For the past two years, 3PLs have been hit hard by the global recession. However, in December of 2009 there were signs in recovery. Fools gold? And with so many 3PLs vying for market share is merger & acquisitions in the future? By George Lauriat, AJOTThere is little doubt that 2009 was a brutal year, following a terrible year, for 3PLs (Third-Party-Logistics). The annual results for 3PLs closely parallel those of asset based transportation companies such as ocean carriers, air carriers and trucking firms. According to Wisconsin-based 3PL specialists & Associates Inc, 2009 was the first time since the first “year over year decline in 3PL market revenues,” in the US since they started keeping tabs in 1995. The consultants reported the “Total 2009 3PL segment gross revenues fell an estimated 15.2% and net revenues were down 6.5% from 2008.” To put the decline into perspective Armstrong & Associates reported through their studies that CAGR (compound annual growth rate) from 1996 through 2008 was a very healthy 12.5% as an industry. The 3PL/4PL market defies exact definition. Often a 3PLs’ core business has more to do with how the company was initially formed, whether it started as a trucking firm or freight forwarder, warehousing, consolidator, an NVO or even the logistics arm of carrier or railroad onto which the remaining logistics services were added, sometimes organically but also through merger & acquisition. Armstrong & Associates divides the 3PL business into four segments; Domestic Transportation Management; International Transport Management; Dedicated Contract Carriage; and Value Added Warehousing & Distribution. Based on the estimated returns 2009, Domestic Transportation, International Transportation and Warehousing each account for 30% segment of the market, with International Freight, essentially air and ocean being slightly larger. Despite the exceptionally poor results a number of positive trends began emerging late in 2009 and into the first quarter of 2010. One constant through the recession, particularly among the global players, was the importance in retaining and if possible building market share. In some cases, this meant adding or improving niche products like pharmaceuticals, project cargo or industrial. In other cases, 3PLs expanded in specific trade lanes through acquisitions. Another consistent element for the 3PLs during the recession was renewed emphasis on redefining the supply chain for the customer. Because the supply chains had expanded so quickly there were elements that could be tweaked during the recession that probably would have been ignored in a marketplace with rising volumes. But the for ocean carriers and the 3PLs alike the unpredicted surge in ocean borne freight late in 2009 and through the first quarter, largely attributable to near simultaneous global inventory re-stocking brings hope of a rebound. It could have worse The year was expected to be worse. But the unexpected fourth quarter surge spread some positive numbers in an otherwise sea of gloom. Peter J. Rose, Chairman and CEO of Expeditors International probably described 2009 best when writing in the annual report: “In a year that began amidst fears of a global financial Armageddon, these fourth quarter results were somewhat better than anticipated and we’re [Expeditors] very encouraged by them. Against all stated odds, we actually ended up having a fourth quarter peak season in 2009.” Expeditors, like other international trade service providers, experienced the fourth quarter surge now attributed to global inventory re-stocking. Rose noted, “Despite the capacity challenges in the airfreight markets…it was reassuring to once again experience airfreight tonnages greater than those handled during the same period the year before —up 16% for the fourth quarter and 36% for the month of December. Fourth quarter ocean freight container counts were 5% lower than 2008 levels, but that was the smallest quarterly ‘lower’ that we’ve seen all year and D