CONTRACT LOGISTICS MARKET SIZE AND SHARE ANALYSIS - GROWTH TRENDS AND FORECASTS (2024-2031)

Contract Logistics Market Size and Trends

The Contract Logistics Market is estimated to be valued at US$ 281.01 Bn in 2024 and is expected to reach US$ 461.27 Bn by 2031, growing at a compound annual growth rate (CAGR) of 7.3% from 2024 to 2031.

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The contract logistics market is expected to witness significant growth during the forecast period. This can be attributed to factors such as increased outsourcing of operations by manufacturing companies, growth of the e-commerce industry, and rising demand for value-added services. Emerging technologies such as automation, robotics and artificial intelligence are enabling logistics companies to enhance efficiency and gain a competitive advantage. Adoption of these technologies is expected to accelerate in the coming years, thereby supporting market growth. However, lack of skilled workforce and rising operating costs may hamper market expansion to some extent.

Market Concentration and Competitive Landscape

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The Growing Role of Supply Chain as a Competitive Advantage

Surging Demand for Customized Supply Chain Solutions: In today's complex global business environment, companies are under immense pressure to provide highly customized products and services to their customers across diverse geographic locations. This has significantly increased the complexity of supply chain operations. Managing disparate distribution centers, fleet requirements, handling returns and compliance with various country-level regulations has become a major headache. Furthermore, customers demand rapid delivery with complete visibility of order status. To address these evolving customer needs while remaining focused on their core operations, many companies are now outsourcing parts of their supply chain management to third-party logistics providers. contract logistics providers have deep expertise in streamlining operations through technological solutions and process optimization. They offer end-to-end customized solutions tailored to the specific industry and business requirements. Over the past decade, there has been a sharp rise in demand for such integrated contract logistics services.

Gaining Competitive Edge with Flexible Asset-Lite Model

Businesses today operate in a highly volatile environment marked by technological disruptions, changing consumer preferences, and trade conflicts. Supply chain resilience has become critical to deal with uncertainties and ensure operational continuity. However, maintaining large fixed assets like warehouses, trucks, handling equipment requires massive capital investments and operating expenses. It also makes the supply chain rigid and less responsive to changes. By partnering with contract logistics providers, companies can maintain a more flexible asset-light model and focus capital on their core offerings. Service providers have access to large modern infrastructure and resources across a wide geographic network. They can dynamically scale up or down operations based on real-time demand through their flexi-staffing models. This way, companies gain the reliability of a robust integrated supply chain without fixing huge assets. Outsourcing non-core logistics activities allows internal resources to be optimized for innovation, resulting in competitive advantages.

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Market Challenges: Skilled Workforce Shortage in the Contract Logistics Market

The contract logistics market faces challenges in terms of lack of skilled workforce. With the rising demand for complex logistic needs from manufacturing and retail industries, there is dearth of talent pool with capabilities of handling advanced technologies like robotics, artificial intelligence etc. Logistics companies find it difficult to hire and retain talent leading to increased operational costs.

Market Opportunities: Expansive Growth Potential in the Contract Logistics Market

The contract logistics market possesses tremendous opportunities for growth and expansion. With continuing globalization and outsourcing trends, third party logistics providers can leverage their expertise and invest in advanced capabilities to gain more business. Growing e-commerce and omni-channel retailing has opened new avenues for logistics players. Integration of new technologies allows them to offer value added services and ensure seamless fulfilment. This will help win new customers and ensure higher revenue streams.

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Insights By Service - Dependable and Cost-Effective Delivery Drives Transportation Share

Transportation accounts for the largest share of the contract logistics market with 42.1% in 2024 owing to its dependability and cost-effectiveness in delivering goods. As contract logistics providers take on greater responsibility for managing supply chains end-to-end, reliable and affordable transportation options are key. Outsourcing transportation to specialized operators allows companies to focus on their core competencies while ensuring products and parts reach customers on time. This is particularly important as supply chains grow more complex with expanding international trade.

Transportation providers offer custom solutions tailored to clients' unique supply chain needs. For perishable goods or time-sensitive deliveries, temperature-controlled trucks, optimized routes, and real-time tracking maximize freshness and minimize delays. Multi-modal options integrating truck, rail, air and ocean transport seamlessly link production facilities globally. Flexible scheduling accommodates variable demand while chartering entire vessel shipments for bulk volumes achieves significant cost savings over less-than-truckload mixes.

Advanced telematics integrate with transportation management software to enhance visibility and efficiency. Real-time load tracking, estimated times of arrival and automated dispatching based on traffic conditions optimize routes on the fly. Automated tendering streamlines processes from order entry to proof of delivery. Machine learning algorithms refine algorithms over time based on historical data to continually improve on-time performance, fuel usage and asset utilization.

The ability of transportation providers to deliver a comprehensive solution tailored to clients' supply chain requirements at competitive rates drives its dominance of the contract logistics market segment. Outsourcing this complex yet critical function frees up capital and management attention for core business priorities.

Insights By Type - Risk Mitigation Drives Insourcing Preference

The insourcing model accounts for a higher share of the contract logistics market with 62.4% in 2024 due to companies' desire to mitigate risks by maintaining direct oversight of certain supply chain activities. For strategically important or profit-driving operations, ownership provides greater control over quality, service levels and intellectual property. Insourcing also ensures adequate capacity and resources are dedicated during business fluctuations with the flexibility to ramp up or down as needed.

Certain activities such as post-production customization, configuration or programming of technology and medical products require specialized facilities, certifications and proprietary production processes. Partnering with expert contract manufacturers that have made the necessary investments in these capabilities onsite maintains oversight of sensitive intellectual property and quality without the upfront capital expenditure.

For seasonal, volatile or immature product lines, insourcing distribution or transportation protects against capacity bottlenecks or service failures during peaks. It also allows companies to devote more attention to new products in early stages before transitioning operations out once mature. Building internal expertise in complex customs clearances or cross-border documentation for globally distributed supply chains likewise reduces compliance risks.

Maintaining ownership and management of certain activities gives companies tighter control over brand reputation and the customer experience in high-value market segments. It ensures the highest standards for food safety, traceability, worker conditions or environmental practices are upheld that outsource partners may not have the same commitment to. The ability to mitigate supply chain risks drives insourcing's prevalence in contract logistics.

Insights By Mode of Transportation- Efficient Last Mile Delivery Boosts Roadways

Road transportation commands the largest share of the contract logistics market with 41.3% in 2024 mode of transportation segment due to its unparalleled versatility and accessibility for delivering goods the final mile. Whether transporting full truckloads between warehouses or coordinating multiple stop routes for less-than-truckload and parcel carriers, optimized road networks maximize service efficiency. Real-time mapping and telematics allow continuously updated ETAs as well as dynamic routing to consolidate deliveries.

Door-to-door connectivity is road transportation’s core advantage over rail, air or ocean transport that require transloading between modes. The accessibility of company vehicles to virtually any address eliminates delays from additional handling. This is particularly important for delivering bulky, oversized or time-sensitive items that would incur sizeable fees on alternate modes. Trucks also accommodate constantly evolving packing and delivery methods from pallets to bins to totes and parcels.

Tailored temperature-controlled vehicles maintain product freshness for grocery, food service and pharmaceutical deliveries with precision monitoring. Refrigerated and dry containers can store entire inventories on wheels. Fleet telematics integrated with warehouse management optimize load building, routing and stop sequencing to minimize mileage and consolidate routes. Machine learning algorithms refine route plans daily based on dynamic factors like traffic.

The last mile's strategic importance for fulfilling customer orders and cultivating ongoing relationships with retailers and consumers underpins road transport's prominence in contract logistics. Its flexible, customized solutions for final-leg connectivity outmatch competitors' efficiency for mission-critical deliveries.

Regional Insights

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North America has established itself as the dominant region with 42.4% market share in 2024 in the global contract logistics market. With a well-developed transportation and warehousing infrastructure, major companies from various industries have their regional headquarters located here. This provides local contract logistics players with scale and recurring business from multinational corporations. The region also has a highly skilled workforce with expertise in complex supply chain requirements of industries such as aerospace, automotive and healthcare. Strong presence of 3PL leaders has ensured standardized services and technological capabilities are consistently delivered across the area.

Meanwhile, Asia Pacific has emerged as the fastest growing market for contract logistics services. Numerous factors are aiding the surge in demand. There is a massive manufacturing shift happening here as OEMs set up factories to cater to domestic and global demand. This has led to development of industrial clusters and special economic zones which new-age 3PL providers are quickly setting up networks in. The region is witnessed growing international trade volumes both for imports and exports. As companies look to consolidate and manage supply chains efficiently, they are increasingly partnering with local providers that understand cultural sensibilities.

Rising wages in China have led to production moves to other Southeast Asian countries such as Vietnam, Indonesia and Thailand. This ongoing manufacturing transition provides opportunities for logistics operators to work with companies through expansion. E-commerce is also ballooning the need for distribution and fulfillment capabilities. While unorganized players historically dominated, organized large scale logistics services are gaining traction. Governments support infrastructure projects that will boost connectivity between cities and ports. Overall, the combination of economic growth, changing trade flows and policy initiatives are powering contract logistics in Asia Pacific to impressive levels. While North America maintains leadership, Asian countries are rapidly enhancing their value proposition.

Market Report Scope

Key Developments

• September 2023: UPS bought MNX, a company based in Long Beach, California, specializing in time-sensitive healthcare logistics, for an undisclosed amount.
• September 2023: CEVA Logistics, a prominent 3PL provider, launched a new carbon-neutral ocean freight service, addressing the rising demand for environmentally friendly logistics solutions.
• August 2023: DHL Supply Chain partnered with Locus Robotics to introduce autonomous mobile robots (AMRs) in warehouse operations across North America, emphasizing the importance of automation in enhancing efficiency and productivity.
• January 2022: Penske and Röhlig Logistics collaborated, adding 55,000 square meters of warehouse space and expanding transportation and e-commerce logistics services in Europe, aiming for further growth.

*Definition: The contract logistics market involves third-party logistics companies that provide logistics and supply chain management services to companies on a contractual basis. These third-party logistics providers store, manage, and transport goods for client companies. They handle inbound and outbound logistics activities like transportation management, warehousing, fulfillment, and distribution. Contract logistics providers help companies improve efficiencies in their supply chain and focus on their core competencies rather than logistics operations.

Market Segmentation

•  Service Insights (Revenue, US$ BN, 2019 - 2031)
  • Transportation
  • Warehousing
  • Distribution
  • Aftermarket Logistics
•  Type  Insights (Revenue, US$ BN, 2019 - 2031)
  • Insourcing
  • Outsourcing
•  Mode Of Transportation Insights (Revenue, US$ BN, 2019 - 2031)
  • Railways
  • Airways
  • Roadways
  • Waterways
•  Industry Vertical Insights (Revenue, US$ BN, 2019 - 2031)
  • Aerospace
  • Automotive
  • Industrial
  • High-tech
  • Pharma and healthcare
  • Others
  • Retail
  • E-Commerce
• Regional Insights (Revenue, US$ BN, 2019 - 2031)
  • North America
    • U.S.
    • Canada
  • Latin America
    • Brazil
    • Argentina
    • Mexico
    • Rest of Latin America
  • Europe
    • Germany
    • U.K.
    • France
    • Italy
    • Russia
    • Rest of Europe
  • Asia Pacific
    • China
    • India
    • Japan
    • Australia
    • South Korea
    • ASEAN
    • Rest of Asia Pacific
  • Middle East & Africa
    • GCC Countries
    • South Africa
    • Rest of Middle East & Africa
• Key Players Insights
  • CJ Logistics Corporation
  • Kuehne Nagel
  • Deutsche Post AG
  • Ryder System, Inc.
  • A.P. Moller - Maersk
  • CEVA LOGISTICS
  • United Parcel Service of America, Inc.
  • YUSEN LOGISTICS CO., LTD.
  • DB Schenker
  • Penske
  • DSV
  • XPO Logistics Inc.
  • LOGISTEED, Ltd.
  • Neovia Logistics Services, LLC.
  • Agility
  • GEODIS
  • Hellmann Worldwide Logistics