3PL results: Margins narrow, productivity improves

Even as gross margins fell across the freight brokerage industry due to relatively low contract rates and increasing purchased transportation costs, publicly traded 3PLs did more with less. C.H. Robinson, J.B. Hunt’s ICS and Echo Global Logistics all grew volumes while cutting headcount. 

The third quarter may have given us a glimpse of the way forward for the 3PL industry, in which leaner providers rely on their technology to operate efficiently in a dynamic, unpredictable freight environment. 

At the same time, the competitive landscape is changing. In 2015, there were six freight brokerages with gross revenues exceeding $1 billion. Now there are 15 that have achieved a $1 billion revenue run rate, if not full-year revenue. Both shippers and carriers have more insight into market conditions and react faster to cyclical changes, narrowing brokerages’ window to exploit mispriced capacity.

In this report, we round up management teams’ guidance on the outlook for the truckload market, discuss the sources of persistent pressure on gross margins and examine some of the more high-profile technology investments made by 3PLs and their productivity impacts.