Logistics Services (3PL & 4PL) Market Size, Share & COVID-19 Impact Analysis, By Deployment Type (On-Premise and Cloud-Based), By Mode of Transport (Airways, Railways, Roadways, and Waterways), By End Use (Automobiles, Machinery, Apparel & Footwear, Pharmaceutical Products, Retail, Aircraft/Ships/Railways, Electronics, Petrochemicals, Agriculture, Building Materials, and Others) and Regional Forecast, 2023-2030

The global logistics services (3PL & 4PL) market size was valued at USD 1,081.65 billion in 2022. The market is projected to grow from USD 1,176.08 billion in 2023 to USD 2,184.22 billion by 2030, exhibiting a CAGR of 9.25% during the forecast period.

3PL is outsourcing of logistics and supply chain management functions to a third-party provider. These services can include transportation, warehousing, distribution, freight forwarding, and other logistics-related activities. 3PL services offer a wide range of services, allowing businesses to choose specific functions to outsource based on their needs. On the other hand, 4PL involves a higher level of outsourcing, where a company outsources the entire management of its supply chain to a fourth-party provider. This not only includes logistics services but also strategic planning and coordination of multiple 3PL providers. 4PL providers act as strategic partners, aligning logistics strategies with overall business objectives. They take a holistic view of the supply chain, focusing on optimizing the entire logistics ecosystem.

The global logistics services (3PL & 4PL) market growth is attributed to the growing e-commerce industry along with surging demand for last-mile delivery services. The growing technological developments in the logistics industry have brought the real-time monitoring of goods and fleets, which is also supporting market growth. The surging adoption of cloud and analytics platforms to improve logistics performance through real-time feedback is expected to drive the 3PL & 4PL market growth over the forecast period.

COVID-19 IMPACT

Disruption in the Supply Chain Activities Due to the Pandemic Restrictions Hampered the Market Growth

In 2020, the COVID-19 pandemic disrupted transportation and logistics operations around the world. The crisis placed unprecedented pressure on transportation and logistics resources. In addition, shippers faced uncertainty in the movement of goods due to entry and exit restrictions in certain countries. Supply and demand imbalances and a lack of capacity for long-distance and last-mile fulfilment services also disrupted the transportation networks. Limited staffing and reduced working hours further hampered logistics activities. Moreover, due to the COVID-19 pandemic, domestic transport management (DTM) services were affected.

Various countries globally experienced imbalances in the arrival and dispatch of goods, increasing delivery times. Truck traffic was also reduced significantly, and the movement of medium and heavy trucks was restricted. In addition, service providers faced a number of challenges, including transportation disruptions due to the nationwide lockdown and an increased need for storage facilities to store stock that can no longer be sold due to border closures. To address this situation, 3PL and 4PL companies introduced short-term memory identification services. For example, DB Schenker Logistics implemented a service to identify unused storage space. The purpose of this service is to inform customers about warehouse space in 794 locations in 60 countries in order to find additional storage space near the production site. Moreover, road transport was severely affected by the health crisis.

LATEST TRENDS

Growing Focus on Utilizing Cloud-based Services in Logistics Management to Propel Market Growth

A significant technological development has taken place in the logistics industry with the evolution of cloud and Internet of Things (IoT) services. Small businesses are focusing on increasing their technology investments by two times by 2025. In addition, major logistics companies are integrating advanced technologies in their service portfolio to gain competitive advantage in the market. Moreover, the major industry players are emphasizing digital supply chains. Transportation Management System (TMS), such as freight viewer and tracking systems, are also moving to the cloud for greater efficiency.

In addition, many logistics companies are moving their TMS to the cloud and creating a cloud-based TMS. A cloud-based TMS enables automation, seamlessly eliminating manual tasks, streamlining workflows, and reducing additional IT infrastructure costs. It also collects data from various internal and external sources, providing better visibility. The cloud-based TMS can be implemented and accessed from anywhere in the world.

DRIVING FACTORS

Growth in the E-commerce Industry to Support the Market Growth

The e-commerce industry heavily depends on the logistics services to manage the delivery of goods to customers. The increased demand for online services, especially after the pandemic, has contributed to the growth of the logistics sector, given its advantages. This change can be attributed to rapid increase in number of e-commerce customers and cross-border sales, as customers have access to many product variations and can evaluate all suppliers around the world.

With the continued expansion of the e-commerce industry, last-mile delivery services are also on the rise. The main sectors that are expected benefit from last-mile delivery services are pharmaceuticals, food and beverages. Moreover, FMCG products are increasingly focused on last-mile delivery options across all logistics sectors.

Sustainability and Environmental Concerns to Drive the Market Growth

There is an increasing focus on reducing the environmental impact of logistics operations. Companies are adopting sustainable practices such as optimizing transportation routes, using eco-friendly packaging and investing in fuel-efficient vehicles to minimize their carbon footprint. With growing awareness of environmental issues, rising number of regulations and standards related to sustainable logistics practices have been made. Adhering to these regulations not only ensures compliance but also aligns businesses with environmentally conscious stakeholders.

Logistics companies are exploring circular economy principles, aiming to minimize waste and promote the reuse or recycling of materials. This involves designing logistics systems that prioritize sustainability, reduce single-end-use packaging, and encourage the recovery of resources. In addition, emphasis on reverse logistics processes, which involve the return, refurbishment, or recycling of products and packaging, contributes to a more circular and sustainable supply chain. This not only reduces waste but also opens up opportunities for cost savings and revenue generation.

RESTRAINING FACTORS

Less Control Over the Operations as Compared to 2PL Services May Restrain Market Growth

Manufacturing companies and retail sectors must rely on the reliability, competence, and consistency of their logistics service providers, but in this situation, they cannot directly control the process. Manufacturers may not even be able to monitor all warehouse operations, which can put product quality and safety at serious risk. Outsourcing to third-party/fourth-party logistics (3PL/4PL) can result in product, technology, or confidentiality breaches and the exposure of customer data. Thus, the lack of control over logistics services is hindering the market growth for 3PL & 4PL.

SEGMENTATION

By Deployment Type Analysis

On-Premise Segment Leads Owing to More Control and Security as Compared to Cloud Platforms

By deployment type, this market is divided into on-premise and cloud-based.

The on-premise segment holds the largest share in this market globally. Logistics companies often deal with sensitive data related to shipments, inventory, and customer information. On-premise solutions provide a higher level of control and security compared to cloud-based alternatives, addressing concerns about data breaches and unauthorized access. Moreover, some regions and industries have stringent regulations regarding data storage and management. On-premise solutions allow logistics companies to have more direct control over compliance with these regulations, ensuring that they meet the necessary standards without relying on external cloud providers. On-premise logistics systems can be customized to specific business needs. This is crucial for companies with unique processes or requirements that may not be easily accommodated by standardized cloud solutions.

The cloud-based is the second fastest-growing segment in the market in terms of CAGR. Cloud-based solutions provide logistics companies with the ability to scale their operations up or down based on demand fluctuations. This scalability is particularly beneficial in the logistics industry, which often experiences seasonal variations and unexpected surges in demand. This solution facilitates real-time collaboration among different stakeholders in the supply chain. By centralizing data and providing access to authorized users from various locations, cloud solutions enhance visibility and coordination, leading to more responsive and efficient operations. Cloud-based solutions offer 3PL and 4PL professionals access to crucial information and manage operations from anywhere with an internet connection. This is particularly valuable in an industry where mobility and remote management are essential, such as overseeing shipments in transit or coordination with global partners. 

By Mode of Transport Analysis

Affordability and Flexibility in Terms of Last Mile Delivery Services to Drive Roadways Segment Growth

By mode of transport, this market is divided into airways, railways, waterways, and roadways.

The roadways segment holds the largest share in the global logistics services (3PL & 4PL) industry. Road transport is most commonly used for freight transportation because it is cheap, easy, and can provide door-to-door service. Technological advancements and the growing e-commerce industry are anticipated to bolster the growth of the roadways segment during the forecast period. The increasing number of global export and import activities is also another factor expected to drive the growth of the segment during the forecast period.

The waterways segment occupies the second-largest market position. The growing development of infrastructure, such as canals that shorten trade routes, expand trade agreements, and increase consumer disposable income, is increasing global demand for international goods. These factors are poised to enable the waterways segment to maintain its second position throughout the forecast period.

Mail and parcels are transported by airmail and they are also used to quickly import something from one country to another. Moreover, global infrastructure spending on new and existing rail networks continues to increase. As business and trade activities increase, the world's population requires the transportation of people and goods. This scenario requires the government to comprehensively improve the transport network, with airways and railways segments expected to register significant growth during the forecast period.

By End Use Analysis

Growing Demand for Environment-friendly Warehouses to Propel the Petrochemicals Segment Growth

Based on end use, the global market is classified into automobiles, pharmaceutical products, machinery, apparel & footwear, retail, aircraft/ships/railways, electronics, petrochemicals, agriculture, building materials, and others.

The petrochemicals segment held the leading market share in the global logistics services (3PL & 4PL) market in 2022 due to the increasing focus on outsourcing complex transportation, storage, and distribution of petrochemicals across the companies. Petrochemicals are one of the essential components in various industrial processes. Products such as industrial oils, plastics, cleaning products, and tires are made from petrochemicals. The increasing demand for environment-friendly warehouses is another factor expected to drive the growth of the petrochemicals segment during the forecast period.

The others segment is expected to register the second most prominent position in this industry. Other segments include plastics, wood, paper, metals, and glass. Increasing demand from many industries, such as electronics, automotive, aerospace and defense, is poised to help it maintain its second position behind other segments over the forecast period. The increasing industrialization and urbanization in developing countries in the Asia Pacific and the Middle East & Africa region are further slated to drive the segment growth during the forecast period.

REGIONAL INSIGHTS

Rising Middle-class Population to Escalate the Asia Pacific Market Growth

Regionally, the market is divided into Europe, the Asia Pacific, North America, and the rest of the world.

The Asia Pacific dominated the logistics services (3PL & 4PL) market share in 2022. The region also has the highest growth rate compared to other segments. With the growing middle-class population in countries such as India and South Korea, the region is expected to see an increase in the hiring of 3PLs and 4PLs. The rising political tensions between China and other countries are forcing industry participants to invest in major ASEAN countries, including the Philippines, Malaysia, Thailand, and Singapore. In addition, China dominates the market in the region with significant exports to Europe and North America.

North America is the market's second most important region. One of the main factors driving the growth in the region is the growing demand for green logistics to address rising environmental issues. In addition, the expanding e-commerce industry and online shopping trends in countries such as the U.S. and Canada are expected to drive the market growth during the forecast period.

KEY INDUSTRY PLAYERS

Strategic Collaborations with Technology Partners by Leading Players to Boost the Market Competition

The players operating in the market for logistics services are focusing on strategic tie-ups for integrating technologies into their services. For instance, in October 2023, iThink Logistics, a technology-driven logistics startup, announced its collaboration with FedEx, a global express transportation and logistics company, for cross-border shipping. The strategic partnership is aimed at providing shipping solutions and significant cost savings for e-commerce sellers entering international markets, according to a statement from iThink Logistics. This collaboration seeks to address international shipping challenges by combining FedEx's extensive transportation network with the platform's comprehensive SAAS solution.

LIST OF KEY COMPANIES PROFILED:

• C.H. Robinson Worldwide Inc. (U.S.)


• United Parcel Service, Inc. (UPS) (U.S.)


• FedEx Corp. (U.S.)


• Deutsche Post AG (Germany)


• Kuehne+Nagel International AG (Switzerland)


• A.P. Moller – Maersk (Denmark)


• Schenker AG (Germany)


• DSV Solutions (Denmark)


• Nippon Express Holdings, Inc.(Japan)


• Landstar System Holdings, Inc. (U.S.)

KEY INDUSTRY DEVELOPMENTS:

• November 2023, Kuehne+Nagel, one of the leading firms in logistics and transportation, announced its acquisition of a Canadian freight forwarding company, Farrow. The company aims to increase its involvement in the North American logistics and transportation market through this acquisition.


• In August 2023, XPO Inc. announced an acceleration and expansion of its planned terminals and equipment additions to meet the upsurge in demand for logistics operations globally. The company witnessed a 9% increase in its shipment delivery orders based on YoY% for the July 2023.


• In February 2023, FourKites and RCS Logistics joined forces in a collaborative venture to offer RCS customers an all-encompassing service that delivers comprehensive insight into their shipments across various modes of transportation, including ocean, water, air, intermodal, and over-the-road (OTR). By leveraging FourKites' real-time supply chain data, RCS's internal teams, as well as their customers, are gaining the advantage of automatic and real-time visibility into the current status and location of shipments in transit and at rest globally.


• November 2022: A.P. Moller–Maersk unveiled its plan to introduce a fresh ocean shipping service named "Shaheen Express." The service will operate on a rotation basis, covering Mundra, Pipavav, Jebel Ali, Dammam, Jebel Ali again, and returning to Mundra. This rotation establishes a consistent and dependable service for the India-UAE-Saudi Arabia corridor, primarily catering to the growing demand from customers engaged in trade between the Indian and Gulf markets.


• October 2022: DHL Supply Chain broadened its logistics services by unveiling a new suite of solutions dedicated to electronic waste recovery management. This innovative circular supply chain solution aids businesses in responsibly processing, reusing, or recycling used electronic components such as touchscreens, processors, computer modules, and other tech assets. Embracing this suite enables companies to reduce their environmental impact and contribute to the conservation of valuable raw materials.

REPORT COVERAGE

The report provides a detailed analysis of the market and focuses on key aspects such as leading companies, product types, end-users, design, and technology. Besides this, the report offers insights into the market trends and highlights key industry developments. In addition to the factors above, the report encompasses several factors that have contributed to the growth of the market over recent years.

Report Scope & Segmentation