Global Logistics and Supply Chain Strategies - April 2008 - (Page 28)

Continuing to Add Ever More to Their Offerings, 3PLs Are—At Your Service Each year Armstrong & Associates Inc. analyzes its research database of relationships between third-party logistics providers and their customers to gain insight into outsourcing trends and overall market dynamics. This report, prepared by Evan Armstrong, president of A&A, is based on a study of 3,334 such partnerships. V alue-added services are what differentiate third-party logistics providers from transportation companies and basic warehousing operations. In fact, the major changes in the industry since 1995 have centered around an increase in the degree and clustering of these services. For instance, several of the largest 3PLs, such as DHL Logistics, Penske Logistics, Ryder System and UTi Worldwide, offer all or most of these services to various customers. The major scale differentiators among 3PLs themselves revolve around supply chain management systems and logistics engineering expertise. Several 3PLs have implemented a fully integrated systems “backbone” to support global transportation and warehouse management operations. These systems offer internet visibility and exception handling capabilities combined with transportation man- agement functionality, which allow for the daily optimization of thousands of shipments across large geographical areas. The same 3PLs can run value-added warehousing operations, perform supply chain network analysis and design, and manage call center and fulfillment operations. Several 3PLs have expanded their global scope to provide significant coverage in those countries which make up the majority of the world’s gross domestic product. Over the next few years, major 3PLs will continue to integrate the pieces they now have. Ten to 12 will offer single-source global solutions with the scale to handle the supply chain needs of large multinational companies. (See Table 1) The size of 3PL accounts varies in net revenue from a few hundred thousand dollars to over $100m. Most major 3PLs steer away from accounts of less than $10m in purchased transportation or dis- tribution management. Smaller accounts with transportation management needs often turn to Landstar Global Logistics, C.H. Robinson or smaller brokeragebased 3PLs, such as BNSF Logistics or Allen Lund. Smaller accounts tend to offer marginally better profitability and change their 3PLs less often. While the Armstrong & Associates database does not include every 3PL customer relationship, it is large enough to identify how and to what extent customers are using 3PL services. Table 2 lists the top Global Fortune 500 3PL customers utilizing 10 or more 3PLs within their supply chain operations. (See Table 2) General Motors ranks fifth in the Global Fortune 500 and first in overall 3PL use with 43 3PL relationships identified, and Ford Motor is second with 36 3PL relationships. CEVA, Menlo, Ryder and Penske Logistics are managing significant parts of 28 APRIL 2008

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Global Logistics and Supply Chain Strategies - April 2008 Contents Editorial GL & SCS Exclusive Fast Forward Up Front Cover Story: Continuing to Add Ever More to Their Offerings, 3PLs Are - At Your Service Over the Long Haul Opinion: Freight Audit Bill Can't Show All Mistakes that Hurt the Bottom Line Opinion: The ‘Good-Freight’ and ‘Bad-Freight’ Trucking Customers Industry Voices

Global Logistics and Supply Chain Strategies - April 2008

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