Not your father’s 3PL
On December 2nd, a large contingent of senior managers and executives gathered at the Toronto Board of Trade Country Club for the Logistics Quarterly Executive Exchange. The themes of sustainability and risk management resounded throughout the proceedings. Logistics service providers were well represented, with many of North America’s largest and most progressive 3PLs present. Over the course of several insightful sessions and the dialogue for which these Exchanges are known, I came away from the session recognizing that today’s 3PL is not the one of old. It seems that leading 3PLs are no longer the purveyors of heavy lifting, but rather lending their extensive expertise, independent perspective, and — in some cases — capital to create solutions that would otherwise be unavailable to trading partners in the supply chain. Allow me to explain.
Dick Armstrong kicked off the program by describing the size and dynamics of the North American 3PL market. The market is expected to drop in 2009 (for the first time since Armstrong & Associates started tracking the 3PL market in 1994) to US$118 billion, down from US$127 billion in 2008. He expects the market to rebound to US$125 billion in 2010, however. While the outsourced transportation component remains robust, value-added warehousing and distribution has seen marked change in recent years. The sessions that followed Armstrong’s talk seemed to reinforce some of these changes. Time and again, logistics service providers (LSPs) spoke of innovative ways in which their companies were getting actively involved in the planning — as well as the execution — of replenishment strategies between buyers and sellers in the supply chain. This is a dramatic difference from looking toward the service provider as a mere facilitator of the physical burdens associated with storing and transporting inventories. In fact, it appears that 3PLs are able to devise solutions that are not possible in their absence — to create provisions that the two trading partners either do not see, themselves, or cannot otherwise agree to terms. 3PLS are able to leverage their independence to bring forward and/or execute such solutions. In limited cases, the service provider may even assume the inventory risk — looking and acting like conventional distributors in some ways.
In related research with colleagues from The Ohio State University, WHU (Germany) and the Technical University of Berlin, we are observing increasing instances of LSPs stepping up to offer new and innovative solutions. Most of these flashes of innovation have appeared in high-tech supply chains of Asia and fashion supply chains in Europe. Increasingly, North American 3PLs are breaking the mold of heavy lifting and using their wile to devise new means of value creation in assorted verticals. The Executive Exchange only helped to reinforce this perspective. Be on the lookout for the executive videos posted at: http://logisticsquarterly.com/videos/ to see how some of these providers are engaging their brains and their braun to create unique forms of value in the supply chain. Also, please share any instances of true innovation that you see in the logistics landscape.
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Posted: December 13th, 2009 under LQ Insights.
Tags: 3pl
Comment from Steve Wood
Time December 15, 2009 at 12:14 pm
In my experience with 3PL relationships, I have witnessed several occasions where an objective viewpoint on our supply chain allowed ideas to be presented that were not first filtered through the “that’s the way we’ve always done it” paradigm. The result? Initiatives that added precious dollars to the bottom line – on both the customer and 3PL side. This is true partnership at work, and should be welcomed – we CAN be more than the sum of the parts.