Transport & Logistics

Every business has something that needs to be sent somewhere – whether it’s confidential paperwork or pallets of goods or liquids that must be refrigerated. Finding suppliers to fill various needs can be daunting when it’s not your core competency. IBISWorld has research to guide your decision-making when it comes to transportation and logistics.

This graphic shows next year’s average forecast price change for the transportation & logistics category as a whole, along with a selection of specific sub - categories of transportation & logistics products and services. Click into each sub - category to see a buying guide that will get you up to speed quickly on the product or service.


CATEGORY FORECAST     SUB-CATEGORY PRICE FORECAST  
Transport & Logistics
1.36%
  General Warehousing & Storage
1.3%
Letter & Parcel Delivery Services
2.4%
Local Freight Trucking Services
0.2%
National Trucking Services
1.9%
Third-Party Logistics Services
1%

KEY   <0.1% 0.1% - 1% 1.1% - 2% 2.1% - 3% >3%
See All Categories          

Buyers of services in the transportation and logistics sector have benefited from favorable purchasing conditions in recent years. Low fuel prices and highly competitive markets have allowed buyers to secure reasonable prices and favorable contract terms. However, as fuel prices begin to rise and higher regulations drive vendors’ costs up, buyers can expect to lose some of their market leverage in the coming years.

Risky Supply Chain

Petroleum Producers

  • Highest risk derived from upstream petroleum refiners, wholesalers and bulk stations
  • Unpredictable gasoline and diesel prices increase the risk that a supply contract may shift suddenly
  • Unstable fuel prices often cause high volatility in the price of transportation and logistics services, although price adjustments are often passed through fuel surcharges

    Key Takeaway: Buyers should maintain a list of vetted suppliers in case their preferred vendor experiences a supply chain disruption or their current contract becomes cost inefficient


Equipment Manufacturers

  • Upstream steel and aluminum producers face high risks stemming from volatile product prices and rising import penetration from cheap, foreign producers
  • Car, truck and bus manufacturers pass this risk through to transportation companies and category buyers
  • Depreciable assets are purchased infrequently and many transportation companies only purchase new vehicles or vessels when fuel prices are exceptionally high
  • Some suppliers will face higher equipment costs in the coming years. For instance, California’s environmental regulations require more fuel efficient trucks by 2023, and all National Trucking Service providers must have an electronic logging device (ELD) by December of 2017

    Key Takeaway: Buyers should budget for base rate price increases in some transportation markets as vehicle and equipment costs increase during the next three years


Specialization

On average, transportation services have a low level of specialization, with most carriers offering minimal customization to buyers (other than the route over which cargo is carried). Logistics services, on the other hand, often have a higher level of specialization, because suppliers must work with a complex network of vendors to provide customized services for each buyer’s shipping needs. Therefore, logistics services are generally sourced through long-term contracts, as vendors often require a few months to become familiar with the buyer’s operational requirements. Buying lead time is longer for logistics services than for cargo transportation services.


Key Takeaway: Buyers should seek transactional relationships with most transportation service providers. They should approach more specialized markets, including Third-Party Logistics Services and Transportation Management Systems, using a collaborative, long-term relationship style.


Recent Price Trends

  • Transportation and logistics service prices have declined during the past three years as suppliers’ fuel costs have fallen
  • Most transportation services providers charge a base rate plus a fuel surcharge
  • Service providers are not able to profit from this fuel surcharge, so the savings from lower fuel costs are passed directly onto buyers in the form of reduced prices


Outlook

As fuel prices return to growth slowly over the next three years, service providers are expected to increase their prices in order to cover costs. At the same time, higher depreciation costs for some markets will cause shipping base rates to rise in addition to fuel surcharges. Buyers should therefore seek to lock in current shipping rates through long-term contracts, if their needs are significant. However, transportation and logistics contracts often still allow for the adjustment of fuel surcharges, so buyers can expect to have less buying power in the coming years.

 

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