A slew of changes in retail operations and global trade flows are going to push third-party logistics to new heights over the next five years.
New research recently released by BlueWeave Consulting shows the global third-party logistics market was worth US$957.3 billion in 2020. The research firm estimates it will grow at a compound annual growth rate (CAGR) of 7.9 percent, earning revenue of around $1,573.8 billion by the end of 2027.
The growth of e-commerce, increasing demand for effective inventory management and enhanced working capital, booming e-commerce, growing globalization, and trade activities, as well as the increase in seaborne trades are all factoring into the need for 3PL services.
According to the International Air Transport Association (IATA), e-commerce accounted for 18 percent of total retail sales in 2020. IATA also stated that air cargo represents about 35 percent of global trade. Furthermore, the International Post Corporation (IPC) reports that eCommerce grew by 141 percent from 2016 to 2020. Third-party logistics are expected to grow at a rapid rate during the forecast period due to the rapid growth of e-commerce.
AI and blockchain
Industry 4.0 has revolutionized the logistics industry with blockchain and artificial intelligence implementations. Amazon, DHL, FedEx, and others are using blockchain and AI not only to manage their inventories and streamline their supply chains, but also to reduce carbon emissions, cut operating costs, and increase security. The growing penetration of blockchain and AI in the logistics industry is expected to create opportunities for the growth of the global third-party logistics market in the coming years.
Road transport is expected to dominate the global third party logistics market during forecast period of 2021-2027. The growing focus on developing a logistics network and forming public-private partnerships for highway construction is boosting the rise of 3PL services. On the other hand, the airways segment will likely be the the fastest-growing segment during the forecast period.
The Asia Pacific region accounted for the maximum revenue share in 2020 and is expected to emerge as the fastest-growing regional market during the forecast period. An increasing number of trans-regional trade corridors and gateways will give 3PL providers more opportunities in the APAC region. The forecast period is likely to witness continued investment in trains, bridges, and airways across the region’s emerging economies, which will boost warehousing and logistics demand.
During the pandemic and subsequent lockdown, the logistics industry was one of the hardest hit. During the resumption of trade, the meteoric rise in demand for medical and healthcare supply derailed supply chains. Moreover, the shortage of labour negatively affected the market for third-party logistics in 2020.
Logistics industry experienced a rollercoaster ride in 2020 as World Trade Organization (WTO) estimated that global trades declined by 9.2 percent. In addition, the WTO estimated a 7.2 percent increase in world trade in 2021; however, a severe second wave of Covid-19 and the ongoing issue of freight shortages have hindered this growth.
Freight costs have increased and are expected to remain high until 2023. Moreover, the freight issue is not expected to be resolved until the first half of 2022, halting the recovery of the third-party logistics market.