Top-to-Bottom 3PL Market Growth
The global 3PL market is strong and growing. In 2011, the market generated about $582 billion in total revenue, including $174 billion in the Asia-Pacific; $167 billion in North America; $134.8 billion in Europe; and $35 billion in Central and South America, according to estimates by supply chain consultants Armstrong & Associates.
Revenue rose in each region from 2010, when they were $165.7 billion, $150 billion, $145.7 billion and $33.3 billion, respectively.
Structurally, the 3PL business model remains strong as companies turn to outsourcing to focus on core businesses. Factor in regulatory and compliance demands, supply chain complexity and rising transportation costs, and it’s clear why 82 percent of Fortune 500 companies used 3PLs services in 2010, up from 56 percent in 2004, said Evan Armstrong, president of Armstrong & Associates. “You don’t want to build an internal staff to manage networks when providers can do it better,” he said.
The significant market share small 3PLs hold is likely to shrink as the major global providers grow even bigger through strategic acquisitions, said Dan Albright, vice president of Capgemini Consulting.
Global 3PLs turn to Capgemini and other consultants for help with planning, fulfillment, LEAN Methodology, asset management, entering new markets, adding services and due diligence related to acquisitions. The top priority for many of the biggest players today is developing end-to-end capabilities and being perceived in the marketplace as a one-stop shop.
The second-highest priority is adding or upgrading value-added services, notably business intelligence and analytics related to customer data. “Instead of relying on customers to identify trends, 3PLs have the responsibility to analyze data and identify savings opportunities,” Albright said.
The major global 3PLs remain intently focused on the BRIC countries of Brazil, Russia, India and China. Many continue to pursue mergers and acquisitions to grow in their target markets and gain specialization in industries such as pharmaceuticals, perishables or consumer electronics.
Source: Journal of Commerce, April 30, 2012
Year-over-year comparisons made difficult because of Chinese New Year factory closings
U.S. imports rebounded sharply in March after falling in February on tough year-over-year comparisons because of the early closing of factories in China. Overall U.S. containerized imports in March increased 7.3 percent year-over-year to 1.37 million 20-foot equivalent units. Imports fell 5.9 percent year-over-year in February.
Leading the March gains were furniture, up 15 percent, or 18,377 TEUs; empty containers and drums, up 178 percent, or 16,873 TEUs; and auto parts, up 15 percent, or 8,052 TEUs.
On a regional level, imports from Northeast Asia rose the most, up 11 percent, or 74,534 TEUs, to a total of 765,501 TEUs. North Europe followed, advancing 6 percent to 158,444 TEUs, while shipments from the Mediterranean surged 12 percent to 77,946 TEUs. Leading the losses were the Indian subcontinent and east coast of South America, down 7 percent and 8 percent respectively.
Imports from China grew 13 percent, or 66,681 TEUs, to 579,181TEUs. This sharp jump in shipments from China is mostly owed to an easier year-over-year comparison with March 2011 base as the 2012 Lunar New Year came early.
Vietnam followed with a remarkable gain of 32 percent, or 8,950 TEUs, while imports from Germany jumped 11 percent, or 5,146 TEUs.
Leading the losses, shipments from Brazil declined 16 percent in TEU volume in the month.
On a month-to-month basis, overall imports rose 15.2 percent in March, following a contraction of 19 percent in February.
For the year-to-date through March, overall U.S. containerized imports were up 2 percent.
Overall U.S. containerized imports advanced 2 percent in the first quarter of 2012 year-over-year to a total of 4,032,857 TEUs. This growth compares favorably to Moreno’s forecast of 1.5 percent as presented in the March 2012 issue of JOC Container Shipping Outlook. Imports from Asia barely rose 0.5 percent in the quarter versus his forecast of 1 percent.
Source: Journal of Commerce, April 26, 2012
Last week, U.S. Representatives Chip Cravaack (R-Minn.) and Tim Bishop (D-N.Y.) introduced H.R. 4350, the “Safe Skies Act of 2012,” in Congress. The bipartisan legislation extends pilot rest requirements to cargo pilots — a concept endorsed by leading associations, including the Independent Pilots Association and the Air Line Pilots Association.
The February 2009 crash of Colgan Air Flight 3407 led the U.S. Federal Aviation Administration to establish a pilot fatigue rule passenger flights. The mandate, which requires pilots to rest eight hours between shifts, was finalized on January 4, and is slated to go into effect on Jan. 14, 2014. Cargo pilots, however, are exempt from the ruling.
Cravaack believes it’s an oversight that could have potentially dangerous consequences. “As a former cargo pilot, I understand the importance of a single standard of safety for pilots who share the same airspace and runways with passenger aircraft,” he said in a statement. “I introduced the Safe Skies Act in order to apply the new, common-sense standards for pilot rest to cargo pilots as well.”
The IPA, which represents UPS pilots, applauded the legislation introduced by Cravaack and cosponsored by Bishop. In a press release, IPA President Capt. Robert Travis spoke out about the “real leadership” Cravaack showed last week, commenting that the Safe Skies Act “will bring the FAA’s final rule back in line with Congress’s original intent: one level of safety for U.S. aviation.”
ALPA President Capt. Lee Moak echoed Travis’ statements. “All airline pilots are human beings, and all airline operations should benefit from the same high safety standards,” he said in a statement.
“This bill would achieve what Congress intended when it passed the Airline Safety and Federal Aviation Administration Act of 2010, by mandating that the FAA’s regulations apply to all commercial airline pilots, regardless of whether they fly passengers or cargo,” Moak added.
Source: Air Cargo World, April 25, 2012
Both cargo demand and capacity declined in the Asia-Pacific region last month, Association of Asia Pacific Airlines data revealed. Falling 4.5 percent and 4.1 percent, year-over-year, respectively, these losses are in line with the sluggish freight volumes witnessed throughout the area during the first quarter of 2012.
According to a press release, freight-tonnes carried in the Asia-Pacific dropped 4.1 percent, year-over-year, during the first three months of 2012. Capacity didn’t see as drastic of a decline during this period, however; it only fell 1.9 percent, year-over-year.
The opposite is true about cargo load factor. Although freight load factor transitioned from 69.5 percent to 69.3 percent, year-over-year, in March, the decline was more pronounced from a three-month perspective. Load factor fell from 66.8 percent in the first quarter of 2011 to 65.3 percent in the first quarter of 2012.
AAPA Director General Andrew Herdman said these numbers “reflect a soft market and lingering concerns over weakening consumer demand, particularly in Europe.”
Still, passenger volumes in the Asia-Pacific remained healthy, according to the press release. Carriers in this region transported 17.2 million passengers in March, a 10.6 percent, year-over-year, increase. Capacity also surged last month, growing 5.6 percent, year-over-year, and leading to a 2.7-percent increase in passenger load factor.
The discrepancy between passenger and cargo volumes contributed to Herdman’s cautious optimism about aviation in the Asia-Pacific. “The global macroeconomic outlook is still overshadowed by the potentially dampening effects of stubbornly high oil prices and poor growth prospects in Europe, but Asian economies are still delivering robust growth,” he said in a statement.
“Nevertheless, airline margins remain under pressure from high fuel costs, forcing attention on further efforts to tightly control costs and carefully match capacity to market demand,” Herdman added.
Source: Air Cargo World, April 26, 2012
The Panama Canal Authority board of directors late Friday approved a proposal to raise tolls on multiple vessel types in stages over the next two summers.
The toll increases would not apply to container ships, but would cover containers carried by breakbulk vessels.
The proposal would modify the canal’s pricing structure to align canal toll charges with what the Canal Authority calls “the value the route provides.
Canal Authority Administrator Alberto Aleman Zubieta has made no secret of the fact the tolls would increase over time to help finance the $5.25 billion construction on the third set of much larger locks to be completed by 2015.
But he also has made it clear the toll increases cannot be too big, because the canal competes with other routes, including the Suez Canal and the intermodal landbridge from the West Coast to the interior and eastern U.S.
The proposal increases the number of vessel segments from eight to 11 by Panama Canal vessel type. It would establish a new segment for container/breakbulk vessels. It also breaks down the tanker segment into three distinct segments and incorporates roll-on, roll-off vessels into the vehicle carrier segment.
Once approved, the Panama Canal’s new market structure would include the following segments: full container; reefer; dry bulk; passenger; vehicle carrier and ro-ro; tanker; chemical tanker; LPG; general cargo and others.
Under the proposal, the canal authority, known by its Panamanian acronym ACP, aims to increase the tolls for the following segments: general cargo, container/breakbulk (new segment), dry bulk, tanker (a redefined segment), chemical tanker (a new segment), LPG (a new segment), vehicle carrier and ro-ro (merged segment), and the segment known as others.
Source: Journal of Commerce, April 20, 2012
Capitalizing on their pricing power, railroads post strong earnings despite weak traffic growth.
If there’s a lesson from U.S. railroads’ first quarter financial performance, it’s this: They’re not likely to let any slowdown in the economic recovery in the coming months derail healthy earnings.
The major U.S. railroads displayed a new level of pricing power in the first quarter, reporting robust earnings on slim volume growth. The top three U.S. railroads, excluding BNSF, which doesn’t publicly report earnings, registered double-digit profit growth on a volume gain of a mere 1 percent. Norfolk Southern and CSX Transportation reported record profit, while Union Pacific posted record revenue despite the sluggish traffic growth. The four publicly traded major U.S. railroads, including Kansas City Southern, increased total profit 26.2 percent.
The railroads flexed their pricing power even more when it came to intermodal traffic. The average revenue per intermodal unit among the four U.S. railroads expanded 9.1 percent against volume growth of about 5.6 percent. The disparity between volume and pricing growth helped push the four railroads’ intermodal revenue up 14 percent from the first quarter of 2011.
Source: Journal of Commerce, April 30, 2012
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