US 3PL revenue to fall next year but from elevated levels

The U.S. third-party logistics market will experience double-digit revenue declines in 2023 after two strong years, according to projections from Armstrong & Associates Inc., a research and consulting firm that specializes in the multibillion dollar sector.

Despite those projected declines, the industry will retain a “fair amount” of the last two years’ gains, said Evan Armstrong, the company’s president.

Demand for 3PL services will remain elevated for years to come as businesses rely ever more heavily on logistics specialists to manage their supply chains, Armstrong said.

In 2023, U.S. 3PL revenue is expected to decline to $328 billion in gross revenue, defined as revenue before the cost of transportation services is factored in. 3PL providers typically don’t own transportation assets.

The drop will be led by a 21% decline in revenue for international transportation management services, which are air and ocean freight forwarding. Domestic transportation management, which comprises freight brokerage, managed transportation and intermodal marketing services, will dip by 12.3%, according to Armstrong forecasts.

The forecast declines, however, do not come close to offsetting the 2021 gains of 74.9% and 52.4% for international and domestic transportation management, respectively, Armstrong said. Last year’s outsized gains were triggered by massive global supply chain surges, and resulting disruptions, as global commerce reopened following the 2020 pandemic year.

The two segments will post gross revenue gains in 2022 of 12% and 8.6%, respectively, over 2021 numbers, according to Armstrong.

The two other categories that make up the 3PL sector, dedicated contract carriage and value-added warehousing and distribution, will post flat to down results next year, Armstrong said. Dedicated contract carriage revenue will drop by 3% as users negotiate more favorable contracts in a slowing macro environment. The warehousing and distribution segment will post flat revenue.

Warehouses currently at or near full capacity will remain mostly that way through 2023 despite some level of inventory drawdown during the year, Armstrong said.

In all, the U.S. 3PL market should generate $375 billion in gross revenue next year, Armstrong said. That figure includes $4 billion in revenue for contract logistics software products and services.

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