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The Third Quarter TIA 3PL Market Report Shows That Smaller 3PLs, Brokers Gain Volume, Sales

Profit margins got tighter in 3Q as recession lingers, report finds smaller logistics operators and freight brokers outperformed their larger counterparts in the third quarter, but a less-than-robust recovery is squeezing profit margins at all 3PLs, said the Transportation Intermediaries Association.

TIA’s latest 3PL Market Report shows intermediaries with less than $3 million in annual revenue increased sales and shipment volume over the second quarter, while larger logistics operators reported flat of slightly falling sales and volume.

The average profit margin at all 3PLs surveyed by TIA dropped 1 percent to 17 percent in the quarter, indicating a recovery still stuck in neutral or in very low gear.

The larger 3PLs — those with $3 million to $10 million and more than $10 million in revenue — also reported a "modest contraction" in truckload billings.

Rate discounting also played a role. "Downward pressure is being placed on prices and having a relatively larger impact on total TL dollars billed," the TIA said.

Truckload shipments accounted for 80 percent or more of the revenue generated by the 3PLs surveyed. Rail represented the next largest source of revenue, particularly for larger operators. Use of rail increased as shippers looked for "low cost shipping alternatives," the association said.

The number of LTL shipments rose from the second quarter, although total billings declined 5.8 percent. That could indicate a higher number of smaller LTL shipments, reducing total dollars billed, the TIA said.

"While total dollars billed, total TL dollars billed and total LTL dollars billed all experienced at least a 5 percent decline in Third Quarter 2009 when compared to Third Quarter 2008, this decline was not necessarily matched by significantly lower volumes," TIA said.

"For example, LTL dollars billed was down over 5 percent but average volume per company was almost unchanged."

The average profit margin for those 3PLs tracked by the report since its inception actually rose year-over-year, climbing half a percentage point to 17.5 percent.

The publication is based on a monthly survey of TIA members who submit real operating data, and answer questions on business conditions affecting the 3PL industry. TIA’s efforts are providing a truly comprehensive report on the trends and practices of the 3PL industry. To subscribe, please send your request to amos@tianet.org.