, 6, 12%

Source: Armstrong & Associates, Inc. Global and Regional Infrastructure, Logistics Costs, and Third-Party Logistics Market Trends and Analysis Report
12 Copyright © 2018 Armstrong & Associates, Inc.
2016 Global Logistics Costs & 3PL Revenues (US$ Billions) – CIS & EU
Logistics 2016 2016 3PL 2016
Country/Region 2016 GDP (GDP %) Logistics Cost Revenue % 3PL Revenue
Kazakhstan 133.8 15.1% 20.2 8.1% 1.6
Russia 1,280.7 16.1% 206.2 7.7% 15.9
Ukraine 93.3 15.9% 14.8 7.8% 1.2
CIS-Others 234.0 16.3% 38.1 7.9% 3.0
CIS Total 1,741.8 16.0% 279.3 7.8% 21.7
Austria 386.8 9.3% 36.0 10.2% 3.7
Belgium 467.0 8.7% 40.6 10.4% 4.2
Czech Republic 193.0 11.0% 21.2 9.6% 2.0
Denmark 306.7 9.6% 29.4 10.1% 3.0
Finland 236.9 9.3% 22.0 10.2% 2.2
France 2,463.2 9.5% 233.7 10.5% 24.5
Germany 3,466.6 8.8% 305.5 10.5% 32.1
Greece 194.2 13.6% 26.4 8.6% 2.3
Hungary 125.7 13.1% 16.5 8.8% 1.5
Ireland 293.6 9.6% 28.2 10.1% 2.8
Italy 1,850.7 9.7% 179.6 10.6% 19.0
Netherlands 771.2 8.3% 64.3 14.4% 9.3
Norway 370.4 9.6% 35.6 10.1% 3.6
Poland 467.6 11.7% 54.7 9.3% 5.1
Portugal 204.8 12.1% 24.8 9.2% 2.3
Romania 187.0 14.5% 27.1 8.3% 2.2
Spain 1,232.6 9.7% 119.3 10.0% 11.9
Sweden 511.4 8.1% 41.4 10.6% 4.4
Switzerland 659.9 8.9% 58.7 10.3% 6.0
United Kingdom 2,629.2 8.8% 230.4 10.5% 24.2
Europe-Others 530.0 13.2% 70.1 8.6% 6.0
Europe Total 17,548.5 9.5% 1,665.5 10.3% 172.3
CIS & EU Grand Total 19,290.3 10.1% 1,944.8 10.0% 194.0

13 Copyright © 2018 Armstrong & Associates, Inc.

 E-Commerce Logistics Costs, 3PL Revenue & Growth (US$ Billions)

*Includes countries with $500 million or more in 2020E e-commerce logistics costs; included countries represent 87% of global GDP and ~98% of 2016
global e-commerce sales.

Source: Armstrong & Associates, Inc. Global and Regional Infrastructure, Logistics Costs, and Third-Party Logistics Market Trends and Analysis Report
14 Copyright © 2018 Armstrong & Associates, Inc.
 3PL Competitive Differentiation
1. Size & Scale
 Broad geographic coverage
 Integrated service offerings
 DHL, Kerry, Kintetsu, XPO
2. Price
 Short-term win
 Some other provider will be cheaper
 Must cover all costs variable, semi variable, and fixed in the long-term
3. Asset vs. Non-Asset
 Some markets still force asset ownership
 Leasing warehousing and contracting for capacity
 Investors prefer non-asset/asset light models to drive ROIC
 C.H. Robinson, Coyote, Expeditors, K+N, Penske, Ryder
4. Information Technology
 Proprietary versus off-the-shelf systems
 Advantages tend to be short-lived
 Better to focus on innovation and process automation
15 Copyright © 2018 Armstrong & Associates, Inc.
 3PL Competitive Differentiation
5. Vertical Industry Expertise
 APL, CEVA, Logwin, Neovia, Penske, Ryder – Automotive
 DHL SC & GF, UPS SCS, FedEx/Genco, Imperial – Healthcare
 DSV, Odyssey – Elements
 XPO, Ingram Micro SCS, Geodis – High-Tech
6. Continuous Improvement
 Lean/Six Sigma Principles
 Kaizen events, Value-Stream mapping, Process Reengineering
 Process standardization, focus on Quality and Performance
 CJ Logistics, XPO, Transplace, NNR Global
7. Value-Added Services
 Kitting, Pick/Pack, Packaging
 Repair/Refurbish
 Sequencing, Subassembly
 Merge in Transit, Shipment consolidation
8. People (Human Resources)
 Recruitment, Hiring, Training, Certification, Development, Empowerment
16 Copyright © 2018 Armstrong & Associates, Inc.
Top 25 Global Air Freight Forwarders by Air Metric Tons
2017 Air
A&A Rank Provider Headquarters Metric Tons*
1 DHL Supply Chain & Global Forwarding Germany 2,248,000
2 Kuehne + Nagel Switzerland 1,570,000
3 Yusen Logistics Japan 1,367,801
4 DB Schenker Germany 1,300,000
5 Panalpina Switzerland 995,900
6 Expeditors United States 985,549
7 UPS Supply Chain Solutions United States 935,300
8 Nippon Express Japan 705,478
9 Hellmann Worldwide Logistics Germany 654,104
10 DSV Denmark 635,655
11 Bolloré Logistics France 569,000
12 Sinotrans China 532,400
13 Kintetsu World Express Japan 495,947
14 CEVA Logistics Netherlands 480,000
15 Agility Kuwait 415,000
16 GEODIS France 330,000
17 NNR Global Logistics Japan 321,704
18 Apex Logistics International China 320,000
19 Kerry Logistics Hong Kong 313,800
20 Crane Worldwide Logistics United States 281,083
21 Hitachi Transport System Japan 280,000
22 FedEx Trade Networks/SupplyChain Systems/Supply Chain United States 276,400
23 DACHSER Germany 272,100
24 Dimerco Express Group Taiwan 233,700
25 Pilot Freight Services United States 220,000
*Air Metric Tons are company reported or Armstrong & Associates, Inc. estimates.

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Top 25 Global Ocean Freight Forwarders by Ocean TEUs
A&A Rank Provider Headquarters 2017 Ocean TEUs*
1 Kuehne + Nagel Switzerland 4,355,000
2 DHL Supply Chain & Global Forwarding Germany 3,259,000
3 Sinotrans China 2,950,800
4 DB Schenker Germany 2,169,000
5 Panalpina Switzerland 1,520,500
6 DSV Denmark 1,389,611
7 Yusen Logistics Japan 1,369,039
8 Expeditors United States 1,070,424
9 Kerry Logistics Hong Kong 1,053,485
10 Hellmann Worldwide Logistics Germany 897,379
11 Bolloré Logistics France 856,000
12 LF Logistics Hong Kong 778,796
13 Agility Kuwait 740,000
14 CEVA Logistics Netherlands 729,000
15 C.H. Robinson United States 698,000
16 GEODIS France 690,000
17 Damco Netherlands 664,000
18 UPS Supply Chain Solutions United States 600,000
18 OOCL Logistics Hong Kong 600,000
18 Logwin Luxembourg 600,000
19 Kintetsu World Express Japan 556,640
20 Nippon Express Japan 550,000
21 Hitachi Transport System Japan 500,000
21 Mallory Alexander International Logistics United States 500,000
22 DACHSER Germany 481,400
*Ocean TEUs are company reported or Armstrong & Associates, Inc. estimates.
18 Copyright © 2018 Armstrong & Associates, Inc.
Top 25 Global Warehousing 3PLs by Millions of Square Feet
A&A Warehousing
Rank Provider Space*
1 DHL Supply Chain & Global Forwarding 248.0
2 Amazon.com (if it was counted as a 3PL) 208.8**
3 XPO Logistics 170.0
4 Kuehne + Nagel 114.4
5 CEVA Logistics 98.0
6 Nippon Express 97.1
7 DB Schenker 86.1
8 Hitachi Transport System 77.4
9 GEODIS 70.0
10 DSV 60.0
11 ID Logistics Group 59.2
12 Ryder Supply Chain Solutions 50.4
13 Kerry Logistics 46.0
14 NFI 41.5
15 Americold 40.0
16 CJ Logistics 38.0
17 FM Logistic 37.6
18 FedEx Supply Chain 35.7
19 UPS Supply Chain Solutions 34.0
20 Sinotrans 33.4
21 BCUBE 32.3
22 Fiege Logistik 30.1
23 Kenco Logistic Services 28.0
24 Lineage Logistics 26.0
24 Toll Group 26.0
*Square footage is company reported or Armstrong & Associates, Inc. estimates.
**Fulfillment, data centers, other
19 Copyright © 2018 Armstrong & Associates, Inc.
 Recent M&A Activity
Buyer Year Target Purchase Price ($M) Multiple
2016 Ingram Micro/IM SCS-$740M 6,000 15.9*

2016 Apex Maritime 87.9 10.0**

4,300
2016 TNT Express 24.0**
(less net cash)
2015 GENCO 2,000 9.8**
.34x
2016 UTi Worldwide 1,350
Sales
2015 OHL 800 10.0**
2015 Con-way 3,000 5.7**
2015 Norbert Dentressangle 3,530 9.1**
2015 Bridge Terminal Transport 100 8.1**
2015 Coyote Logistics 1,800 15.0**

2015 Command Transportation 420 11.4**

2015 APL Logistics 1,200 15.0**
2015 Toll Holdings 5,069 9.1**
2015 Freightquote.com 365 10.7**
EBIT* or EBITDA** Multiple, Source: Primary, Company Information; Secondary, A&A Estimates
20 Copyright © 2018 Armstrong & Associates, Inc.
 Top Global Fortune 500 Buyers of 3PL Services

63
51
49 57
55 38

32

46 36
45
35

38 37
33 34

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Transportation and Warehousing Services Dominate 3PL Demand

Primary 3PL services provided are led by transportation management

(23.8%), warehousing (19.4%) and value-added services (18.5%).
22 Copyright © 2018 Armstrong & Associates, Inc.
 Most Important 3PL Services by Region
30%

25%

20%

15%

10%

5%

0%
Transp. Mgt. Warehouse Value-Added Dedicated Integrated Intermodal International Supply Chain Lead Other
Mgt. TM or WM Contract Solutions Management Logistics
Carriage Provider

Asia-Pacific EMEA North America

• Transportation management ranks first among all regions included.

• Asia-Pacific-based 3PLs provide shippers with a significant proportion of International
services.
• EMEA-based 3PLs provide Warehousing, Value-Added, and Integrated Solutions.
• North American services are typically within Transportation Management, Warehousing, and
Value-Added.

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 Most Important 3PL Services by Region
Percent of Relationships
that are Strategic or More Strategic by Region
50% 46,3%

40% Average
Region Number of
31,0% 31,2% Services
30%

19,8%
21,3% Asia/Pacific 2.70
20%
14,6% EMEA 3.14

10% North America 2.63

0%
Strategic Relationships (LLC/SCM) More Strategic Relationships
(LLP/SCM/Integrated)
Asia-Pacific EMEA North America

• Customer relationships with North America and Asia-Pacific-based 3PLs tend to

be the most strategic while partnering on fewer services.
• Relationships with EMEA-based 3PLs involve more services and become more
strategic due to the high quantity of Integrated Solutions.

24 Copyright © 2018 Armstrong & Associates, Inc.

 Distribution of 3PL Services by Region and Industry

• Nearly half of 3PL/Customer relationships in the Asia-Pacific are within the

Technological and Retailing industries.
• For EMEA-based 3PLs, services within the Automotive industry are most
predominant, followed by Retailing and Technological.
• North American-based 3PL relationships are more evenly distributed by
industry, and are led by the Food and Groceries industry, followed by Retailing,
Technological, and Industrial.
25 Copyright © 2018 Armstrong & Associates, Inc.
 3PL Information Technology Trends

 IT is a top reason for companies outsourcing logistics.

 3PLs traditionally spend 8% - 9% of net revenue on IT.
 Mid – Large 3PLs have developed an integrated core systems backbone that
can be deployed quickly.
 Most 3PL systems suites incorporate purchased off-the-shelf solutions with
proprietary applications.
 Business Intelligence, web connectivity, and automated data handling are
increasingly important.
 SaaS and Cloud-based solutions are becoming commonplace.
 CRM and Salesforce automation are gaining momentum.
Integration Layer

Customer Transportation Warehouse Yard Mgt. Visibility / Accounting/

ERP/OMS Mgt. System Mgt. System System Track & Trace Financials
(TMS) (WMS) (YMS)

26 Copyright © 2018 Armstrong & Associates, Inc.

Investment in Digital Freight Matching
• Over $420 million in investment in U.S.-based Digital Freight Matching companies.
• 2017 was characterized by $25 million+ investments. Convoy raised $62 million and
Transfix raised $42 million.
• Investment in on-demand startups cooled in 2016, but had a strong return in the first half
of 2017, indicating continued interest.

Global Investment in Digital Freight Matching

On-Demand Venture/Equity Investment
(US$ Billions) (US$ Millions)

Sources: A&A Research, CBInsights, Thompson Reuters, CrunchBase

27 Copyright © 2018 Armstrong & Associates, Inc.

 Thank You!

Madison and Milwaukee, Wisconsin; Salt Lake City, Utah USA

Chiang Mai, Thailand

Dublin, Ireland

Wuhan, China