Tighter US Freight Capacity Driving 3PL Growth, Mergers

Author PhotoBlueGrace Logistics - June 15, 2021

By William B. Cassidy | The Journal of Commerce
Published June 14, 2021

An unprecedented US freight market is creating new opportunities for third-party logistics (3PL) providers, as shippers increasingly desperate for freight capacity turn to intermediaries. Freight brokers and third-party freight managers are digging deeper into customer supply chains, and mergers and acquisitions such as the combination of GlobalTranz and Worldwide Express facilitate expansion. 

“There’s no question capacity is tight right now,” Tom Madine, CEO of Worldwide Express, told JOC.com Monday. “There’s an unnatural amount of freight out there, just given the amount of inventory in the supply chain and the need for restocking. Some of that additional freight is likely to be permanent and be there forevermore, thanks to e-commerce.” Restraints on capacity are not slackening, he said. 

Worldwide Express and GlobalTranz announced a merger Friday that will create the fourth-largest US truck freight brokerage, with a combined service offering spanning US domestic supply chains from parcel and less-than-truckload (LTL) to full truckload freight. 

“We find ourselves with some overlap but not competing with one another so much as playing different ends of the market,” Madine said of the tie-up. 

That market is certainly stressed, with truck and intermodal capacity shrinking and freight rates climbing higher in the second quarter, as US real gross domestic product (GDP) expands at a rate between 7 and 9 percent, according to IHS Markit, the parent company of JOC.com. The June 9 GDP Now estimate from the Federal Reserve Bank of Atlanta put the second-quarter US GDP expansion rate at 9.3 percent. 

That rate would be higher even excluding imports, which are a subtraction in the calculation of GDP but fill intermodal rail containers and tractor-trailers. Widespread capacity shortages and service failures make this a booming market for 3PLs that can help shippers source capacity when carriers either do not have enough or reject freight to control volume in their networks, as LTL carrier FedEx Freight did to 1,400 customers this week, according to FreightWaves. 

“FedEx Freight has implemented targeted volume controls designed to minimize network disruptions and balance our capacity and demand to avoid backlogs across the country – particularly in the most capacity-constrained Freight service centers,” a spokesperson for the largest US LTL provider told JOC.com in an e-mail. FedEx is one of many trucking and intermodal providers trying to control freight volume. 

Doubling Down on Disruption 

Capacity constraints and service failures will drive more shippers to 3PLs and managed transportation services, according to 3PL executives. Many shippers turned to 3PLs for help last year during the COVID-19 pandemic and resulting recession. Now, those shippers are finding a strong economic recovery in 2021 poses new challenges that often create more supply chain disruption. 

With capacity expected to remain tight, “A huge wave of business is being pushed toward third-party logistics in this market,” Adam Blankenship, chief commercial officer for BlueGrace Logistics said in an interview. “There will be a push toward more creative solutions, more creative route planning, more ways to combine shipments. We may see shifts in how we bring freight into the country.” 

Mark Ford, chief operating officer for 3PL BlueGrace Logistics, said the market in 2021 has been “just all over the place. We’re not just looking at a normal seasonal surge or a catastrophic event that shifts capacity around. We’ve had a massive winter storm, all of the containers that were delayed coming into the ports, shortages of raw materials, and then the US economy booming like it is.” 

View the full article by William B. Cassidy | JOC.COM

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