Rising Supply Chain Risks Drive Growth for Global and U.S. Logistics Firms

Rising supply chain risks are driving growth for the 3PL logistics industry, as shippers look to secure transportation capacity to hedge against uncertainty.

shipping-and-logistics

Image: CM&E/Phaata

The volatility in global trade is forcing shippers to reassess their supply chains, which will boost demand for domestic and international third-party logistics (3PL) services, according to logistics research firm Armstrong & Associates.

Global logistics firms are still recovering from 2023, when their total revenue fell 21.4% after rising rapidly during the COVID-19 pandemic, Armstrong & Associates said in its annual report on the top 50 domestic and global 3PLs ranked by revenue, released last week.

Amazon tops both the domestic and global 3PLs list, with 3PL-related revenue of $156.2 billion, according to Armstrong. DHL Supply Chain & Global Forwarding is second in the global 3PL rankings, followed by Kuehne + Nagel.

In the domestic U.S. market, C.H. Robinson Worldwide is second, followed by GXO Logistics and J.B. Hunt Transport Services.

The global 3PL market is expected to stabilize in 2024 and grow 3.4% to $1.22 trillion. According to Armstrong, risks from trade uncertainty and widespread conflict will help push global 3PL gross revenue up 2.7% in 2025 to $1.25 trillion.

This revenue is forecast to continue to grow by 4.9% in 2026, reaching $1.3 trillion.

In the U.S. 3PL market, Armstrong expects 3PL revenue to increase 4.5% to $321.8 billion this year, after rising 2.8% last year, bringing domestic 3PL revenue to $307.9 billion.

Risks Rising on Multiple Fronts

The list of risks that U.S. importers and domestic shippers are trying to mitigate is growing. The threat from the Iranian government to close the Strait of Hormuz amid an Israeli attack on the country could put pressure on already strained global container capacity.

Data from Armstrong & Associates shows that some shippers are shifting their focus to the risk of a capacity shortage in North America, should the impact of higher U.S. tariffs lead to tighter trucking capacity as carriers cut back on capital spending on equipment.

By 2024, International Transportation Management will be the fastest-growing segment of the U.S. 3PL market, with revenue soaring 7.9% to $79.8 billion. This year, Armstrong expects Dedicated Contract Transportation (DCC) to lead the market with 5.7% growth.

That suggests shippers are increasingly concerned about the possibility of a more abrupt shift in the trucking market as demand for transportation finally shifts. With no immediate end in sight for the three-year downturn in the trucking industry, major carriers continue to cut capacity.

The Journal of Commerce Truckload Capacity Index has fallen 18.3 percentage points through Q1 from its mid-2022 peak, and at 74.9, it is the lowest since 2014.

The U.S. DCC market’s gross revenue has increased 5.9% in 2024 to $31.5 billion. Armstrong estimates DCC gross revenue will reach $33.2 billion this year.

This suggests that shippers are once again looking to “lock in” capacity, as they did during COVID-19-related supply chain disruptions in 2021, to hedge against the risk of reduced trucking capacity due to tariff-related factors.

See more: