Executive Briefings

Top 25 Third-Party Logistics Providers: Bigger and Broader

The world's largest logistics service providers expand their offerings and continue to enlarge their businesses through acquisitions, geographic expansion, and organic growth, as well as good old-fashioned price increases.

The past year has been huge for third-party logistics providers. Total revenue for outsourced logistics grew at a double-digit rate in 2004 to reach $333bn. The top 25 global 3PLs alone earned $97bn compared with about $79bn in 2003. These 25 3PLs now account for nearly 30 percent of all logistics outsourcing expenditures worldwide. In North America alone, 3PLs took in nearly $115bn. In addition to this organic growth, 2004 saw the big 3PLs grow larger through dozens of acquisitions of both small and large logistics providers to broaden their service offerings and their geographic coverage. These same global players expanded their own operations geographically with major investments in China, Southeast Asia, Eastern Europe, Latin America and even the Middle East.

China
The most pervasive story in 2004 has been the continued expansion of 3PL activity in China. Because just about every manufacturer and retailer is increasing its business in China, the focus for all the major 3PLs has been stepped up in that region. While the entire Pacific Rim is enjoying substantial economic growth, the big 3PLs are correctly focusing their efforts on China itself. The providers' opportunity for at least the next five years will be the ongoing wave of exports from China to North America and Europe, but the long-term opportunity is for the 3PLs to position themselves to service the domestic Chinese economy. It is very likely that the domestic economy will catch up with Japan and the West.

Thanks to the pressures of the World Trade Organization agreement, China is gradually loosening the regulations on direct foreign ownership of logistics businesses and assets within the country. For decades, foreign 3PLs had to operate in joint ventures (JVs) with Chinese companies such as SinoTrans. In the many free trade zones around major ports and manufacturing areas, 3PLs are beginning to operate under their own names and ownership. Some 3PLs still prefer to operate as JVs with Chinese partners, but increasingly 3PLs can compete on their own. The 3PLs operating on their own at least to some degree include UPS Supply Chain Solutions, Exel, Kuehne + Nagel, DHL, FedEx, Nippon Express and Kintetsu World Express (KWE).

Because Japanese companies are dramatically outsourcing their production to China, Japanese 3PLs are doing much more business there. The pattern is familiar. Japanese manufacturers select one of the major Japanese forwarders and use it to cover all of its logistics needs. KWE, for example, is doing about 20 percent of the airfreight moving between China and Japan. Recent political pressure in the Peoples Republic of China (PRC) over Japan's failure to apologize to its satisfaction for World War II atrocities is unlikely to have a significant impact on this business.

Penske Logistics has opened an operation in Shanghai and it is positioning itself to become a significant player in China. Penske's primary equity owner, GE, is one of the largest U.S. companies in China and has earned the right to do business on its own throughout most of the country. No doubt GE will be making opportunities for Penske in China.

As foreign 3PLs begin to operate on their own in China, there will be significantly more investment in assets. For example, in Shenzhen, near Hong Kong, UPS is finishing up a 240,000-square-foot warehouse in a foreign trade zone. APL Logistics has just built a flow center there. This type of logistics investment is happening all over China, especially in the free trade zones where foreign companies have the right to handle both imports and exports without a Chinese partner.

Initially, many foreign 3PLs had expatriate managers running operations, but now the managers tend to be local. Thousands of Chinese educated in the West have returned. In Hong Kong alone, there are 10,000 graduates just from the University of Toronto. These people have the education and the dual-cultural expertise to run foreign-owned companies in China. The demand, however, is exceeding the supply, and there is a crying need for more Western-educated Chinese. Experience is less important. Good prospects are being taught logistics on the job.

While China and Hong Kong are still at the top of the list for 3PL expansion, major logistics providers are establishing footholds in India, and to a lesser extent in Indonesia, Malaysia, Vietnam and the Philippines. Most 3PLs have long had some operating capabilities in South Korea, Thailand and Taiwan, and as these economies again see greater growth, there will be continued 3PL expansion there. China, however, remains the major focus.

The large European 3PLs are increasing their expansion into Eastern Europe. Schenker, for example, is opening up Russia. Such expansion makes sense for Schenker, which is owned by the German national railroad. It already has extensive transportation operations in Western and Eastern Europe, so it is just making a logical move eastward into Russia.

APL Logistics Expands Ingersoll-Rand's Worldwide Parts Distribution Business
Ingersoll-Rand Company Ltd., a $9.4bn diversified industrial company, has expanded its parts distribution outsourcing to APL Logistics over the past seven years. Ingersoll-Rand's Bobcat unit, which makes compact industrial and construction equipment, first chose APL Logistics to operate its worldwide parts distribution center in 1997. Last year, Ingersoll-Rand awarded APL Logistics a major expansion of its global aftermarket parts business to include the company's Infrastructure Sector. This division is composed of market-leading brands that serve diverse markets such as road and general construction, gated communities, golf courses and municipal governments. APL Logistics now handles aftermarket parts distribution for these products to dealers throughout North America, Latin America and Asia Pacific.

"APL Logistics has proven to be consistently reliable in deliveries to our dealers," says West Fargo, N.D.-based Rich Goldsbury, Bobcat's vice president for marketing services. "They have shown their ability to add value-added services to meet contingencies, and they have a partnership approach to supporting our changing business needs. They have earned the increased business we have awarded to them."

At the Bobcat facility at Woodridge, Ill., APL Logistics operates a 240,000square-foot warehouse. To handle the additional parts distribution business for the Ingersoll-Rand Infrastructure Sector, APL Logistics last spring added about 117,000 square feet to the main building and another 18,000 square feet as a parts mezzanine. At this facility, APL Logistics provides a full range of value-added logistics services to support the parts business on a worldwide basis.

Bobcat and other Ingersoll-Rand divisions remain in charge of their supply chain planning and customer-facing functions, including order receipt. APL Logistics is responsible for fulfilling these orders and running all warehouse operations. APL Logistics' specific services to Ingersoll-Rand include inspection and processing of returns, production of parts kits and assemblies required by customers, management of receiving and inventory activities, order fulfillment, transportation management, and related support activities. The inventory of parts handled at the facility increased by nearly 75 percent in the past year from 55,000 SKUs to 95,000.

Dealer orders are passed via electronic data interchange from the Ingersoll-Rand IT system to APL Logistics' warehouse management system that runs all functions within the facility. APL Logistics proprietary software also includes radio-frequency technology to scan part numbers and update locations. It supports inventory visibility and control, and it integrates with Ingersoll-Rand's own systems.

The systems constantly update each other, so inventory status is always correct.

"Specific warehouse part locations are not kept in Ingersoll-Rand systems," says Goldsbury. "That is APL Logistics' responsibility, and we don't have to manage that process. My system knows how many units of any part we have, so we can take an order and know when to replenish the inventory. We do the material planning and procurement process. We rely on APL to maintain a logistics system that confirms orders and maintains inventory in the warehouse."

APL Logistics ships parts to approximately 1,000 affiliated Ingersoll-Rand dealerships in 75 countries. The shipping function includes processing bills of lading and other freight documents as well as payment of freight bills. Shipments to many overseas dealers are carried by containerships operated by APL, sister company of APL Logistics. For other dealers, Ingersoll-Rand has contracts with other carriers and forwarders that specialize in certain countries. APL Logistics tenders those shipments to the appropriate carrier from the Woodridge warehouse.

"APL Logistics integrates very well with all the partners that we have selected," says Goldsbury.


Growing by Acquisition
Acquisition activity was brisk throughout the 3PL industry in 2004, with the biggest companies making the biggest deals. Exel, already the world's largest 3PL, completed at least five acquisitions. The most aggressive was its purchase of Tibbett & Britten, the world's third-largest contract logistics 3PL. Tibbett & Britten itself had annual revenues of nearly $3bn. The purchase price was $710m, which raised eyebrows in the investment community because it was 23 times T&B's earnings per share. The purchase prices was also 6.7 times earnings before interest, tax, depreciation and amortization (EBITDA), which is the key financial measure used by investors to gauge relative value. The normal range for value-added warehousing companies was five to six times EBITDA.

T&B had thin profit margins, but the acquisition gives Exel considerably more capabilities with fashion logistics and reverse logistics, particularly in Europe. The T&B operations also give Exel better coverage in Canada, Mexico, Saudi Arabia and other locations. The after-acquisition cost of absorbing Tibbett & Britten was about $60m. Exel now has 110,000 employees and $11.6bn in sales.

Other Exel acquisitions in 2004 include Fujitsu Logistics, Pharma Logistics and Chile-based Bodenor. Exel also completed its acquisition of Power Packaging, which is a provider of manufacturing and packaging services to America's food companies. This purchase should help Exel boost the margins on its marginally profitable food warehousing and distribution. Power Packaging allows Exel to add higher-margin value-added services for these food and beverage customers.

The high price for Tibbett & Britten indicates how much the momentum has shifted in the sellers' direction. There are fewer large 3PLs available for purchase, so the prices just keep climbing.

Exel itself has been rumored to be a target for acquisition by UPS or DHL. Exel's CEO vigorously denies the rumor, and it seems unlikely for at least two reasons. The price for Exel would be extremely high based on the robust evaluations that today's 3PL deals are bringing. UPS does not tend to buy at the top of the market. Exel's high price would be hard for UPS to justify and would take too long to produce a payback. As for DHL, the company is too involved in establishing its express business in the U.S. to become a viable competitor to UPS and FedEx. DHL simply cannot handle another acquisition the size of Exel at this time.

Another large deal in 2004 was TNT's purchase of Wilson Logistics, a Swedish-based forwarder with service to 28 countries. TNT needs a strong freight forwarding capability to fill out its global supply chain management offering and remain competitive with DHL, FedEx and UPS. TNT paid $334m for Wilson. The multiple is 12.8 times EBITDA, which is in the high-normal range for purchase of freight forwarders. Wilson was number 22 on last year's list of top 25 global 3PLs.

The last big deal of the year was UPS's purchase of Menlo Worldwide Forwarding (previously known as Emery Worldwide) for $260m. UPS paid $150m in cash, which the cash-rich company could easily afford. UPS also assumed $110m in debt. The sale of this airfreight business was a blessing for CNF, the former owner of Menlo Worldwide Forwarding. The airfreight operation did not fit well with Menlo's logistics operations and created red ink for years. For UPS, the acquisition fills in several airfreight lanes and creates a presence in the heavyweight airfreight market.

KWE Keeps South African Airways Flying-and Well Fed
Kintetsu World Express (KWE) has served as the fourth-party logistics (4PL) services and operations provider for South African Airways Technical (SAAT) since January 2001. KWE's responsibility is to optimize SAAT's entire supply chain. Specifically, KWE's responsibilities as 4PL provider include the vetting and selection of all service contractors involved with SAAT's supply chain, proactive management of each individual supplier to ensure all service commitments are met, as well as development and implementation of continual supply chain innovation and enhancement.

"KWE has met all responsibilities contained in the SAAT 4PL contract," says John Cunningham, KWE's director of aerospace development. "We've also reduced SAAT's working capital investment, lowered operating costs and provided high levels of customer service to SAAT."

Operating from a KWE-designed 100,000-square-foot warehouse at Johannesburg International Airport, KWE currently manages SAAT's entire inventory of aircraft spares, consisting of more than 170,000 SKUs. KWE handles more than 700,000 picks a year from this distribution facility, with an accuracy factor of 99.8 percent. In addition to responsibility for distribution warehouse operations and global freight forwarding services from more than 700 suppliers, KWE also provides customs brokerage services, transportation, consulting services, IT support, insurance services and other special attendance services to SAAT. On a monthly basis, the KWE Group handles over 2,500 international airfreight shipments on behalf of SAAT through KWE's office network in North America, Asia and Europe.

KWE's service to South African Airways extends beyond global aircraft spares supply chain management, according to Cunningham. KWE also manages all buyer-furnished equipment (BFE) for the manufacture of the new SAA Airbus fleet. That includes transportation of such BFE as aircraft galleys, seats, entertainment systems, carpeting, etc., from global original equipment manufacturers to Airbus facilities in Germany and France.

"Those OEM components are supplied to Airbus for the assembly of new aircraft for the SAA fleet right to the production line," explains Cunningham.

Cunningham says that KWE's 4PL business has been so successful that it will soon create a separate company to provide comprehensive supply chain services and lead logistics management for aerospace and automotive customers.

"This lead logistics business has been great for us and for our customers, who want to focus their efforts on their core business," says Cunningham.
As a further expansion in the business partnership, South African Airways Catering Division recently awarded to KWE a new third-party logistics contract for global in-flight logistics services. Under this three-year contract, KWE is providing logistics management, transportation and warehousing services at 55 locations globally. KWE will manage inventory warehouses at every airport served by SAA, including Atlanta, Amsterdam, Bombay, Cape Town, Durban, Frankfurt, Johannesburg, Hong Kong, JFK, London, Mauritius, Milan, Paris, Perth, Port Elizabeth, Sao Paulo, Zurich and numerous African destinations.

KWE also provides SAA Catering with consumption forecasts to ensure seamless services to SAA Catering global providers. KWE coordinates material shipments from suppliers, provides transportation between the suppliers and the global warehouses, manages and provides warehousing operations services, and transportation from the warehouses to SAA caterers. Completing KWE's end-to-end logistics services program for SAA, KWE will also handle the reverse logistics operations.


Organic Growth
Two thirds of the Top 25 enjoyed substantial revenue growth in their business, with 12 of them increasing more than 20 percent. While each of these companies had its own story, a few major factors contributed to the bottom line for many of these companies:

1. The tremendous increase in outsourcing of manufacturing to China brought many 3PLs new sources of revenue.

2. Chinese outsourcing resulted in double-digit increases in container volumes from Asia to the U.S. and Europe.

3. Rates increased for both ocean containers and airfreight shipments between 10 and 15 percent.

4. Rises in value of the euro, British pound, Swiss franc, yen and other currencies against the U.S. dollar.

5. Capacity-driven rate increases for truckload movements throughout North America that boosted earnings for brokers and transportation management 3PLs.

6. Tighter capacities and increases for assembly, packaging, light manufacturing and other value-added services provided by warehouse logistics providers.

The revenue drivers for some of the individual companies who enjoyed sales growth at the upper end include:

• Kuehne + Nagel's Asia-U.S. traffic increased by about 40 percent. Overall its ocean freight revenue was up 28 percent and its airfreight was up 15 percent.

• Schenker's airfreight revenue climbed 15 percent and its ocean freight 11 percent, mainly from Asia to Europe. Its European trucking business also expanded.

• P&O Nedlloyd's container shipping increased 22 percent.

• DHL grew its entire business organically 13 percent. Its Asian business was the main contributor. The inclusion of DHL Logistics Solutions into the business in 2004 added substantially to the top line.

• UPS's Chinese and Pacific Rim business grew at a double-digit rate. The acquisition of Menlo Worldwide Forwarding was a revenue factor.

• UTi increased its gross revenues by more than 40 percent and net revenues by 30 percent. Airfreight grew by 28 percent and ocean revenue by grew 30 percent.

• Penske Logistics' dedicated contract carriage business surged because it gives shippers predictable capacity.

At Schneider Logistics, where much of its business has been fee-based transportation management, the company is rapidly shifting to a brokerage model and opening offices in key markets throughout the country. With a brokerage operation, the 3PL gains a percentage of the total transportation spend rather than a small administrative fee per shipment. The broker maintains its margins with commissions 10 percent or higher of the total freight costs. As a transportation manager, the 3PLs often receive only a small fee for each shipment, regardless of the actual freight costs. The brokerage model is the best way for non-asset domestic 3PLs to make money.

There has also been an increase in revenue for many of the major 3PLs from lead logistics provider (LLP) services for their large customers. LLPs are the logistics controllers overseeing the operation of carriers, warehouse operators, customs brokers and other 3PLs. To be effective in this role, the lead logistics provider needs outstanding IT capabilities, including web-based capabilities, so that it can manage each logistics participant throughout the supply chain, as well as control inventory and shipments. Armed with this capability and information from each link in the supply chain, the 3PL can make important tradeoffs between inventory, transportation and warehousing.

A skilled 3PL acting in the lead logistics provider role can save its customers tremendous amounts of money where inventory ties up large amounts of cash. For example, sourcing and manufacturing in China ties up an additional six weeks' worth of capital while goods are in transit. It is vital that companies stay on top of where that inventory is at any point in time and be able to make decisions to keep the supply chain flowing. Lead logistics 3PLs have the state-of-the-art systems, the web-based track-and-trace interfaces and the event management capability needed to manage these long, risky supply chains. The next tier of 3PLs below the Top 25 does not yet have these systems or these abilities. A big differentiator between the major-league 3PLs and everyone else is the ability to spend the money and build this systems capability.

The lead logistics role is different from the 4PL. Many experts predicted that 4PLs would become a significant part of 3PL business. 4PLs have evolved as separate companies, usually joint ventures, created to manage logistics and transportation providers. Vector, for example, is a 4PL joint venture that was created by Menlo and General Motors to handle a wide variety of logistics operations for GM. Last year, Vector's revenue was only $18m. The 4PL model has not been an important growth business for the 3PL participants. Another feature is that open-book relationships between the partner and the customer participant tend to minimize the earnings of the 3PL participant. As a lead logistics provider, the 3PL gains revenue because it deals with the total amount of transportation and logistics expenditures.

Ryder Builds on Success at Tier One Automotive Supplier Visteon
When automotive supplier Visteon was spun off from Ford Motor Company in 1997, one of its first logistics decisions was to bring in Ryder as its third-party logistics provider. After all, Ryder had been providing lead logistics management (LLM) services to Ford Motor Company for years and already was familiar with much of the Visteon operation. Ryder continued to provide LLM services at Visteon's North American facilities while it pursued the new 3PL assignment to design, recommend, implement and then maintain Visteon's logistics network. Visteon employs 70,000 people in 25 countries. It now provides parts and components to more than 15 of the world's largest automotive manufacturers. "It just made sense for us," says Charlie Kiesling, who was brought in from Ford to head up Visteon's logistics operations. "We had a positive history and a good working relationship with Ryder. In some cases, they knew more about the logistics end of our business than we did at the time. Ryder knew what had to be done because there had been Ryder people in our plants all along."

Ryder's LLM group at the plant level continued to handle the day-to-day operations of managing material flow and equipment balance while overseeing carrier performance and yard activity. The group also created a transportation database dedicated solely to Visteon. Into that database went information on all Visteon freight movements by lanes, modes, carriers, rate structures, delivery frequencies, and delivery requirements driven by customer inventory needs.

Armed with this data, the Ryder team optimized each freight movement with a particular focus on minimizing transit times and maximizing capacity utilization. Ryder specialists divided the freight flow into categories: full truckload, less-than-truck-load carriers, multi-stop "milk runs," international ocean, and airfreight. Procurement specialists within the group then initiated the process of selecting the best carriers for each freight movement. The procurement team members also identified support service suppliers such as freight forwarders, ground expediting resources, and cross-border transportation providers.

"Some of our plant people were shocked at the amount of money we saved with the incumbent carriers," he says. "Following a bid for freight movement at one of our plants, we saved more than a million dollars without changing the carrier."

Both partners maintain a pulse on a schedule of performance metrics, which are shared on a monthly basis. Ryder tracks 26 metrics, many of them operational in nature, while Visteon charts 22, most of them financial. They continue to work on network optimization by plant, says Kiesling. "We're also working together to get a better handle on forecasting and understanding future transportation costs and what drives them."


In the Future
The growth pattern in 2005 is favorable, but it is likely to be a little different for the major 3PLs. Acquisitions will probably be less of a factor because there are fewer larger 3PLs to be acquired, and the multiples are prohibitively high. Acquisitions will be of small to medium-sized logistics operations that can be bolted on to parent 3PL operations. Organic growth should continue to be strong and remain in the 10 to 11 percent range worldwide with the Asia boom still the main driver.

China has several government-sponsored 3PLs that are growing at a fast clip. The two largest are SinoTrans and Cosco Logistics. These 3PLs are becoming major players with revenues like those of the Top 25. However, these 3PLs are highly focused on the Chinese market and have very limited activity in Europe or North America. These state-owned enterprises are not competitive businesses in the same way as the 3PLs on our list.

Most of the big 3PLs have had small operations in Latin America for a number of years, but the GDP of the entire region is not large. There are other negatives for Latin American 3PL investment such as Argentina's erratic economy, Venezuela's volatile politics and Colombia's lawlessness. Foreign companies are not flocking to Latin America, and there is relatively little attraction for the major 3PLs to invest in larger operations. Brazil and Mexico continue to be the major opportunities.

The Iraq wars have brought more 3PL activity to the Middle East, and it is likely to expand as peace in the region allows more economic growth. For example, EGL Eagle Global Logistics has done well with airfreight charters, especially with its use of huge Anatov freighters into Iraq. Schenker and DHL are also building a growing business in this region, mainly with airfreight services. In addition, several Arab-owned 3PLs have sprung up in Dubai and the United Arab Emirates where warehouse and distribution operations are becoming an important business that serves the entire Persian Gulf region.

Conclusion
The expanding worldwide economy buoyed by the boom in China helped the Top 25 Global 3PLs to strong double-digit growth in 2004. In turn, the large 3PLs are prosperous enough to invest in high-quality systems, processes and logistics networks that have allowed the world's largest companies to implement efficient supply chains that stretch from Asia to North America and Europe. This synergy between the major 3PLs and their customers has been highly beneficial to both sides and is likely to continue. The big 3PLs will continue to get the big opportunities.

Top 25 3PLs

1.Exel plc Berkshire, UK, London: EXL
Exel Americas Westerville, OH, 614-865-8500, Bruce Edwards, CEO
www.exel.com

3PL Revenue: 11.6bn Parent Revenue: 11.6bn

Coverage: Global (Service to over 95% of World GDP)

3PL Assets: 111,000 employees; 1,600 warehouses; 5923 tractors, 7544 trailers

Information Systems: Very good; TMS - i2, RedPrairie, G-Log; WMS - HK Systems. Topex, Insight, RedPrairie

Services: Warehousing and distribution (contract logistics), air and ocean freight forwarding, supply chain consulting, customs brokerage, transportation management, returns management, home delivery

Industry Focus: Consumer goods, retail, computers and electronics, automotive, chemical, healthcare.

Key Customers: Adolph Coors Co., Apple Computer, Compaq, Ford Motor Co., Hewlett-Packard, Home Depot, Honda, Intel, International Paper, Kodak, Maxtor, Miller Brewing, Mitsubishi Corp., Motorola, Nissan, Owens Corning, Pepsi Americas, PPG, Procter & Gamble, SC Johnson, Shell, Sony, Sun Microsystems, Unilever, Wal-Mart, Xerox

Armstrong & Associates' Evaluation: Exel is the world's largest 3PL. It has grown primarily by acquisition, adding Tibbett & Britten recently. Its strengths are in contract logistics and freight forwarding. Exel is one of the world's largest airfreight forwarders. Exel has had difficulty with some of its North American domestic transportation businesses. Some are realigned - others are being closed as Exel's emphasis refocuses on international supply chain management. Exel did generate over $500m in free cash flow last year, but its overall profit margins continue to be small. Exel does a good job of marketing and can supply the whole range of value-added services. It covers all the major verticals. CEO John Allen indicated in early March that no takeover offer for Exel was pending. UPS and DHL had been rumored as possibles.

2.Kuehne + Nagel International AG Schindellegi, Switzerland, SWX: KNIN
Kuehne & Nagel, Inc. Rolf Altorfer, President & CEO,
201-413-5500
www.kuehne-nagel.com

3PL Revenue: 9.3bn Parent Revenue: 9.3bn

Coverage: Global (Service to over 85% of World GDP)

3PL Assets: 23,000 employees; 200+ warehouses

Information Systems: Very good; TMS - CIEL 4000, KN Road, i2; WMS - FOURSiTE, MARC

Services: Ocean and airfreight forwarding, contract logistics, value-added warehousing and distribution, transportation management, customs brokerage, insurance services, supply chain management

Industry Focus: Automotive, pharmaceutical & healthcare, high-technology, industrial goods & chemicals, retail & durables

Key Customers: Nortel, Siemens

Armstrong & Associates' Evaluation: Kuehne + Nagel is the world's largest ocean freight forwarder and one of the top five airfreight carriers. Last year it handled over 1.6 million TEUs and 600,000 tons of airfreight. K+N's contract logistics operations did not grow in 2004, but profitability was restored. K+N has begun its own contract logistics operations in the Far East after its strategic relationship with SembCorp was dissolved. K+N is a transparent company with an emphasis on global logistics solutions.

3.Schenker Essen, Germany; (U.S.) Freeport, NY, 516-377-3000
Heiner Muhrmann, CEO
www.schenkerusa.com

3PL Revenue: 8.9bn Parent Revenue: 30bn

Coverage: Europe, Asia, South America, Africa, North America

3PL Assets: 38,000 employees; 405 warehouses

Information Systems: Good; TMS - SWORD, Procars, ILS; WMS - HTS, SAP, SoLiNET

Services: Air and ocean freight forwarding, customs brokerage, warehousing and distribution, transportation management

Industry Focus: Automotive, computers and electronics, consumer goods, healthcare

Key Customers: BMW, DaimlerChrysler, IBM, Intel, Procter & Gamble, Subaru

Armstrong & Associates' Evaluation: Schenker is a major European player with expanding, but somewhat limited, U.S. presence. The quality of operations is good with the primary emphasis on international logistics. Recent expansion efforts have centered on Russia, Eastern Europe and China. Schenker is owned by Deutsche Bahn, the German railroad, and is part of Stinnes, which has large oil and raw materials operations. European trucking operations account for over half of Schenker revenues. Forwarding operations are 40% and contract logistics is about 9%. Parent company losses aren't helping Schenker in its efforts against major global competitors.

4.DHL Danzas Air & Ocean Basel, Switzerland, Deutsche Post World Net
(U.S.) Plantation, FL, 954-888-7000, Hans Toggweiler, President & CEO
www.us.danzas.com

3PL Revenue: 8.5bn Parent Revenue: 55.9bn

Coverage: Global (Service to 99% of World GDP)

3PL Assets: 13,000 employees

Information Systems: Good; TMS - LOGIS, proprietary; WMS - ELIS

Services: Air and ocean freight forwarding, customs brokerage, transportation management, warehousing and distribution, supply chain consulting

Industry Focus: Electronics, automotive, consumer products, chemicals, industrial

Key Customers: Bell & Howell, Caterpillar, Cole Vision, Gatorade, IBM, John Deere, Rodenstock Lens, Satis Vacuum, Xerox

Armstrong & Associates' Evaluation: DHL lost $654m in the U.S. in 2004. It expects to lose $400m in 2005 and break even in 2006. Overall it will invest $1.2bn in becoming a major competitor of UPS and FedEx. It's a pile of money, but a logical move for one of the major global players. Revenues and profits for DHL's parent, Deutsche Post, were up for the year. Logistics revenues are 15% of the business. No one argues that DHL Danzas is one of the world's best freight forwarders. It is the name-brand leading competitor in China. In North America its best operations are at DHL Logistics, a profitable niche player. The investment in North America will constrain DHL in other markets.

5.P&O Nedlloyd London, United Kingdom, Euronext: Nedlloyd
(Royal P&O Nedlloyd N.V.)
P&O Nedlloyd Ltd. East Rutherford, NJ, 201-896-6200,
Michael J. White, CEO
www.ponl.com

3PL Revenue: 6.7bn Parent Revenue: 6.7bn

Coverage: Europe, Asia, United States

3PL Assets: 10,000 employees; 166 Vessels, 1,000 containers, 2,000 trucks, 6,700 trailers

Information Systems: Good; TMS - LOG-NET

Services: Warehousing and distribution, ocean shipping, supply chain consulting, customs brokerage, port services

Industry Focus/Key Customers: Retail, fast moving consumer goods, industrial, chemicals

Armstrong & Associates' Evaluation: P&O Nedlloyd's logistics businesses (including Gilbert in the U.S.) provide complementary logistics services to support the point-to-point full container load core business. They offer a range of value-added services - from freight management through to sophisticated supply chain management packages. Gilbert's operations involve extensive consolidation/deconsolidation operations, especially in the garment-on-hanger segment. P&O Nedlloyd handled 4 million TEUs in 2004. Average rates per TEU were $1451 for Europe and $1613 for North America. Rates to Asia were $1269.

6.UPS Supply Chain Solutions Atlanta, GA, NYSE: UPS, (United Parcel Service)
Bob Stoffel, President
800-742-5727
www.UPS-SCS.com

3PL Revenue: 5.3bn Parent Revenue: 36bn

Coverage: Global (Service to 99% of World GDP)

3PL Assets: 22,000 employees; 550 warehouses; 1100 tractors, 2425 trailers

Information Systems: Excellent; TMS - i2, Roadnet; WMS - operates all major systems

Services: Air and ocean freight forwarding, customs brokerage, transportation management, warehousing and distribution, supply chain consulting, dedicated contract carriage, trade finance and insurance, equipment leasing, mail services

Industry Focus: Computers and electronics, telecommunications, healthcare, automotive, retail, consumer goods

Key Customers: Alcatel, Birkenstock, Cisco, DaimlerChrysler, Dell, Fabricut, General Motors, Honeywell, Lucent Technologies, Nike, Siemens, Therasense

Armstrong & Associates' Evaluation: The big brown machine moves steadily forward. UPS is the largest U.S.-based 3PL and it continues to spread worldwide, offering services everywhere the package company goes. The acquisition of Menlo Forwarding fills some heavyweight airfreight and geographical gaps and cost little. Not only is UPS gearing up for the promise in China, but it already has 190 employees in Japan. It's only a start and Japan is the world's second-largest economy. Free cash flow, UPS Capital and a lot of options are key to the battles ahead with DHL, FedEx and the other guys.

7.Panalpina Basel, Switzerland
(U.S.) Foster City, CA, 650-653-6600, Peter Merath, Regional CEO
www.panalpina.com

3PL Revenue: 5.3bn Parent Revenue: 5.3bn

Coverage: Europe, Asia, Americas, Africa

3PL Assets: 13,000 employees; 300 warehouses

Information Systems: Good; Emphasis is on internet-native SCM

Services: Air and ocean freight forwarding, transportation management, warehousing and distribution, oil and gas services

Industry Focus: Automotive, computers and electronics, oil and gas, consumer goods, beverages, apparel, healthcare

Key Customers: Chevron, Delphi, Hewlett Packard, IBM, Philips Electronics, Robert Bosch, Shell Chemical, Sun Microsystems

Armstrong & Associates' Evaluation: Panalpina, a major player in the airfreight forwarding market, will have an initial public offering this year. Panalpina has developed good 3PL, project logistics and ocean forwarding operations to grow with its quality airfreight operations. David Beatson, the CEO for North America, recently left in a rift over company direction. The IPO should give Panalpina the extra cash it needs to stay in the race as a key global supply chain manager, but Beatson's departure won't help.

8.TPG/TNT Hoolddorp, Netherlands
TNT Logistics North America Jacksonville, FL, 888-LOGISTX
Jeffrey Hurley, Managing Director
www.tnt.com

3PL Revenue: 4.8bn Parent Revenue: 15.6bn

Coverage: Europe, Americas, Asia

3PL Assets: 45,000 employees; 357 warehouses

Information Systems: Very good; TMS - Vector 21, Reply; WMS - J.D.Edwards, MA, LIS, Reply, MARC

Services: Manufacturing support and subassembly, transportation management, supply chain consulting, dedicated contract carriage, warehousing and distribution, returns management

Industry Focus: Automotive, electronics, rail, tire, consumer goods, utilities, heavy machinery

Key Customers: Andersen Corp., BMW, CSX, DaimlerChrysler, Fiat, Ford, General Motors, Goodyear, Home Depot, Honda, NACCO Materials Handling Group, Sears

Armstrong & Associates' Evaluation: TNT is the world's largest automotive 3PL. It is expanding in other sectors and spreading geographically, primarily with existing customers. Operations in France and Italy have been improved through "standardization." As a result, profit margins have been increased. TNT's acquisition of Wilson Logistics helps fill a need for more freight forwarding ability. TNT is very good at value-added support activities. Its Matrix software suite reflects its range of logistics capabilities, including materials management. Its parent runs the privatized Dutch post office and generates significant free cash flows for investment. Further acquisitions to fill out global supply chain management capabilities are likely.

9.C.H. Robinson Worldwide Eden Prairie, MN; Nasdaq: CHRW
John Wiehoff, CEO, 952-937-8500
www.chrobinson.com

3PL Revenue: 4.3bn Parent Revenue: 4.3bn

Coverage: North America, Europe, Brazil

3PL Assets: 4,800 employees; 100 warehouses and cross-dock affiliates

Information Systems: Very Good; TMS - Express; WMS - High Jump

Services: Freight brokerage, air and ocean freight forwarding, transportation management, warehousing, print logistics

Industry Focus: Technology, food and beverage, retail, paper products and printed materials, agriculture, consumer goods

Key Customers: Anheuser-Busch, AOL, Best Buy, Clorox, Dana Corp, International Paper, Wal-Mart

Armstrong & Associates' Evaluation: C.H. Robinson Logistics continues to be a very profitable, well run company. It has expanded its produce sourcing operations. It is the leader in North American freight brokerage and crafts complete supply chain solutions. It has been very successful in the less-than-truckload market. CHR has recently developed competitive IT transportation and SCM solutions. CHR has relied on organic growth, a follow-the-customer strategy and small purchases for most of its international expansion. A majority of its business is in the food and beverage vertical. Because of the size of market capitalization ($4.5bn), CHR is not a likely takeover candidate. However, a merger with Expeditors International would put together two complementary, financially strong operations. It would solve CHR's need for global SCM and Expeditors need for an expanded U.S. base. Such a merger would create a strong single-source offering.

10.Schneider Logistics Green Bay, WI
Tom Escott, President, 800-525-9358
www.schneiderlogistics.com

3PL Revenue: 3.4bn Parent Revenue: 5bn

Coverage: North America, Europe

3PL Assets: 1,400 employees; 8,750 tractors, 17,450 trailers

Information Systems: Excellent; TMS - SUMIT

Services: Transportation management, supply chain consulting, dedicated contract carriage, freight payment and auditing

Industry Focus: Consumer products and retail, automotive, heavy equipment, computers and electronics, food and beverage, chemicals, healthcare, paper

Key Customers: 3M, Anheuser Busch, Baxter Healthcare, CHN Corp., DaimlerChrysler, Dow Chemical, Fort James, General Motors, Guardian Glass, Honda, Kimberly-Clark, Kroger, Nabisco, Ocean Spray, Thomson Multimedia, TRW, World Kitchen

Armstrong & Associates' Evaluation: Tom Escott has made significant changes to SLI over the last year. The largest is a reemphasis on brokerage and total transportation management with less push on being an IT-based administrator. Schneider is expanding from its core automotive logistics business. The major customer for this business is GMSPO, a $40m account. SLI runs a large freight bill payment service that handles $7bn per year in freight bills. Its dedicated contract carriage, based for the most part on committed capacity rather than exclusive equipment, has made it the nation's largest.

11.Expeditors International of Washington Seattle, WA; Nasdaq: EXPD
Peter Rose, CEO & Chairman, 206-674-3400
www.expeditors.com

3PL Revenue: 3.3bn Parent Revenue: 3.3bn

Coverage: Asia, Americas, Europe

3PL Assets: 9,400 employees; 110 warehouses

Information Systems: Good; TMS - Tradeflow, SNEP, Exp.0

Services: Air freight forwarding, customs brokerage, transportation management, warehousing and distribution, supply chain consulting

Industry Focus: Automotive, electronics, retail, chemicals, healthcare

Key Customers: Ace Hardware, Cisco, General Motors, Merck, Motorola, Philips, Toyota, Trane

Armstrong & Associates' Evaluation: Expeditors net revenue grew 21% and its net profit continued to be one of the best in the business. It is expanding its European and American operations, but its largest growth is in information systems. Expeditors has made a commitment to increasing its communications and technology capabilities to the global supply chain management level. Expeditors maintains its strong commitment to quality personnel. Its business is roughly 40% airfreight forwarding, 40% customs brokerage and 20% ocean forwarding. Its primary traffic lane is between China and the U.S.

12.Penske Logistics Reading, PA
Vince Hartnett, President
610-775-8285
www.penskelogistics.com

3PL Revenue: 3.2bn Parent Revenue: 4.8bn

Coverage: North America, Europe, Brazil

3PL Assets: 8,300 employees; 130 warehouses; 2600 tractors, 5,733 trailers

Information Systems: Very Good; TMS - LMS, i2, proprietary; WMS - EXE, RT Systems, MARC, proprietary

Services: Dedicated contract carriage, transportation management, supply chain consulting, warehousing and distribution, equipment leasing

Industry Focus: Automotive, retail, food, appliances, utilities

Key Customers: Amcor Sunclipse, Carrefour, Ford, General Motors, Hewlett Packard, Iams, International Truck and Engine, Mission Foods, Whirlpool Corp.

Armstrong & Associates' Evaluation: Penske Logistics is one of the top automotive 3PLs. It is a lead logistics provider for Ford and Saturn. Major new business gains last year included the takeover of GM Power Train's cross-dock and transportation management, inbound transportation for Whirlpool's distribution center and a large dedicated operation for CSK. Its European operation continues to grow. Penske's Brazilian operations are automotive- and retail-based. An office has been opened in Shanghai. Penske's primary stockholder, GE Capital, has cleared the bar on some important governmental requirements in the Peoples Republic of China. Penske should benefit and expand quickly.

13.Nippon Express Tokyo, Japan, Tokyo: 9062
Nippon Express U.S.A., Inc. New York, NY, 800-896-9633
Tadaaki Hashimoto, President & CEO
www.nipponexpress.com

3PL Revenue: 3.18bn Parent Revenue: 15.9bn

Coverage: Global (except Africa)

3PL Assets: 15,000 logistics employees; 1,450 service centers and warehouses

Information Systems: Good; TMS -NEWINS; WMS - NEWINS, Rewards

Services: Air and ocean freight forwarding, warehousing and distribution, transportation management, supply chain consulting, customs brokerage

Industry Focus: Automotive, healthcare, computers and electronics, industrial

Key Customers: Apple Computer, Baxter Healthcare, DaimlerChrysler, Honda, IBM, Mitsubishi, Toyota

Armstrong & Associates' Evaluation: Nippon Express covers Japan. Its Pelican Express operation is the largest package operation in Japan. Eighty percent of Nippon revenues are from domestic Japanese operations. Its large, international operations in forwarding and contract logistics are tied to its Japanese base. That base is Nippon's strength and ultimately its Achilles' heel. It has lacked the ability and need to move to broader, less Japanese-centric offerings. Major cultural changes are moving Japan to a new place. The question is "What pace of change will Nippon follow?"

14.NYK Logistics Tokyo, Japan; Tokyo: 9101
(U.S.) Long Beach, CA, 310-518-3096
Saburo Yamagata, CEO & President
www.nyklogistics.com

3PL Revenue: 2.8bn Parent Revenue: 13.2bn

Coverage: Japan, China, Southeast Asia, Americas, Europe

3PL Assets: 11,000 employees; 50 warehouses; 350 vehicles (Europe)

Information Systems: Good; TMS - Via View (Provia Cargo Information System); WMS - Provia, SCM visibility

Services: Freight forwarding, customs brokerage, intermodal transportation, value-added warehousing

Industry Focus: Food and beverage, retail, consumer goods, automotive, high-tech

Key Customers: Cadbury, Clark Shoes, Casio, Hitachi, Johnson & Johnson, Isuzu, Johnson Controls, Sony, Spontex, TESCO, UK Paper, Yamaha

Armstrong & Associates' Evaluation: NYK does not have the kind of strong domestic base in Japan that characterizes Nippon and others. It has to grow in international markets. It recently announced that it wants to become a "logistics integrator," by offering combined services through use of "the world's leading hardware" of ships, trucks and rail, plus software for an electronic international transport system. NYK Logistics started in 2001 by combining purchases and adding intermodal to expanding contract logistics and airfreight operations. Contract logistics and distribution are strong in Europe. Automotive, industrial and retail verticals are emphasized. Its automotive logistics includes roll-on/roll-off, JIT and parts distribution.

15.Eagle Global Logistics Houston, TX; Nasdaq: EAGL,
Jim Crane, President & CEO, 800-888-4949
www.eaglegl.com

3PL Revenue: 2.6bn Parent Revenue: 2.6bn

Coverage: Asia, United States, Europe

3PL Assets: 10,000 employees; 87 warehouses, 400 service centers

Information Systems: Good; TMS - proprietary; WMS - proprietary

Services: Air and ocean freight forwarding, transportation management, warehousing and distribution, customs brokerage, expedited, project management

Industry Focus: Automotive, aerospace, trade shows, telecommunications, computers and electronics, pharmaceuticals, printed materials, oil and gas, apparel and entertainment equipment

Key Customers: Amdahl, Compaq, Neiman Marcus, U.S. Military Traffic Management Command, Visteon Corp.

Armstrong & Associates' Evaluation: EGL has had a major success with its Iraq operations using 40-ton capacity Antonov aircraft. It continues to have large increases in revenues and profitability. About half of the revenue for this heavy weight airfreight specialist is North American-based. Airfreight forwarding is about two-thirds of the business, with ocean and customs brokerage splitting the rest. Trucking linehaul substitution, along with its Iraq success, has contributed significantly to EGL's return to profitability. EGL sold off its 40% ownership in TDS, the automotive 3PL specialist, in September. TDS has struggled to find profitability.

16.BAX Global Irvine, CA
NYSE: BCO (The Brink's Company)
Joseph L. Carnes, President
404-768-2003
www.baxglobal.com

3PL Revenue: 2.4bn Parent Revenue: 4.7bn

Coverage: Asia, North America, United Kingdom

3PL Assets: 10,000 employees; 48 warehouses; 35 aircraft

Information Systems: Very good; TMS - CAPS, i2; WMS - EXE, Ultramain

Services: Airfreight forwarding, transportation management, warehousing and distribution, supply chain consulting, freight payment and auditing, customs brokerage

Industry Focus: Computers and electronics, automotive, aerospace, airlines, healthcare, retail

Key Customers: Airbus, Bombardier, Boeing, Epson, GE Medical Systems, Microsoft, NEC, Philips Consumer Electronics, Subaru

Armstrong & Associates' Evaluation: The core BAX service is time-definite heavy airfreight. Over the last five years, BAX has added more value-added warehousing services, eliminated airplanes and increased its SCM emphasis. Asia-based operations have expanded. More North American traffic has been converted to truckload. The change of corporate direction has brought BAX back to profitability and revenues have grown quickly. International revenues are 58% of total revenue.

17.UTi Worldwide Rancho Dominguez, CA; Nasdaq: UTIW
Roger MacFarlane, CEO, 310-604-3311
www.go2uti.com

3PL Revenue: 2.2bn Parent Revenue: 2.2bn

Coverage: Europe, Africa, Asia, North America

3PL Assets: 10,000 employees; 84 warehouses and logistics centers; 350 tractors, 900 trailers

Information Systems: Good; TMS - eMpower; WMS - eMpower

Services: Air and ocean freight forwarding, customs brokerage, warehousing and distribution

Industry Focus: Chemicals, health and beauty products, apparel, automotive, computers and electronics

Key Customers: Dow Corning, General Motors, Johnson Controls, Owens Corning, Sara Lee, Bristol Meyers Squib

Armstrong & Associates' Evaluation: UTi has grown in 12 years to be a major global freight forwarder/SCM and darling of Wall Street. Growth exceeds 20% per year while gross and net margins remain solid. Airfreight forwarding and contract logistics are each one-third of the business. Customs brokerage and ocean forwarding split the rest. More value-added services and contract logistics will be added this year. UTi now has competitive SCM technology. In Poland and South Africa, the company has developed innovative pharmaceutical supply chain networks. Roger MacFarlane leads by example, emphasizing teamwork, measurement and results. Management structures are fluid and adaptive with a core of 10 key leaders.

18.Caterpillar Logistics Morton, IL
NYSE: CAT, (Caterpillar Inc.)
Mary Bell, CEO
800-240-2126
www.catlogistics.com

3PL Revenue: 2bn Parent Revenue: 30bn

Coverage: 160 countries

3PL Assets: 9,000 employees; 100+ warehouses

Information Systems: Excellent; TMS - CAT TIS, i2; WMS - CLSS, SAP, Facility Logistics, ProAct

Services: Warehousing and distribution, transportation management, logistics consulting

Industry Focus: Automotive, industrial, aerospace, manufacturing, technology, consumer goods, defense, energy

Key Customers: DaimlerChrysler, Delphi, Ford Motor Co., Harley-Davidson, Hyundai, MG Rover, Saab USA, United States Navy

Armstrong & Associates' Evaluation: Cat Logistics' operations parallel its global parent. Vertical emphasis is on automotive and industrial logistics/SCM. Business is split between North America and international. Warehousing, transportation management and other applications are integrated. Cat has good demand and supply forecasting using proprietary probability models. Warehousing is often low-tech emphasizing well-controlled procedures and results. Cat is an i2 transportation management shop. Along with Ford and SAP, it is developing new generation parts SCM software.

19.Kintetsu World Express Tokyo, Japan; Tokyo: KWE
(U.S.) New York, NY, Masa Hattori, President & CEO
800-275-4045
www.kwe.com

3PL Revenue: 1.9bn Parent Revenue: 5.5bn

Coverage: Asia, North America, Europe

3PL Assets: 5,500 employees; 169 warehouses

Information Systems: Good; TMS - CSS; WMS - KWE WMS

Services: Airfreight forwarding, warehousing and distribution, transportation management, customs brokerage

Industry Focus: Automotive, high-tech, medical

Key Customers: Daewoo, Dong Yang Mechatronics, Manco

Armstrong & Associates' Evaluation: Kintetsu's largest operations are in Japan and China. Seventy-nine percent of its business is airfreight based. Ocean and logistics business accounts for 21%. KWE has a host of joint ventures and affiliated companies. Its verticals are high-tech, automotive, medical and other. It has 120 logistics warehouses outside Japan, with 3.4 million square feet. Thirty-five of these are in China. It handles 2.3 million TEUs per year between China and Japan. KWE handles 100,000 airfreight tons per year between Japan and China. The balance is 2/1 outbound from China. KWE's total airfreight tonnage is 150,000 tons. KWE listens to the "Voice of the Customer." It's a quality management success story.

20.Ryder Miami, FL; NYSE: R
Gregory Swienton President & CEO, 888-887-9337
www.ryder.com

3PL Revenue: 1.9bn Parent Revenue: 5.2bn

Coverage: North America

3PL Assets: 12,440 employees; 184 warehouses; 57,255 tractors, 56,462 trailers

Information Systems: Good; TMS - i2; WMS - OPTUM, V3, PkMS

Services: Supply chain consulting, transportation management, warehousing and distribution, dedicated contract carriage, air and ocean freight forwarding, equipment leasing, returns management, freight payment and auditing, insurance

Industry Focus: Automotive, aerospace, industrial, telecommunications, computers and electronics, food and beverage, pharmaceuticals, building materials, utilities, consumer products and retail, newspaper distribution

Key Customers: Applied Materials, CVS, DaimlerChrysler, John Deere, General Motors, Hewlett Packard, Honda, Lucent Technologies, Target, Whirlpool, Xerox

Armstrong & Associates' Evaluation: Ryder was the most recognized brand name in North American logistics. For over two decades it has been one of the largest U.S. dedicated contract carriers, often converting its leasing customers to expanded service. Ryder is still an excellent choice for small, stand-alone dedicated fleets. Ryder has expanded into transportation management, distribution center operation and SCM over the last 15 years. It took a change in direction when Greg Swienton became CEO. Ryder has shed some unprofitable business and operates in the black, but it is not growing. At times, Ryder Logistics has been a takeover target. It covers all the major verticals and appears to be in need of new blood.

21.Menlo Worldwide Redwood City, CA
John Williford, President & CEO; NYSE: CNF
650-596-4000
www.menloworldwide.com

3PL Revenue: 1.3bn Parent Revenue: 3.7bn

Coverage: Americas, Asia, Europe

3PL Assets: 3,600 employees; 55 warehouses; 34 tractors, 165 trailers

Information Systems: Excellent; TMS -TTMS, LMS; WMS - WMS (Provia-modified)

Services: Transportation management, warehousing and distribution, air freight forwarding, customs brokerage, supply chain consulting, returns management and expedited

Industry Focus: Computers and electronics, chemicals, retail, beverage

Key Customers: DaimlerChrysler, Dow Chemical, Electrolux, IBM, Hewlett-Packard, HALO Branded Products, NCR, Nike, Nissan, Nortel Networks, Ricoh Family Group, Sears, Stanley Works, Takata

Armstrong & Associates' Evaluation: Menlo is one of the leading U.S.-based 3PLs. It has solid inbound supply chain management, good automotive logistics and finished goods distribution. Menlo's LMS provides good technology and SCM solutions. Recently, the company redesigned itself to accommodate the sale of its red ink laden freight forwarding affiliate. Vector SCM, its successful joint venture with GM, is one of the few 4PL successes. Parent CNF has a set of strong, profitable, less-than-truckload operations plus Conway Integrated Logistics. UPS talked to CNF about a takeover within the last year.

22.APL Logistics Oakland, CA
Singapore: NOL (Neptune Orient Lines Ltd.)
David Lim, NOL Group President; 800-331-4289
www.apllogistics.com

3PL Revenue: 1.1bn Parent Revenue: 6.5bn

Coverage: Asia, North America, Europe

3PL Assets: 4,500 employees; 155 warehouses; 95 tractors, 229 trailers

Information Systems: Excellent; TMS - i2, proprietary; WMS - Irista, PkMS, proprietary

Services: Ocean and airfreight forwarding, warehousing and distribution, transportation management, dedicated contract carriage, customs brokerage

Industry Focus: Automotive, retail, consumer goods, electronics and government

Key Customers: Baxter Healthcare, Colgate-Palmolive, DaimlerChrysler, General Motors, Ingersoll-Rand, Nike, Panasonic, Philips Electronics, Procter & Gamble, Thomson Multimedia, Toto, Turtle Wax

Armstrong & Associates' Evaluation: APL's major verticals have been retail and automotive. It has its contract logistics operations, which provide the majority of its net revenues, back in the black. APL has good Pacific Rim and China coverage, including an automotive joint venture in China. Its L.A. basin consolidation/deconsolidation operations are good. Links to Singapore are a key part of APL's Asian Success.

23.FedEx Trade Networks/Supply Chain Services Buffalo, NY;
NYSE: FDX, (FedEx Corp.)
Ed Clark, President, 800-222-7657
www.fedex.com

3PL Revenue: 700m Parent Revenue: 22.5bn

Coverage: Global (Service to 99% of World GDP)

3PL Assets: 2,000 employees; 35 warehouses; 298 tractors, 1094 trailers

Information Systems: Excellent; TMS - Optum: SCE Transportation i2; WMS - EXCEED 4000

Services: Domestic and international transportation management, customs brokerage and freight forwarding, supply chain consulting, warehousing and distribution services

Industry Focus: Apparel, automotive, healthcare, computers and electronics, industrial, retail

Key Customers: DaimlerChrysler, DirecTV, Ford Motor Co., GM Power Train, Hewlett-Packard, Mitsubishi, Philips Semiconductor

Armstrong & Associates' Evaluation: Contract logistics, freight forwarding and customs brokerage at FedEx are service businesses whose role is to support FedEx transportation operations. FedEx Trade Networks is a quality international transportation manager. FedEx SCS has lost key business and is no longer a significant third-party logistics competitor. For FedEx, SCM is a value-added part of express, package, less-than-truckload and other operations.

24.SembCorp Logistics Singapore; Singapore Stock Exchange
SembCorp Logistics (USA) Inc. Inglewood, CA,
K. K. Chan, Sr. Vice President, Americas
310-215-3725
www.semblog.com

3PL Revenue: 469m Parent Revenue: 469m

Coverage: Asia

3PL Assets: 2,700 employees; 101 warehouses

Information Systems: Good; TMS - Route Pro, Maxload; OMS - ELIMS

Services: Warehousing and distribution, air and ocean shipping, supply chain management, dangerous goods management, offshore logistics

Industry Focus: Automotive, consumer goods, computers and electronics, healthcare, oil, food and groceries

Key Customers: Abbott Labs, Apple Computer, Bridgestone, Firestone, Colgate-Palmolive, ExxonMobil, Gillette Co., Nestle, Pepsi

Armstrong & Associates' Evaluation: SembCorp is one of Asia's largest 3PLs. It is owned primarily by Temasek and is a product of Singapore's state capitalism model. SembCorp has built a strong base in India and China. The Chinese joint venture, St. Anda, is one of the largest 3PLs in the PRC. SembCorp made windfall profits when it sold its stock and dissolved its strategic alliance with Kuehne + Nagel last year. Its profit margins are expected to suffer going forward. SembCorp is often considered as a takeover target.Its operating territory, cultural insider status and quality of operations look attractive, but the market cap appears too high for buyers.

25.Maersk Logistics Copenhagen, Denmark;
Copenhagen: Maersk A / Maersk B (A. P. Moller-Maersk A/S)
Maersk Logistics USA Inc. Madison, NJ,
Tony Chiarello, President, 973-574-5000
www.maersk-logistics.com

3PL Revenue: 350m Parent Revenue: 25bn

Coverage: Asia, Europe, North America

3PL Assets: 60,000 employees; 15 warehouses

Information Systems: Excellent; TMS - proprietary; WMS - proprietary

Services: Ocean and airfreight forwarding, warehousing and distribution, customs brokerage, supply chain consulting

Industry Focus: Consumer products, retail, sporting goods, apparel and garments, cosmetics and personal care, electronics

Key Customers: Adidas, Federated Stores, Footstar Inc., Home Depot, Hudson's Bay Co., Ikea, Liz Claiborne, Nike, Reebok, Target Corp., Wal-Mart

Armstrong & Associates' Evaluation: Maersk is the world's largest container line. It and parent A.P. Moeller are financially strong, aggressive and successful. Maersk Logistics is an ancillary business that functions primarily in connection with container operations. Maersk Logistics does not report separately and the revenue shown is an estimate. Over half of its business is warehousing and distribution; about one-fifth is forwarding and consolidation. SCM, airfreight forwarding and customs brokerage account for the rest. The majority of revenues are between Asia and North America. About one-third is in Asia-European traffic.


Click here for a PDF of the Top 25 3PLs ranked by revenue.

Want more information about Global and Regional 3PLs? Contact Dick Armstrong at 800-525-3915 or dick@3PLogistics.com.

About Armstrong & Associates: Armstrong & Associates Inc. is a supply-chain management consulting firm specializing in market research, mergers and acquisitions and outsourcing. Armstrong & Associates publishes Who's Who In Logistics? Armstrong's Guide to Global Supply Chain Management. Recent research papers include Warehousing in the United States and Global Logistics Services Providers II. In addition, Armstrong & Associates maintains databases of warehousemen, freight forwarders and third-party logistics and distributing companies. Armstrong & Associates, Inc., 100 Business Park Circle, Suite 202, Stoughton, WI 53589; Ph: 608-873-8929; Fax: 608-873-5509; Web: www.3PLogistics.com.

The past year has been huge for third-party logistics providers. Total revenue for outsourced logistics grew at a double-digit rate in 2004 to reach $333bn. The top 25 global 3PLs alone earned $97bn compared with about $79bn in 2003. These 25 3PLs now account for nearly 30 percent of all logistics outsourcing expenditures worldwide. In North America alone, 3PLs took in nearly $115bn. In addition to this organic growth, 2004 saw the big 3PLs grow larger through dozens of acquisitions of both small and large logistics providers to broaden their service offerings and their geographic coverage. These same global players expanded their own operations geographically with major investments in China, Southeast Asia, Eastern Europe, Latin America and even the Middle East.

China
The most pervasive story in 2004 has been the continued expansion of 3PL activity in China. Because just about every manufacturer and retailer is increasing its business in China, the focus for all the major 3PLs has been stepped up in that region. While the entire Pacific Rim is enjoying substantial economic growth, the big 3PLs are correctly focusing their efforts on China itself. The providers' opportunity for at least the next five years will be the ongoing wave of exports from China to North America and Europe, but the long-term opportunity is for the 3PLs to position themselves to service the domestic Chinese economy. It is very likely that the domestic economy will catch up with Japan and the West.

Thanks to the pressures of the World Trade Organization agreement, China is gradually loosening the regulations on direct foreign ownership of logistics businesses and assets within the country. For decades, foreign 3PLs had to operate in joint ventures (JVs) with Chinese companies such as SinoTrans. In the many free trade zones around major ports and manufacturing areas, 3PLs are beginning to operate under their own names and ownership. Some 3PLs still prefer to operate as JVs with Chinese partners, but increasingly 3PLs can compete on their own. The 3PLs operating on their own at least to some degree include UPS Supply Chain Solutions, Exel, Kuehne + Nagel, DHL, FedEx, Nippon Express and Kintetsu World Express (KWE).

Because Japanese companies are dramatically outsourcing their production to China, Japanese 3PLs are doing much more business there. The pattern is familiar. Japanese manufacturers select one of the major Japanese forwarders and use it to cover all of its logistics needs. KWE, for example, is doing about 20 percent of the airfreight moving between China and Japan. Recent political pressure in the Peoples Republic of China (PRC) over Japan's failure to apologize to its satisfaction for World War II atrocities is unlikely to have a significant impact on this business.

Penske Logistics has opened an operation in Shanghai and it is positioning itself to become a significant player in China. Penske's primary equity owner, GE, is one of the largest U.S. companies in China and has earned the right to do business on its own throughout most of the country. No doubt GE will be making opportunities for Penske in China.

As foreign 3PLs begin to operate on their own in China, there will be significantly more investment in assets. For example, in Shenzhen, near Hong Kong, UPS is finishing up a 240,000-square-foot warehouse in a foreign trade zone. APL Logistics has just built a flow center there. This type of logistics investment is happening all over China, especially in the free trade zones where foreign companies have the right to handle both imports and exports without a Chinese partner.

Initially, many foreign 3PLs had expatriate managers running operations, but now the managers tend to be local. Thousands of Chinese educated in the West have returned. In Hong Kong alone, there are 10,000 graduates just from the University of Toronto. These people have the education and the dual-cultural expertise to run foreign-owned companies in China. The demand, however, is exceeding the supply, and there is a crying need for more Western-educated Chinese. Experience is less important. Good prospects are being taught logistics on the job.

While China and Hong Kong are still at the top of the list for 3PL expansion, major logistics providers are establishing footholds in India, and to a lesser extent in Indonesia, Malaysia, Vietnam and the Philippines. Most 3PLs have long had some operating capabilities in South Korea, Thailand and Taiwan, and as these economies again see greater growth, there will be continued 3PL expansion there. China, however, remains the major focus.

The large European 3PLs are increasing their expansion into Eastern Europe. Schenker, for example, is opening up Russia. Such expansion makes sense for Schenker, which is owned by the German national railroad. It already has extensive transportation operations in Western and Eastern Europe, so it is just making a logical move eastward into Russia.

APL Logistics Expands Ingersoll-Rand's Worldwide Parts Distribution Business
Ingersoll-Rand Company Ltd., a $9.4bn diversified industrial company, has expanded its parts distribution outsourcing to APL Logistics over the past seven years. Ingersoll-Rand's Bobcat unit, which makes compact industrial and construction equipment, first chose APL Logistics to operate its worldwide parts distribution center in 1997. Last year, Ingersoll-Rand awarded APL Logistics a major expansion of its global aftermarket parts business to include the company's Infrastructure Sector. This division is composed of market-leading brands that serve diverse markets such as road and general construction, gated communities, golf courses and municipal governments. APL Logistics now handles aftermarket parts distribution for these products to dealers throughout North America, Latin America and Asia Pacific.

"APL Logistics has proven to be consistently reliable in deliveries to our dealers," says West Fargo, N.D.-based Rich Goldsbury, Bobcat's vice president for marketing services. "They have shown their ability to add value-added services to meet contingencies, and they have a partnership approach to supporting our changing business needs. They have earned the increased business we have awarded to them."

At the Bobcat facility at Woodridge, Ill., APL Logistics operates a 240,000square-foot warehouse. To handle the additional parts distribution business for the Ingersoll-Rand Infrastructure Sector, APL Logistics last spring added about 117,000 square feet to the main building and another 18,000 square feet as a parts mezzanine. At this facility, APL Logistics provides a full range of value-added logistics services to support the parts business on a worldwide basis.

Bobcat and other Ingersoll-Rand divisions remain in charge of their supply chain planning and customer-facing functions, including order receipt. APL Logistics is responsible for fulfilling these orders and running all warehouse operations. APL Logistics' specific services to Ingersoll-Rand include inspection and processing of returns, production of parts kits and assemblies required by customers, management of receiving and inventory activities, order fulfillment, transportation management, and related support activities. The inventory of parts handled at the facility increased by nearly 75 percent in the past year from 55,000 SKUs to 95,000.

Dealer orders are passed via electronic data interchange from the Ingersoll-Rand IT system to APL Logistics' warehouse management system that runs all functions within the facility. APL Logistics proprietary software also includes radio-frequency technology to scan part numbers and update locations. It supports inventory visibility and control, and it integrates with Ingersoll-Rand's own systems.

The systems constantly update each other, so inventory status is always correct.

"Specific warehouse part locations are not kept in Ingersoll-Rand systems," says Goldsbury. "That is APL Logistics' responsibility, and we don't have to manage that process. My system knows how many units of any part we have, so we can take an order and know when to replenish the inventory. We do the material planning and procurement process. We rely on APL to maintain a logistics system that confirms orders and maintains inventory in the warehouse."

APL Logistics ships parts to approximately 1,000 affiliated Ingersoll-Rand dealerships in 75 countries. The shipping function includes processing bills of lading and other freight documents as well as payment of freight bills. Shipments to many overseas dealers are carried by containerships operated by APL, sister company of APL Logistics. For other dealers, Ingersoll-Rand has contracts with other carriers and forwarders that specialize in certain countries. APL Logistics tenders those shipments to the appropriate carrier from the Woodridge warehouse.

"APL Logistics integrates very well with all the partners that we have selected," says Goldsbury.


Growing by Acquisition
Acquisition activity was brisk throughout the 3PL industry in 2004, with the biggest companies making the biggest deals. Exel, already the world's largest 3PL, completed at least five acquisitions. The most aggressive was its purchase of Tibbett & Britten, the world's third-largest contract logistics 3PL. Tibbett & Britten itself had annual revenues of nearly $3bn. The purchase price was $710m, which raised eyebrows in the investment community because it was 23 times T&B's earnings per share. The purchase prices was also 6.7 times earnings before interest, tax, depreciation and amortization (EBITDA), which is the key financial measure used by investors to gauge relative value. The normal range for value-added warehousing companies was five to six times EBITDA.

T&B had thin profit margins, but the acquisition gives Exel considerably more capabilities with fashion logistics and reverse logistics, particularly in Europe. The T&B operations also give Exel better coverage in Canada, Mexico, Saudi Arabia and other locations. The after-acquisition cost of absorbing Tibbett & Britten was about $60m. Exel now has 110,000 employees and $11.6bn in sales.

Other Exel acquisitions in 2004 include Fujitsu Logistics, Pharma Logistics and Chile-based Bodenor. Exel also completed its acquisition of Power Packaging, which is a provider of manufacturing and packaging services to America's food companies. This purchase should help Exel boost the margins on its marginally profitable food warehousing and distribution. Power Packaging allows Exel to add higher-margin value-added services for these food and beverage customers.

The high price for Tibbett & Britten indicates how much the momentum has shifted in the sellers' direction. There are fewer large 3PLs available for purchase, so the prices just keep climbing.

Exel itself has been rumored to be a target for acquisition by UPS or DHL. Exel's CEO vigorously denies the rumor, and it seems unlikely for at least two reasons. The price for Exel would be extremely high based on the robust evaluations that today's 3PL deals are bringing. UPS does not tend to buy at the top of the market. Exel's high price would be hard for UPS to justify and would take too long to produce a payback. As for DHL, the company is too involved in establishing its express business in the U.S. to become a viable competitor to UPS and FedEx. DHL simply cannot handle another acquisition the size of Exel at this time.

Another large deal in 2004 was TNT's purchase of Wilson Logistics, a Swedish-based forwarder with service to 28 countries. TNT needs a strong freight forwarding capability to fill out its global supply chain management offering and remain competitive with DHL, FedEx and UPS. TNT paid $334m for Wilson. The multiple is 12.8 times EBITDA, which is in the high-normal range for purchase of freight forwarders. Wilson was number 22 on last year's list of top 25 global 3PLs.

The last big deal of the year was UPS's purchase of Menlo Worldwide Forwarding (previously known as Emery Worldwide) for $260m. UPS paid $150m in cash, which the cash-rich company could easily afford. UPS also assumed $110m in debt. The sale of this airfreight business was a blessing for CNF, the former owner of Menlo Worldwide Forwarding. The airfreight operation did not fit well with Menlo's logistics operations and created red ink for years. For UPS, the acquisition fills in several airfreight lanes and creates a presence in the heavyweight airfreight market.

KWE Keeps South African Airways Flying-and Well Fed
Kintetsu World Express (KWE) has served as the fourth-party logistics (4PL) services and operations provider for South African Airways Technical (SAAT) since January 2001. KWE's responsibility is to optimize SAAT's entire supply chain. Specifically, KWE's responsibilities as 4PL provider include the vetting and selection of all service contractors involved with SAAT's supply chain, proactive management of each individual supplier to ensure all service commitments are met, as well as development and implementation of continual supply chain innovation and enhancement.

"KWE has met all responsibilities contained in the SAAT 4PL contract," says John Cunningham, KWE's director of aerospace development. "We've also reduced SAAT's working capital investment, lowered operating costs and provided high levels of customer service to SAAT."

Operating from a KWE-designed 100,000-square-foot warehouse at Johannesburg International Airport, KWE currently manages SAAT's entire inventory of aircraft spares, consisting of more than 170,000 SKUs. KWE handles more than 700,000 picks a year from this distribution facility, with an accuracy factor of 99.8 percent. In addition to responsibility for distribution warehouse operations and global freight forwarding services from more than 700 suppliers, KWE also provides customs brokerage services, transportation, consulting services, IT support, insurance services and other special attendance services to SAAT. On a monthly basis, the KWE Group handles over 2,500 international airfreight shipments on behalf of SAAT through KWE's office network in North America, Asia and Europe.

KWE's service to South African Airways extends beyond global aircraft spares supply chain management, according to Cunningham. KWE also manages all buyer-furnished equipment (BFE) for the manufacture of the new SAA Airbus fleet. That includes transportation of such BFE as aircraft galleys, seats, entertainment systems, carpeting, etc., from global original equipment manufacturers to Airbus facilities in Germany and France.

"Those OEM components are supplied to Airbus for the assembly of new aircraft for the SAA fleet right to the production line," explains Cunningham.

Cunningham says that KWE's 4PL business has been so successful that it will soon create a separate company to provide comprehensive supply chain services and lead logistics management for aerospace and automotive customers.

"This lead logistics business has been great for us and for our customers, who want to focus their efforts on their core business," says Cunningham.
As a further expansion in the business partnership, South African Airways Catering Division recently awarded to KWE a new third-party logistics contract for global in-flight logistics services. Under this three-year contract, KWE is providing logistics management, transportation and warehousing services at 55 locations globally. KWE will manage inventory warehouses at every airport served by SAA, including Atlanta, Amsterdam, Bombay, Cape Town, Durban, Frankfurt, Johannesburg, Hong Kong, JFK, London, Mauritius, Milan, Paris, Perth, Port Elizabeth, Sao Paulo, Zurich and numerous African destinations.

KWE also provides SAA Catering with consumption forecasts to ensure seamless services to SAA Catering global providers. KWE coordinates material shipments from suppliers, provides transportation between the suppliers and the global warehouses, manages and provides warehousing operations services, and transportation from the warehouses to SAA caterers. Completing KWE's end-to-end logistics services program for SAA, KWE will also handle the reverse logistics operations.


Organic Growth
Two thirds of the Top 25 enjoyed substantial revenue growth in their business, with 12 of them increasing more than 20 percent. While each of these companies had its own story, a few major factors contributed to the bottom line for many of these companies:

1. The tremendous increase in outsourcing of manufacturing to China brought many 3PLs new sources of revenue.

2. Chinese outsourcing resulted in double-digit increases in container volumes from Asia to the U.S. and Europe.

3. Rates increased for both ocean containers and airfreight shipments between 10 and 15 percent.

4. Rises in value of the euro, British pound, Swiss franc, yen and other currencies against the U.S. dollar.

5. Capacity-driven rate increases for truckload movements throughout North America that boosted earnings for brokers and transportation management 3PLs.

6. Tighter capacities and increases for assembly, packaging, light manufacturing and other value-added services provided by warehouse logistics providers.

The revenue drivers for some of the individual companies who enjoyed sales growth at the upper end include:

• Kuehne + Nagel's Asia-U.S. traffic increased by about 40 percent. Overall its ocean freight revenue was up 28 percent and its airfreight was up 15 percent.

• Schenker's airfreight revenue climbed 15 percent and its ocean freight 11 percent, mainly from Asia to Europe. Its European trucking business also expanded.

• P&O Nedlloyd's container shipping increased 22 percent.

• DHL grew its entire business organically 13 percent. Its Asian business was the main contributor. The inclusion of DHL Logistics Solutions into the business in 2004 added substantially to the top line.

• UPS's Chinese and Pacific Rim business grew at a double-digit rate. The acquisition of Menlo Worldwide Forwarding was a revenue factor.

• UTi increased its gross revenues by more than 40 percent and net revenues by 30 percent. Airfreight grew by 28 percent and ocean revenue by grew 30 percent.

• Penske Logistics' dedicated contract carriage business surged because it gives shippers predictable capacity.

At Schneider Logistics, where much of its business has been fee-based transportation management, the company is rapidly shifting to a brokerage model and opening offices in key markets throughout the country. With a brokerage operation, the 3PL gains a percentage of the total transportation spend rather than a small administrative fee per shipment. The broker maintains its margins with commissions 10 percent or higher of the total freight costs. As a transportation manager, the 3PLs often receive only a small fee for each shipment, regardless of the actual freight costs. The brokerage model is the best way for non-asset domestic 3PLs to make money.

There has also been an increase in revenue for many of the major 3PLs from lead logistics provider (LLP) services for their large customers. LLPs are the logistics controllers overseeing the operation of carriers, warehouse operators, customs brokers and other 3PLs. To be effective in this role, the lead logistics provider needs outstanding IT capabilities, including web-based capabilities, so that it can manage each logistics participant throughout the supply chain, as well as control inventory and shipments. Armed with this capability and information from each link in the supply chain, the 3PL can make important tradeoffs between inventory, transportation and warehousing.

A skilled 3PL acting in the lead logistics provider role can save its customers tremendous amounts of money where inventory ties up large amounts of cash. For example, sourcing and manufacturing in China ties up an additional six weeks' worth of capital while goods are in transit. It is vital that companies stay on top of where that inventory is at any point in time and be able to make decisions to keep the supply chain flowing. Lead logistics 3PLs have the state-of-the-art systems, the web-based track-and-trace interfaces and the event management capability needed to manage these long, risky supply chains. The next tier of 3PLs below the Top 25 does not yet have these systems or these abilities. A big differentiator between the major-league 3PLs and everyone else is the ability to spend the money and build this systems capability.

The lead logistics role is different from the 4PL. Many experts predicted that 4PLs would become a significant part of 3PL business. 4PLs have evolved as separate companies, usually joint ventures, created to manage logistics and transportation providers. Vector, for example, is a 4PL joint venture that was created by Menlo and General Motors to handle a wide variety of logistics operations for GM. Last year, Vector's revenue was only $18m. The 4PL model has not been an important growth business for the 3PL participants. Another feature is that open-book relationships between the partner and the customer participant tend to minimize the earnings of the 3PL participant. As a lead logistics provider, the 3PL gains revenue because it deals with the total amount of transportation and logistics expenditures.

Ryder Builds on Success at Tier One Automotive Supplier Visteon
When automotive supplier Visteon was spun off from Ford Motor Company in 1997, one of its first logistics decisions was to bring in Ryder as its third-party logistics provider. After all, Ryder had been providing lead logistics management (LLM) services to Ford Motor Company for years and already was familiar with much of the Visteon operation. Ryder continued to provide LLM services at Visteon's North American facilities while it pursued the new 3PL assignment to design, recommend, implement and then maintain Visteon's logistics network. Visteon employs 70,000 people in 25 countries. It now provides parts and components to more than 15 of the world's largest automotive manufacturers. "It just made sense for us," says Charlie Kiesling, who was brought in from Ford to head up Visteon's logistics operations. "We had a positive history and a good working relationship with Ryder. In some cases, they knew more about the logistics end of our business than we did at the time. Ryder knew what had to be done because there had been Ryder people in our plants all along."

Ryder's LLM group at the plant level continued to handle the day-to-day operations of managing material flow and equipment balance while overseeing carrier performance and yard activity. The group also created a transportation database dedicated solely to Visteon. Into that database went information on all Visteon freight movements by lanes, modes, carriers, rate structures, delivery frequencies, and delivery requirements driven by customer inventory needs.

Armed with this data, the Ryder team optimized each freight movement with a particular focus on minimizing transit times and maximizing capacity utilization. Ryder specialists divided the freight flow into categories: full truckload, less-than-truck-load carriers, multi-stop "milk runs," international ocean, and airfreight. Procurement specialists within the group then initiated the process of selecting the best carriers for each freight movement. The procurement team members also identified support service suppliers such as freight forwarders, ground expediting resources, and cross-border transportation providers.

"Some of our plant people were shocked at the amount of money we saved with the incumbent carriers," he says. "Following a bid for freight movement at one of our plants, we saved more than a million dollars without changing the carrier."

Both partners maintain a pulse on a schedule of performance metrics, which are shared on a monthly basis. Ryder tracks 26 metrics, many of them operational in nature, while Visteon charts 22, most of them financial. They continue to work on network optimization by plant, says Kiesling. "We're also working together to get a better handle on forecasting and understanding future transportation costs and what drives them."


In the Future
The growth pattern in 2005 is favorable, but it is likely to be a little different for the major 3PLs. Acquisitions will probably be less of a factor because there are fewer larger 3PLs to be acquired, and the multiples are prohibitively high. Acquisitions will be of small to medium-sized logistics operations that can be bolted on to parent 3PL operations. Organic growth should continue to be strong and remain in the 10 to 11 percent range worldwide with the Asia boom still the main driver.

China has several government-sponsored 3PLs that are growing at a fast clip. The two largest are SinoTrans and Cosco Logistics. These 3PLs are becoming major players with revenues like those of the Top 25. However, these 3PLs are highly focused on the Chinese market and have very limited activity in Europe or North America. These state-owned enterprises are not competitive businesses in the same way as the 3PLs on our list.

Most of the big 3PLs have had small operations in Latin America for a number of years, but the GDP of the entire region is not large. There are other negatives for Latin American 3PL investment such as Argentina's erratic economy, Venezuela's volatile politics and Colombia's lawlessness. Foreign companies are not flocking to Latin America, and there is relatively little attraction for the major 3PLs to invest in larger operations. Brazil and Mexico continue to be the major opportunities.

The Iraq wars have brought more 3PL activity to the Middle East, and it is likely to expand as peace in the region allows more economic growth. For example, EGL Eagle Global Logistics has done well with airfreight charters, especially with its use of huge Anatov freighters into Iraq. Schenker and DHL are also building a growing business in this region, mainly with airfreight services. In addition, several Arab-owned 3PLs have sprung up in Dubai and the United Arab Emirates where warehouse and distribution operations are becoming an important business that serves the entire Persian Gulf region.

Conclusion
The expanding worldwide economy buoyed by the boom in China helped the Top 25 Global 3PLs to strong double-digit growth in 2004. In turn, the large 3PLs are prosperous enough to invest in high-quality systems, processes and logistics networks that have allowed the world's largest companies to implement efficient supply chains that stretch from Asia to North America and Europe. This synergy between the major 3PLs and their customers has been highly beneficial to both sides and is likely to continue. The big 3PLs will continue to get the big opportunities.

Top 25 3PLs

1.Exel plc Berkshire, UK, London: EXL
Exel Americas Westerville, OH, 614-865-8500, Bruce Edwards, CEO
www.exel.com

3PL Revenue: 11.6bn Parent Revenue: 11.6bn

Coverage: Global (Service to over 95% of World GDP)

3PL Assets: 111,000 employees; 1,600 warehouses; 5923 tractors, 7544 trailers

Information Systems: Very good; TMS - i2, RedPrairie, G-Log; WMS - HK Systems. Topex, Insight, RedPrairie

Services: Warehousing and distribution (contract logistics), air and ocean freight forwarding, supply chain consulting, customs brokerage, transportation management, returns management, home delivery

Industry Focus: Consumer goods, retail, computers and electronics, automotive, chemical, healthcare.

Key Customers: Adolph Coors Co., Apple Computer, Compaq, Ford Motor Co., Hewlett-Packard, Home Depot, Honda, Intel, International Paper, Kodak, Maxtor, Miller Brewing, Mitsubishi Corp., Motorola, Nissan, Owens Corning, Pepsi Americas, PPG, Procter & Gamble, SC Johnson, Shell, Sony, Sun Microsystems, Unilever, Wal-Mart, Xerox

Armstrong & Associates' Evaluation: Exel is the world's largest 3PL. It has grown primarily by acquisition, adding Tibbett & Britten recently. Its strengths are in contract logistics and freight forwarding. Exel is one of the world's largest airfreight forwarders. Exel has had difficulty with some of its North American domestic transportation businesses. Some are realigned - others are being closed as Exel's emphasis refocuses on international supply chain management. Exel did generate over $500m in free cash flow last year, but its overall profit margins continue to be small. Exel does a good job of marketing and can supply the whole range of value-added services. It covers all the major verticals. CEO John Allen indicated in early March that no takeover offer for Exel was pending. UPS and DHL had been rumored as possibles.

2.Kuehne + Nagel International AG Schindellegi, Switzerland, SWX: KNIN
Kuehne & Nagel, Inc. Rolf Altorfer, President & CEO,
201-413-5500
www.kuehne-nagel.com

3PL Revenue: 9.3bn Parent Revenue: 9.3bn

Coverage: Global (Service to over 85% of World GDP)

3PL Assets: 23,000 employees; 200+ warehouses

Information Systems: Very good; TMS - CIEL 4000, KN Road, i2; WMS - FOURSiTE, MARC

Services: Ocean and airfreight forwarding, contract logistics, value-added warehousing and distribution, transportation management, customs brokerage, insurance services, supply chain management

Industry Focus: Automotive, pharmaceutical & healthcare, high-technology, industrial goods & chemicals, retail & durables

Key Customers: Nortel, Siemens

Armstrong & Associates' Evaluation: Kuehne + Nagel is the world's largest ocean freight forwarder and one of the top five airfreight carriers. Last year it handled over 1.6 million TEUs and 600,000 tons of airfreight. K+N's contract logistics operations did not grow in 2004, but profitability was restored. K+N has begun its own contract logistics operations in the Far East after its strategic relationship with SembCorp was dissolved. K+N is a transparent company with an emphasis on global logistics solutions.

3.Schenker Essen, Germany; (U.S.) Freeport, NY, 516-377-3000
Heiner Muhrmann, CEO
www.schenkerusa.com

3PL Revenue: 8.9bn Parent Revenue: 30bn

Coverage: Europe, Asia, South America, Africa, North America

3PL Assets: 38,000 employees; 405 warehouses

Information Systems: Good; TMS - SWORD, Procars, ILS; WMS - HTS, SAP, SoLiNET

Services: Air and ocean freight forwarding, customs brokerage, warehousing and distribution, transportation management

Industry Focus: Automotive, computers and electronics, consumer goods, healthcare

Key Customers: BMW, DaimlerChrysler, IBM, Intel, Procter & Gamble, Subaru

Armstrong & Associates' Evaluation: Schenker is a major European player with expanding, but somewhat limited, U.S. presence. The quality of operations is good with the primary emphasis on international logistics. Recent expansion efforts have centered on Russia, Eastern Europe and China. Schenker is owned by Deutsche Bahn, the German railroad, and is part of Stinnes, which has large oil and raw materials operations. European trucking operations account for over half of Schenker revenues. Forwarding operations are 40% and contract logistics is about 9%. Parent company losses aren't helping Schenker in its efforts against major global competitors.

4.DHL Danzas Air & Ocean Basel, Switzerland, Deutsche Post World Net
(U.S.) Plantation, FL, 954-888-7000, Hans Toggweiler, President & CEO
www.us.danzas.com

3PL Revenue: 8.5bn Parent Revenue: 55.9bn

Coverage: Global (Service to 99% of World GDP)

3PL Assets: 13,000 employees

Information Systems: Good; TMS - LOGIS, proprietary; WMS - ELIS

Services: Air and ocean freight forwarding, customs brokerage, transportation management, warehousing and distribution, supply chain consulting

Industry Focus: Electronics, automotive, consumer products, chemicals, industrial

Key Customers: Bell & Howell, Caterpillar, Cole Vision, Gatorade, IBM, John Deere, Rodenstock Lens, Satis Vacuum, Xerox

Armstrong & Associates' Evaluation: DHL lost $654m in the U.S. in 2004. It expects to lose $400m in 2005 and break even in 2006. Overall it will invest $1.2bn in becoming a major competitor of UPS and FedEx. It's a pile of money, but a logical move for one of the major global players. Revenues and profits for DHL's parent, Deutsche Post, were up for the year. Logistics revenues are 15% of the business. No one argues that DHL Danzas is one of the world's best freight forwarders. It is the name-brand leading competitor in China. In North America its best operations are at DHL Logistics, a profitable niche player. The investment in North America will constrain DHL in other markets.

5.P&O Nedlloyd London, United Kingdom, Euronext: Nedlloyd
(Royal P&O Nedlloyd N.V.)
P&O Nedlloyd Ltd. East Rutherford, NJ, 201-896-6200,
Michael J. White, CEO
www.ponl.com

3PL Revenue: 6.7bn Parent Revenue: 6.7bn

Coverage: Europe, Asia, United States

3PL Assets: 10,000 employees; 166 Vessels, 1,000 containers, 2,000 trucks, 6,700 trailers

Information Systems: Good; TMS - LOG-NET

Services: Warehousing and distribution, ocean shipping, supply chain consulting, customs brokerage, port services

Industry Focus/Key Customers: Retail, fast moving consumer goods, industrial, chemicals

Armstrong & Associates' Evaluation: P&O Nedlloyd's logistics businesses (including Gilbert in the U.S.) provide complementary logistics services to support the point-to-point full container load core business. They offer a range of value-added services - from freight management through to sophisticated supply chain management packages. Gilbert's operations involve extensive consolidation/deconsolidation operations, especially in the garment-on-hanger segment. P&O Nedlloyd handled 4 million TEUs in 2004. Average rates per TEU were $1451 for Europe and $1613 for North America. Rates to Asia were $1269.

6.UPS Supply Chain Solutions Atlanta, GA, NYSE: UPS, (United Parcel Service)
Bob Stoffel, President
800-742-5727
www.UPS-SCS.com

3PL Revenue: 5.3bn Parent Revenue: 36bn

Coverage: Global (Service to 99% of World GDP)

3PL Assets: 22,000 employees; 550 warehouses; 1100 tractors, 2425 trailers

Information Systems: Excellent; TMS - i2, Roadnet; WMS - operates all major systems

Services: Air and ocean freight forwarding, customs brokerage, transportation management, warehousing and distribution, supply chain consulting, dedicated contract carriage, trade finance and insurance, equipment leasing, mail services

Industry Focus: Computers and electronics, telecommunications, healthcare, automotive, retail, consumer goods

Key Customers: Alcatel, Birkenstock, Cisco, DaimlerChrysler, Dell, Fabricut, General Motors, Honeywell, Lucent Technologies, Nike, Siemens, Therasense

Armstrong & Associates' Evaluation: The big brown machine moves steadily forward. UPS is the largest U.S.-based 3PL and it continues to spread worldwide, offering services everywhere the package company goes. The acquisition of Menlo Forwarding fills some heavyweight airfreight and geographical gaps and cost little. Not only is UPS gearing up for the promise in China, but it already has 190 employees in Japan. It's only a start and Japan is the world's second-largest economy. Free cash flow, UPS Capital and a lot of options are key to the battles ahead with DHL, FedEx and the other guys.

7.Panalpina Basel, Switzerland
(U.S.) Foster City, CA, 650-653-6600, Peter Merath, Regional CEO
www.panalpina.com

3PL Revenue: 5.3bn Parent Revenue: 5.3bn

Coverage: Europe, Asia, Americas, Africa

3PL Assets: 13,000 employees; 300 warehouses

Information Systems: Good; Emphasis is on internet-native SCM

Services: Air and ocean freight forwarding, transportation management, warehousing and distribution, oil and gas services

Industry Focus: Automotive, computers and electronics, oil and gas, consumer goods, beverages, apparel, healthcare

Key Customers: Chevron, Delphi, Hewlett Packard, IBM, Philips Electronics, Robert Bosch, Shell Chemical, Sun Microsystems

Armstrong & Associates' Evaluation: Panalpina, a major player in the airfreight forwarding market, will have an initial public offering this year. Panalpina has developed good 3PL, project logistics and ocean forwarding operations to grow with its quality airfreight operations. David Beatson, the CEO for North America, recently left in a rift over company direction. The IPO should give Panalpina the extra cash it needs to stay in the race as a key global supply chain manager, but Beatson's departure won't help.

8.TPG/TNT Hoolddorp, Netherlands
TNT Logistics North America Jacksonville, FL, 888-LOGISTX
Jeffrey Hurley, Managing Director
www.tnt.com

3PL Revenue: 4.8bn Parent Revenue: 15.6bn

Coverage: Europe, Americas, Asia

3PL Assets: 45,000 employees; 357 warehouses

Information Systems: Very good; TMS - Vector 21, Reply; WMS - J.D.Edwards, MA, LIS, Reply, MARC

Services: Manufacturing support and subassembly, transportation management, supply chain consulting, dedicated contract carriage, warehousing and distribution, returns management

Industry Focus: Automotive, electronics, rail, tire, consumer goods, utilities, heavy machinery

Key Customers: Andersen Corp., BMW, CSX, DaimlerChrysler, Fiat, Ford, General Motors, Goodyear, Home Depot, Honda, NACCO Materials Handling Group, Sears

Armstrong & Associates' Evaluation: TNT is the world's largest automotive 3PL. It is expanding in other sectors and spreading geographically, primarily with existing customers. Operations in France and Italy have been improved through "standardization." As a result, profit margins have been increased. TNT's acquisition of Wilson Logistics helps fill a need for more freight forwarding ability. TNT is very good at value-added support activities. Its Matrix software suite reflects its range of logistics capabilities, including materials management. Its parent runs the privatized Dutch post office and generates significant free cash flows for investment. Further acquisitions to fill out global supply chain management capabilities are likely.

9.C.H. Robinson Worldwide Eden Prairie, MN; Nasdaq: CHRW
John Wiehoff, CEO, 952-937-8500
www.chrobinson.com

3PL Revenue: 4.3bn Parent Revenue: 4.3bn

Coverage: North America, Europe, Brazil

3PL Assets: 4,800 employees; 100 warehouses and cross-dock affiliates

Information Systems: Very Good; TMS - Express; WMS - High Jump

Services: Freight brokerage, air and ocean freight forwarding, transportation management, warehousing, print logistics

Industry Focus: Technology, food and beverage, retail, paper products and printed materials, agriculture, consumer goods

Key Customers: Anheuser-Busch, AOL, Best Buy, Clorox, Dana Corp, International Paper, Wal-Mart

Armstrong & Associates' Evaluation: C.H. Robinson Logistics continues to be a very profitable, well run company. It has expanded its produce sourcing operations. It is the leader in North American freight brokerage and crafts complete supply chain solutions. It has been very successful in the less-than-truckload market. CHR has recently developed competitive IT transportation and SCM solutions. CHR has relied on organic growth, a follow-the-customer strategy and small purchases for most of its international expansion. A majority of its business is in the food and beverage vertical. Because of the size of market capitalization ($4.5bn), CHR is not a likely takeover candidate. However, a merger with Expeditors International would put together two complementary, financially strong operations. It would solve CHR's need for global SCM and Expeditors need for an expanded U.S. base. Such a merger would create a strong single-source offering.

10.Schneider Logistics Green Bay, WI
Tom Escott, President, 800-525-9358
www.schneiderlogistics.com

3PL Revenue: 3.4bn Parent Revenue: 5bn

Coverage: North America, Europe

3PL Assets: 1,400 employees; 8,750 tractors, 17,450 trailers

Information Systems: Excellent; TMS - SUMIT

Services: Transportation management, supply chain consulting, dedicated contract carriage, freight payment and auditing

Industry Focus: Consumer products and retail, automotive, heavy equipment, computers and electronics, food and beverage, chemicals, healthcare, paper

Key Customers: 3M, Anheuser Busch, Baxter Healthcare, CHN Corp., DaimlerChrysler, Dow Chemical, Fort James, General Motors, Guardian Glass, Honda, Kimberly-Clark, Kroger, Nabisco, Ocean Spray, Thomson Multimedia, TRW, World Kitchen

Armstrong & Associates' Evaluation: Tom Escott has made significant changes to SLI over the last year. The largest is a reemphasis on brokerage and total transportation management with less push on being an IT-based administrator. Schneider is expanding from its core automotive logistics business. The major customer for this business is GMSPO, a $40m account. SLI runs a large freight bill payment service that handles $7bn per year in freight bills. Its dedicated contract carriage, based for the most part on committed capacity rather than exclusive equipment, has made it the nation's largest.

11.Expeditors International of Washington Seattle, WA; Nasdaq: EXPD
Peter Rose, CEO & Chairman, 206-674-3400
www.expeditors.com

3PL Revenue: 3.3bn Parent Revenue: 3.3bn

Coverage: Asia, Americas, Europe

3PL Assets: 9,400 employees; 110 warehouses

Information Systems: Good; TMS - Tradeflow, SNEP, Exp.0

Services: Air freight forwarding, customs brokerage, transportation management, warehousing and distribution, supply chain consulting

Industry Focus: Automotive, electronics, retail, chemicals, healthcare

Key Customers: Ace Hardware, Cisco, General Motors, Merck, Motorola, Philips, Toyota, Trane

Armstrong & Associates' Evaluation: Expeditors net revenue grew 21% and its net profit continued to be one of the best in the business. It is expanding its European and American operations, but its largest growth is in information systems. Expeditors has made a commitment to increasing its communications and technology capabilities to the global supply chain management level. Expeditors maintains its strong commitment to quality personnel. Its business is roughly 40% airfreight forwarding, 40% customs brokerage and 20% ocean forwarding. Its primary traffic lane is between China and the U.S.

12.Penske Logistics Reading, PA
Vince Hartnett, President
610-775-8285
www.penskelogistics.com

3PL Revenue: 3.2bn Parent Revenue: 4.8bn

Coverage: North America, Europe, Brazil

3PL Assets: 8,300 employees; 130 warehouses; 2600 tractors, 5,733 trailers

Information Systems: Very Good; TMS - LMS, i2, proprietary; WMS - EXE, RT Systems, MARC, proprietary

Services: Dedicated contract carriage, transportation management, supply chain consulting, warehousing and distribution, equipment leasing

Industry Focus: Automotive, retail, food, appliances, utilities

Key Customers: Amcor Sunclipse, Carrefour, Ford, General Motors, Hewlett Packard, Iams, International Truck and Engine, Mission Foods, Whirlpool Corp.

Armstrong & Associates' Evaluation: Penske Logistics is one of the top automotive 3PLs. It is a lead logistics provider for Ford and Saturn. Major new business gains last year included the takeover of GM Power Train's cross-dock and transportation management, inbound transportation for Whirlpool's distribution center and a large dedicated operation for CSK. Its European operation continues to grow. Penske's Brazilian operations are automotive- and retail-based. An office has been opened in Shanghai. Penske's primary stockholder, GE Capital, has cleared the bar on some important governmental requirements in the Peoples Republic of China. Penske should benefit and expand quickly.

13.Nippon Express Tokyo, Japan, Tokyo: 9062
Nippon Express U.S.A., Inc. New York, NY, 800-896-9633
Tadaaki Hashimoto, President & CEO
www.nipponexpress.com

3PL Revenue: 3.18bn Parent Revenue: 15.9bn

Coverage: Global (except Africa)

3PL Assets: 15,000 logistics employees; 1,450 service centers and warehouses

Information Systems: Good; TMS -NEWINS; WMS - NEWINS, Rewards

Services: Air and ocean freight forwarding, warehousing and distribution, transportation management, supply chain consulting, customs brokerage

Industry Focus: Automotive, healthcare, computers and electronics, industrial

Key Customers: Apple Computer, Baxter Healthcare, DaimlerChrysler, Honda, IBM, Mitsubishi, Toyota

Armstrong & Associates' Evaluation: Nippon Express covers Japan. Its Pelican Express operation is the largest package operation in Japan. Eighty percent of Nippon revenues are from domestic Japanese operations. Its large, international operations in forwarding and contract logistics are tied to its Japanese base. That base is Nippon's strength and ultimately its Achilles' heel. It has lacked the ability and need to move to broader, less Japanese-centric offerings. Major cultural changes are moving Japan to a new place. The question is "What pace of change will Nippon follow?"

14.NYK Logistics Tokyo, Japan; Tokyo: 9101
(U.S.) Long Beach, CA, 310-518-3096
Saburo Yamagata, CEO & President
www.nyklogistics.com

3PL Revenue: 2.8bn Parent Revenue: 13.2bn

Coverage: Japan, China, Southeast Asia, Americas, Europe

3PL Assets: 11,000 employees; 50 warehouses; 350 vehicles (Europe)

Information Systems: Good; TMS - Via View (Provia Cargo Information System); WMS - Provia, SCM visibility

Services: Freight forwarding, customs brokerage, intermodal transportation, value-added warehousing

Industry Focus: Food and beverage, retail, consumer goods, automotive, high-tech

Key Customers: Cadbury, Clark Shoes, Casio, Hitachi, Johnson & Johnson, Isuzu, Johnson Controls, Sony, Spontex, TESCO, UK Paper, Yamaha

Armstrong & Associates' Evaluation: NYK does not have the kind of strong domestic base in Japan that characterizes Nippon and others. It has to grow in international markets. It recently announced that it wants to become a "logistics integrator," by offering combined services through use of "the world's leading hardware" of ships, trucks and rail, plus software for an electronic international transport system. NYK Logistics started in 2001 by combining purchases and adding intermodal to expanding contract logistics and airfreight operations. Contract logistics and distribution are strong in Europe. Automotive, industrial and retail verticals are emphasized. Its automotive logistics includes roll-on/roll-off, JIT and parts distribution.

15.Eagle Global Logistics Houston, TX; Nasdaq: EAGL,
Jim Crane, President & CEO, 800-888-4949
www.eaglegl.com

3PL Revenue: 2.6bn Parent Revenue: 2.6bn

Coverage: Asia, United States, Europe

3PL Assets: 10,000 employees; 87 warehouses, 400 service centers

Information Systems: Good; TMS - proprietary; WMS - proprietary

Services: Air and ocean freight forwarding, transportation management, warehousing and distribution, customs brokerage, expedited, project management

Industry Focus: Automotive, aerospace, trade shows, telecommunications, computers and electronics, pharmaceuticals, printed materials, oil and gas, apparel and entertainment equipment

Key Customers: Amdahl, Compaq, Neiman Marcus, U.S. Military Traffic Management Command, Visteon Corp.

Armstrong & Associates' Evaluation: EGL has had a major success with its Iraq operations using 40-ton capacity Antonov aircraft. It continues to have large increases in revenues and profitability. About half of the revenue for this heavy weight airfreight specialist is North American-based. Airfreight forwarding is about two-thirds of the business, with ocean and customs brokerage splitting the rest. Trucking linehaul substitution, along with its Iraq success, has contributed significantly to EGL's return to profitability. EGL sold off its 40% ownership in TDS, the automotive 3PL specialist, in September. TDS has struggled to find profitability.

16.BAX Global Irvine, CA
NYSE: BCO (The Brink's Company)
Joseph L. Carnes, President
404-768-2003
www.baxglobal.com

3PL Revenue: 2.4bn Parent Revenue: 4.7bn

Coverage: Asia, North America, United Kingdom

3PL Assets: 10,000 employees; 48 warehouses; 35 aircraft

Information Systems: Very good; TMS - CAPS, i2; WMS - EXE, Ultramain

Services: Airfreight forwarding, transportation management, warehousing and distribution, supply chain consulting, freight payment and auditing, customs brokerage

Industry Focus: Computers and electronics, automotive, aerospace, airlines, healthcare, retail

Key Customers: Airbus, Bombardier, Boeing, Epson, GE Medical Systems, Microsoft, NEC, Philips Consumer Electronics, Subaru

Armstrong & Associates' Evaluation: The core BAX service is time-definite heavy airfreight. Over the last five years, BAX has added more value-added warehousing services, eliminated airplanes and increased its SCM emphasis. Asia-based operations have expanded. More North American traffic has been converted to truckload. The change of corporate direction has brought BAX back to profitability and revenues have grown quickly. International revenues are 58% of total revenue.

17.UTi Worldwide Rancho Dominguez, CA; Nasdaq: UTIW
Roger MacFarlane, CEO, 310-604-3311
www.go2uti.com

3PL Revenue: 2.2bn Parent Revenue: 2.2bn

Coverage: Europe, Africa, Asia, North America

3PL Assets: 10,000 employees; 84 warehouses and logistics centers; 350 tractors, 900 trailers

Information Systems: Good; TMS - eMpower; WMS - eMpower

Services: Air and ocean freight forwarding, customs brokerage, warehousing and distribution

Industry Focus: Chemicals, health and beauty products, apparel, automotive, computers and electronics

Key Customers: Dow Corning, General Motors, Johnson Controls, Owens Corning, Sara Lee, Bristol Meyers Squib

Armstrong & Associates' Evaluation: UTi has grown in 12 years to be a major global freight forwarder/SCM and darling of Wall Street. Growth exceeds 20% per year while gross and net margins remain solid. Airfreight forwarding and contract logistics are each one-third of the business. Customs brokerage and ocean forwarding split the rest. More value-added services and contract logistics will be added this year. UTi now has competitive SCM technology. In Poland and South Africa, the company has developed innovative pharmaceutical supply chain networks. Roger MacFarlane leads by example, emphasizing teamwork, measurement and results. Management structures are fluid and adaptive with a core of 10 key leaders.

18.Caterpillar Logistics Morton, IL
NYSE: CAT, (Caterpillar Inc.)
Mary Bell, CEO
800-240-2126
www.catlogistics.com

3PL Revenue: 2bn Parent Revenue: 30bn

Coverage: 160 countries

3PL Assets: 9,000 employees; 100+ warehouses

Information Systems: Excellent; TMS - CAT TIS, i2; WMS - CLSS, SAP, Facility Logistics, ProAct

Services: Warehousing and distribution, transportation management, logistics consulting

Industry Focus: Automotive, industrial, aerospace, manufacturing, technology, consumer goods, defense, energy

Key Customers: DaimlerChrysler, Delphi, Ford Motor Co., Harley-Davidson, Hyundai, MG Rover, Saab USA, United States Navy

Armstrong & Associates' Evaluation: Cat Logistics' operations parallel its global parent. Vertical emphasis is on automotive and industrial logistics/SCM. Business is split between North America and international. Warehousing, transportation management and other applications are integrated. Cat has good demand and supply forecasting using proprietary probability models. Warehousing is often low-tech emphasizing well-controlled procedures and results. Cat is an i2 transportation management shop. Along with Ford and SAP, it is developing new generation parts SCM software.

19.Kintetsu World Express Tokyo, Japan; Tokyo: KWE
(U.S.) New York, NY, Masa Hattori, President & CEO
800-275-4045
www.kwe.com

3PL Revenue: 1.9bn Parent Revenue: 5.5bn

Coverage: Asia, North America, Europe

3PL Assets: 5,500 employees; 169 warehouses

Information Systems: Good; TMS - CSS; WMS - KWE WMS

Services: Airfreight forwarding, warehousing and distribution, transportation management, customs brokerage

Industry Focus: Automotive, high-tech, medical

Key Customers: Daewoo, Dong Yang Mechatronics, Manco

Armstrong & Associates' Evaluation: Kintetsu's largest operations are in Japan and China. Seventy-nine percent of its business is airfreight based. Ocean and logistics business accounts for 21%. KWE has a host of joint ventures and affiliated companies. Its verticals are high-tech, automotive, medical and other. It has 120 logistics warehouses outside Japan, with 3.4 million square feet. Thirty-five of these are in China. It handles 2.3 million TEUs per year between China and Japan. KWE handles 100,000 airfreight tons per year between Japan and China. The balance is 2/1 outbound from China. KWE's total airfreight tonnage is 150,000 tons. KWE listens to the "Voice of the Customer." It's a quality management success story.

20.Ryder Miami, FL; NYSE: R
Gregory Swienton President & CEO, 888-887-9337
www.ryder.com

3PL Revenue: 1.9bn Parent Revenue: 5.2bn

Coverage: North America

3PL Assets: 12,440 employees; 184 warehouses; 57,255 tractors, 56,462 trailers

Information Systems: Good; TMS - i2; WMS - OPTUM, V3, PkMS

Services: Supply chain consulting, transportation management, warehousing and distribution, dedicated contract carriage, air and ocean freight forwarding, equipment leasing, returns management, freight payment and auditing, insurance

Industry Focus: Automotive, aerospace, industrial, telecommunications, computers and electronics, food and beverage, pharmaceuticals, building materials, utilities, consumer products and retail, newspaper distribution

Key Customers: Applied Materials, CVS, DaimlerChrysler, John Deere, General Motors, Hewlett Packard, Honda, Lucent Technologies, Target, Whirlpool, Xerox

Armstrong & Associates' Evaluation: Ryder was the most recognized brand name in North American logistics. For over two decades it has been one of the largest U.S. dedicated contract carriers, often converting its leasing customers to expanded service. Ryder is still an excellent choice for small, stand-alone dedicated fleets. Ryder has expanded into transportation management, distribution center operation and SCM over the last 15 years. It took a change in direction when Greg Swienton became CEO. Ryder has shed some unprofitable business and operates in the black, but it is not growing. At times, Ryder Logistics has been a takeover target. It covers all the major verticals and appears to be in need of new blood.

21.Menlo Worldwide Redwood City, CA
John Williford, President & CEO; NYSE: CNF
650-596-4000
www.menloworldwide.com

3PL Revenue: 1.3bn Parent Revenue: 3.7bn

Coverage: Americas, Asia, Europe

3PL Assets: 3,600 employees; 55 warehouses; 34 tractors, 165 trailers

Information Systems: Excellent; TMS -TTMS, LMS; WMS - WMS (Provia-modified)

Services: Transportation management, warehousing and distribution, air freight forwarding, customs brokerage, supply chain consulting, returns management and expedited

Industry Focus: Computers and electronics, chemicals, retail, beverage

Key Customers: DaimlerChrysler, Dow Chemical, Electrolux, IBM, Hewlett-Packard, HALO Branded Products, NCR, Nike, Nissan, Nortel Networks, Ricoh Family Group, Sears, Stanley Works, Takata

Armstrong & Associates' Evaluation: Menlo is one of the leading U.S.-based 3PLs. It has solid inbound supply chain management, good automotive logistics and finished goods distribution. Menlo's LMS provides good technology and SCM solutions. Recently, the company redesigned itself to accommodate the sale of its red ink laden freight forwarding affiliate. Vector SCM, its successful joint venture with GM, is one of the few 4PL successes. Parent CNF has a set of strong, profitable, less-than-truckload operations plus Conway Integrated Logistics. UPS talked to CNF about a takeover within the last year.

22.APL Logistics Oakland, CA
Singapore: NOL (Neptune Orient Lines Ltd.)
David Lim, NOL Group President; 800-331-4289
www.apllogistics.com

3PL Revenue: 1.1bn Parent Revenue: 6.5bn

Coverage: Asia, North America, Europe

3PL Assets: 4,500 employees; 155 warehouses; 95 tractors, 229 trailers

Information Systems: Excellent; TMS - i2, proprietary; WMS - Irista, PkMS, proprietary

Services: Ocean and airfreight forwarding, warehousing and distribution, transportation management, dedicated contract carriage, customs brokerage

Industry Focus: Automotive, retail, consumer goods, electronics and government

Key Customers: Baxter Healthcare, Colgate-Palmolive, DaimlerChrysler, General Motors, Ingersoll-Rand, Nike, Panasonic, Philips Electronics, Procter & Gamble, Thomson Multimedia, Toto, Turtle Wax

Armstrong & Associates' Evaluation: APL's major verticals have been retail and automotive. It has its contract logistics operations, which provide the majority of its net revenues, back in the black. APL has good Pacific Rim and China coverage, including an automotive joint venture in China. Its L.A. basin consolidation/deconsolidation operations are good. Links to Singapore are a key part of APL's Asian Success.

23.FedEx Trade Networks/Supply Chain Services Buffalo, NY;
NYSE: FDX, (FedEx Corp.)
Ed Clark, President, 800-222-7657
www.fedex.com

3PL Revenue: 700m Parent Revenue: 22.5bn

Coverage: Global (Service to 99% of World GDP)

3PL Assets: 2,000 employees; 35 warehouses; 298 tractors, 1094 trailers

Information Systems: Excellent; TMS - Optum: SCE Transportation i2; WMS - EXCEED 4000

Services: Domestic and international transportation management, customs brokerage and freight forwarding, supply chain consulting, warehousing and distribution services

Industry Focus: Apparel, automotive, healthcare, computers and electronics, industrial, retail

Key Customers: DaimlerChrysler, DirecTV, Ford Motor Co., GM Power Train, Hewlett-Packard, Mitsubishi, Philips Semiconductor

Armstrong & Associates' Evaluation: Contract logistics, freight forwarding and customs brokerage at FedEx are service businesses whose role is to support FedEx transportation operations. FedEx Trade Networks is a quality international transportation manager. FedEx SCS has lost key business and is no longer a significant third-party logistics competitor. For FedEx, SCM is a value-added part of express, package, less-than-truckload and other operations.

24.SembCorp Logistics Singapore; Singapore Stock Exchange
SembCorp Logistics (USA) Inc. Inglewood, CA,
K. K. Chan, Sr. Vice President, Americas
310-215-3725
www.semblog.com

3PL Revenue: 469m Parent Revenue: 469m

Coverage: Asia

3PL Assets: 2,700 employees; 101 warehouses

Information Systems: Good; TMS - Route Pro, Maxload; OMS - ELIMS

Services: Warehousing and distribution, air and ocean shipping, supply chain management, dangerous goods management, offshore logistics

Industry Focus: Automotive, consumer goods, computers and electronics, healthcare, oil, food and groceries

Key Customers: Abbott Labs, Apple Computer, Bridgestone, Firestone, Colgate-Palmolive, ExxonMobil, Gillette Co., Nestle, Pepsi

Armstrong & Associates' Evaluation: SembCorp is one of Asia's largest 3PLs. It is owned primarily by Temasek and is a product of Singapore's state capitalism model. SembCorp has built a strong base in India and China. The Chinese joint venture, St. Anda, is one of the largest 3PLs in the PRC. SembCorp made windfall profits when it sold its stock and dissolved its strategic alliance with Kuehne + Nagel last year. Its profit margins are expected to suffer going forward. SembCorp is often considered as a takeover target.Its operating territory, cultural insider status and quality of operations look attractive, but the market cap appears too high for buyers.

25.Maersk Logistics Copenhagen, Denmark;
Copenhagen: Maersk A / Maersk B (A. P. Moller-Maersk A/S)
Maersk Logistics USA Inc. Madison, NJ,
Tony Chiarello, President, 973-574-5000
www.maersk-logistics.com

3PL Revenue: 350m Parent Revenue: 25bn

Coverage: Asia, Europe, North America

3PL Assets: 60,000 employees; 15 warehouses

Information Systems: Excellent; TMS - proprietary; WMS - proprietary

Services: Ocean and airfreight forwarding, warehousing and distribution, customs brokerage, supply chain consulting

Industry Focus: Consumer products, retail, sporting goods, apparel and garments, cosmetics and personal care, electronics

Key Customers: Adidas, Federated Stores, Footstar Inc., Home Depot, Hudson's Bay Co., Ikea, Liz Claiborne, Nike, Reebok, Target Corp., Wal-Mart

Armstrong & Associates' Evaluation: Maersk is the world's largest container line. It and parent A.P. Moeller are financially strong, aggressive and successful. Maersk Logistics is an ancillary business that functions primarily in connection with container operations. Maersk Logistics does not report separately and the revenue shown is an estimate. Over half of its business is warehousing and distribution; about one-fifth is forwarding and consolidation. SCM, airfreight forwarding and customs brokerage account for the rest. The majority of revenues are between Asia and North America. About one-third is in Asia-European traffic.


Click here for a PDF of the Top 25 3PLs ranked by revenue.

Want more information about Global and Regional 3PLs? Contact Dick Armstrong at 800-525-3915 or dick@3PLogistics.com.

About Armstrong & Associates: Armstrong & Associates Inc. is a supply-chain management consulting firm specializing in market research, mergers and acquisitions and outsourcing. Armstrong & Associates publishes Who's Who In Logistics? Armstrong's Guide to Global Supply Chain Management. Recent research papers include Warehousing in the United States and Global Logistics Services Providers II. In addition, Armstrong & Associates maintains databases of warehousemen, freight forwarders and third-party logistics and distributing companies. Armstrong & Associates, Inc., 100 Business Park Circle, Suite 202, Stoughton, WI 53589; Ph: 608-873-8929; Fax: 608-873-5509; Web: www.3PLogistics.com.