2021 was an unprecedented year for the third-party logistics industry (3PL).

Increasing volumes and emphasis on outsourced logistics to manage ever-changing inventories led to 2021 being the most profitable year ever for the trillion-dollar industry, according to a report from Armstrong & Associates Inc: the number one research and consulting firm in the industry. According to Evan Armstrong, firm president, the U.S 3PL industry is expected to keep growing with an estimated $414.1 billion in 2022 gross revenue, a 22 percent increase from the year before. Net revenue is expected to reach $140 billion, a 17% increase.

One of four major subgroups, Armstrong’s domestic transportation management (DTM) subgroup will report a 25% gross revenue increase to $174.6 billion. The DTM is the largest U.S subgroup tracked by Armstrong. The three remaining subgroups, “international transportation management (ITM) comprising air and ocean freight forwarding, customs brokerage and related value-added services, warehousing and distribution, and dedicated contract carriage” (Solomon 2022), all reported double-digit increases in gross and net revenues.

Armstrong has said that the growth recorded for the first half of the year has been surprising, and should start to normalize as supply chain bottlenecks ease. “2023 should see some substantial leveling off if it happens.”

The 3PL industry in 2021 has experienced never seen numbers in its 27-year history. ITM, DTM, and the warehousing and distribution subcategory all reported significant increases in gross and net revenue. With an “unheard-of” 75% increase in gross revenue to $122.4 billion, the ITM sector was led by rising ocean and air freight rates. Net revenue also grew 44.6% to $35.6 billion, in spite of tight capacity and high spot market rates.

This surge in revenue and pricing was not just limited to the U.S Global revenues, which reached $1.4 trillion in 2021, a “41.8% year-over-year gain”, far more than the 7.7 year-over-year increase from 2019 to 2020. The ITM subgroup led all groups with a 60.8% year-over-year gain.

These rising trends have not gone unnoticed by investors. Last year, the 3PL industry saw 25 M&A (mergers and acquisitions) transactions valued at more than $100 million, three times more than the year before. Armstrong says these deals will continue throughout 2022 but are likely to be strategic with 3PL companies acquiring other 3PLS. As a result of historically low capital costs and abundant liquidity, many deals will be financed with equity rather than debt: high-interest rates prove not to deter. One of the unknowns will be truckload rates. Spot rates are currently below their 2021 highs and contract rates. Armstrong expects contract rates to remain increased deep into 2023, and for “spot rates to settle at levels consistent with their five-year averages.” (Armstrong 2022) Recommendations for 3PL clients to finalize contracts with shipping companies as soon as possible. “We will see a lot of renegotiating in the fourth quarter and into the first quarter of 2023.,” Armstrong says.

The consumer demand of the U.S. for goods and an easing of supply chain restrictions drove a
surge in imports in November 2021,  pushing the trade deficit close to the record. Thus, demand for imports
outstripped the U.S. export by a significant amount, which leads the U.S. trade deficit in goods and
services.

American manufacturers sent fewer goods overseas in November 2021 than before, spending by
tourists as U.S. borders loosened Covid-19 restrictions for international travelers boosted export services.
According to the PNC Financial Services Group Economist said, “The trade deficit will likely stay high in
January due to the backlog of ships waiting to unload at U.S. ports and headwinds to tourism from
Omicron.” As backlogs at the U.S. ports showed signs of easing in the fall, helping boost imports, while
consumer spending was solid early in the holiday shopping season.

After collapsing during the pandemic, global trade has roared back, pushing the U.S. trade deficit
to record levels as the pandemic continues. In recent months, high demand and transportation and
delivery challenges, such as shortages of port and warehouse workers, have crimped goods trade. But
signs are mounting the supply chain disruptions are beginning to dissipate.|

Thus, factories in Europe and the U.S. reported a further easing of supply chain woes and related
cost increases as 2021 ended. However, the spread of Omicron worldwide threatens to worsen shortages
of labor and supplies.

Industrial properties, in general, have enjoyed strong rent growth and a low rate of vacancies during the pandemic. As people started to purchase goods online, it has created a tremendous demand for the warehouse to hold ordered items. Thus, retailers near highly populated areas where online orders can be loaded onto trucks and vans for local delivery have overly coveted their delivery spaces. Having these issues, retailers faced a scarcity of warehouses near populated cities since such space is rising in demand and value.

As the consumers want their shopping lists to be directly delivered to the home, but at the same time, they don’t wish the truckers to drive down the residential streets all day emitting diesel fumes. Still, builders are discovering innovative approaches to add last-mile space near city centers.
Last, “The pandemic advanced us ten years in the eCommerce business model,” said Bret Jordan, the president of the northwest region for the north area for his companies; consequently, He claims the pandemic has enhanced us ten responses, and we must encounter to the conditions in 2030.

*Reference: https://www.wsj.com/articles/pandemic-delivery-boom-fuels-demand-for-last-mile-space-11638277201?mod=Searchresults_pos1&page=1

Robotic orders have increased to ensure the labor shortage by North American transportation companies are on track for their biggest shipment year, according to an industry group. Total robotic sales for the nine months of this year have expanded constantly to advance automation. Industrial robots are usually used for assembling parts or transporting heavy materials in production settings, according to the association.

“With labor shortages throughout logistics, manufacturing, and virtually every industry, companies of all sizes are increasingly turning to robotics and automation to stay productive and competitive,” A3 President Jeff Burnstein said. Companies ordered nearly 29,000 robotics units in the first nine months of the year, A3 said.

Many U.S. companies have been hard-pressed to find workers during a national wide labor shortage, and some warehouses have turned to robots to improve the operation works. FedEx Corp., for instance, is using robots to help sort packages. Thus, researchers and companies are working on advancing artificial intelligence systems, in order to enable robots to work not only to increase the productivity of the workforce but also to be prepared for the upcoming country’s biggest shopping sale day event.

*Reference: https://www.wsj.com/articles/companies-order-record-number-of-robots-amid-labor-shortage-11636669766?page=1

With the rise of online orders demanding more labor from the grocery workers, such as picking and packing, at a time when the industry is experiencing a staffing shortage, many sellers are turning to microfilament and other automated solutions. On Monday 20th, the world’s largest grocery store, Walmart, has announced that it will generate the automated grocery distribution center by the following July. This is to radically improve the disruptive supply chain that the world now faces.

Thus, amid changing consumer habits and the digital transformation reshaping the retail sector, Walmart is now collaborating with robotic and automation systems to revamp its regional distribution network and expand its service tracks. “To serve customers now and in the future, our business must provide the right tools and training to our associates so they can deliver the items our customers want, when they want them, with unmatched convenience,” Joe Metzer, executive vice president of supply chain operations, Walmart U.S., said in an announcement.

*Reference:  https://www.pymnts.com/news/retail/2021/walmart-aims-to-revamp-regional-distribution-network-with-robotics/