Logistics Service Providers and the Economy

According to The Conference Board, the United States leading economic indicators were flat in June. This would seem to indicate that the economy, while not rushing toward recovery, is also not losing ground. Obviously, some segments are recovering faster than others; but taken as a whole, it appears that recovery will continue to be slow.

Well, what does that mean for the logistics service provider (LSP) industry? A close examination of the latest Armstrong & Associates figures shows that during the height of the downturn in 2009, LSP revenues dropped 16% from the previous year. But in 2010, they recovered that loss; and in 2012, revenues were 11% above 2010. Armstrong predicts another 5% increase for 2013. That reinforces my belief that when supply chains get a little difficult to predict and /or manage, many firms will turn to outsourcing. Obviously, that didn’t happen in 2009, but with reductions in, or elimination of resources, I think many managers ended up just putting their heads down and hoping for the best. Once the initial shocks were over however, many managers found the use of LSP’s to be a good strategic move.

 I have been in the supply chain industry a long time, and closed my first outsourcing deal in 1964. The providers have come a long way since then, and they continue to be sophisticated links in many supply chains. I believe that they will emerge from the economic downturn even more important than they were before. With the continuing uncertainty in the economy and the supply chain (even if recovered), LSP’s offer the flexibility a firm needs in attempting to design networks that can be changed within a reasonable length of time when market and transportation conditions change.  Third party logistic partners are a critical resource to keep up with the demands of today’s economy.