Asset-based Companies Lead 3PL Growth

March 22, 2006
Benjamin Gordon, managing director for BG Strategic Advisors, told warehousemen gathered at the International Warehouse Logistics Association meeting

Benjamin Gordon, managing director for BG Strategic Advisors, told warehousemen gathered at the International Warehouse Logistics Association meeting in Las Vegas that share appreciation of 29% for asset-laden rail companies outpaced asset-light freight forwarders for the first time in three years. That was just one example of the importance of assets in the logistics market today, according to Gordon. He offered a list of the usual suspects – drivers, steamship capacity etc. Then he pointed to the Dakota Minnesota and Eastern Railroad’s application for $2.5 billion in federal funding to create the first new Class 1 railroad in over 100 years.

Concern over congestion at ports in Southern California led Wal-Mart to a decision to build Houston into a port that is competitive with Los Angeles and Long Beach, Gordon says. That decision centers on a 4 million square foot distribution facility. The Wal-Mart move is just one of the indicators of a logistics world Gordon says is turned upside down. Wal-Mart’s investment at the port speaks to a larger infrastructure problem Gordon highlights. While the U.S. six-year plan to spend $286 billion on transportation infrastructure is positive, it represents an investment of only 5% of the $1 trillion U.S. companies spend for logistics spend each year. India, with a logistics market of only $15 billion, is spending $17 billion over the next five years on infrastructure development. That’s a pace of 23% per year.

The top 50 logistics companies in the U.S. are still dominated by non-asset companies. Their combined revenues of $48.9 billion are split into $18.9 billion for non-asset-based surface transportation, $12.7 billion for value-added warehousing, $9.4 billion for air and ocean freight forwarding and $7.9 billion for asset-based transportation.

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