Growing Complexity of In-House Logistics Operations Propelling the 3PL Market in the US, Says Technavio
By Business Wire News
By Business Wire News
According to the latest research report released by Technavio, the 3PL market in the USis predicted to reach over USD 94 billion by 2020.
This report titled ‘Third Party Logistics(3PL) Market in the US 2016-2020’, provides an in-depth analysis of the market in terms of revenue and emerging trends. This market study also presents up to date analysis and forecasts for various market segments and all geographical regions.
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“Manufacturing companies worldwide are expanding their production capacities and operations. This increases their logistics requirements in terms of transporting raw materials to factories and finished goods to retailers and distributors. Difficulty in fleet management, shortage of skilled drivers, and lack of IT infrastructure such as time management systems (TMSs) are some major issues shippers have to tackle if they prefer in-house management of logistics, and it may also divert their focus from their core business areas,” said Sharan Raj, one of Technavio’s lead analysts for logistics research.
“As in house logistics handling adds to supply chain management (SCM) complexities for manufacturing companies, it has resulted in an increasing number of manufacturers in US outsourcing their SCM functions to 3PL providers partially or completely,” added Sharan.
Some of the key outsourced services for the 3PL market in the US
|Freight accounting and documentation||34%|
|Product labeling and packaging||31%|
|Order management fulfillment||17%|
Three key driving forces behind the growth of the 3PL market in the US are:
- Growing logistics services demand from e-commerce market
- Increase in cross-border trade between US and Mexico
- Growing complexities of in-house logistics operations
Growing logistics services demand from e-commerce market
The e-commerce market is a developed market in the US and is expected to grow at a rapid pace in the coming years. The e-commerce market in North America reported sales revenue of over USD 375 billion in 2015, an increase of 13.65% from USD 330.74 billion in 2014. Of this, the US alone accounted for close to 93.4% of the sales in 2015. It is estimated that the revenue from the US will nearly double to just over half a trillion dollars by 2020.
Revenue growth in the e-commerce market is due to structural factors such as the supply-side expansion of online retail firms and the introduction of online payment methods. Efficient inventory management and quick delivery are the keys to operational success in the e-commerce market, which requires well-stocked and well-located logistics facilities. This has led to an increased need for efficiency in delivery systems, inventory management, and freight forwarding. As the market continues to expand, the demand for large-scale, convenient, and functional logistics facilities will also increase. The e-commerce market segment in the US will be characterized by the need for servicing various small package deliveries and individualized shipping time requirements during the forecast period.
Increase in cross-border trade between the US and Mexico
The development of the manufacturing sector in Mexico has enhanced and solidified the country’s trade relations with the US. Mexico is a key manufacturing and logistics hub of Latin America and is increasing its exports by providing a cost competitive advantage to manufacturers.
To leverage its manufacturing potential, companies in the US are increasingly shifting their business operations to Mexico, thereby taking advantage of lower logistics and trade costs. This shift creates opportunities for 3PL service providers with the demand for freight movement and distribution center services, thereby driving the growth of the 3PL market in the US.
|Mexico: Key facts||Reasons for emergence of Mexico as manufacturing and logistics hub|
|World’s 14th largest economy; 80% of its economic activity is in the manufacturing sector||According to the Office of the USTR, trade between the US and Mexico has grown by 30% since 2010, and amounted to $528 billion in 2014. The open economy model adopted in Mexico has granted it access to the international market and increases the scope of its trade activities. In addition, Mexico has a network of 12 Free Trade Agreements, which further enhances its economic positioning.|
|World’s 15th largest exporter|
|12 Free Trade Agreements|
|Serves as manufacturing, engineering, and sourcing base for the market in North America|
Growing complexities of in-house logistics operations
Many manufacturing companies in the US are expanding their production capacities and operations. This trend increases their logistics requirements in terms of transporting raw materials to factories and finished goods to retailers and distributors. Also, given the benefits of outsourcing in terms of increased operational efficiency and cost savings, shippers are increasingly outsourcing their logistics part of operations to 3PL players, for focusing on core competencies.
Browse related reports:
- 3PL Market in Japan 2015-2019
- 3PL Market in Europe 2015-2019
- 3PL Market in India 2015-2019
- 3PL Market in Brazil 2015-2019
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