3PLs report record profits amid capacity crunch

Dive Brief:

After adding 40 new customers in Q1 2018 in the wake of the trucking boom and capacity crunch, XPO Logistics announced 5,000 new jobs at the company, according to a press release provided to Supply Chain Dive.
XPO isn't the only 3PL benefiting from the capacity crunch in Q1 2018: J.B. Hunt beat revenue estimates for Q1 2018 after big 3PLs like C.H. Robinson, UPS, FedEx and XPO posted record-breaking results for Q4 2017.
The growth of 3PLs is an ongoing trend as more shippers turn to them to negotiate better contracts and rates to skirt the capacity crunch.

Dive Insight:

The trucking capacity crunch is forcing shippers to get creative about how they ship goods, and 3PLs are perfectly poised to help — and turn a profit.

As rates start to rise and shippers struggle to find the capacity on the routes they need, 3PLs can step in and usually save money for the shipper while helping the shipper get a faster route. XPO's 40 new customers shows that strategy is working.

Furthermore, 3PLs are increasingly investing in technology to get faster and better at everything they do for shippers (XPO and UPS are just two prominent examples), fueling the competition among themselves and persuading shippers to use their services instead of figuring out logistics in-house.

JOC.com reported last week that at the Transportation Intermediaries Association (TIA) Capital Ideas Conference, 3PLs were optimistic about current freight conditions as their profit margins continue to increase.

FreightWaves also reported that financial analysts are betting on the freight market, and 3PLs in particular. According to the report, analysts are predicting increases in earnings per share for many 3PLs.

Now as the first 3PLs release their earnings for Q1, the reports jive with the prediction that e-commerce and tight capacity are giving 3PLs a sizeable boost. Many 3PLs saw the boom coming, which accounts for UPS' $12 billion investment in its logistics network, announced earlier this year.

As trucking still shows no sign of peaking, the industry is likely to see some strong earnings results from 3PLs in the coming weeks and months.