9/1/04
Trends
and Services Offered in the 3PL Industry
Written
by:
Scott Hudson, SCRC |
|
The
third party logistics (3PL) provider industry
is expanding as global companies are realizing
the cost savings of outsourcing their logistics
services (1). The 3PL market grew by 6.9 percent
in 2002 even though total United States-based
companies’ logistics costs declined from
$957 billion in 2001 to $910 billion in 2002.
Companies are focusing on their core competencies
and outsourcing other aspects of their business,
such as logistics (1).
Services Offered by 3PL Providers (3)
3PL providers offer an increasing array of logistics
services to their customers. More than 40 percent
of survey respondents indicated that they used
the following services.
| • |
Outbound
transportation |
| • |
Warehousing |
| • |
Inbound
Transportation |
| • |
Freight
Bill Auditing/Payment |
| • |
Customs
Brokerage |
| • |
Freight
Forwarding |
| • |
Customs
Clearance |
Trends in the 3PL Industry (3)
Each year, several logistics studies that reveal
trends in the industry are released. The annual
State of Logistics report (2), the annual Third
Party Logistics Study (3), and the annual Accenture/Northeastern
University 3PL Industry Study (4) reveal trends
across the entire logistics industry as well as
the 3PL industry.
| • |
Seventy-eight
percent of North American companies use 3PL
services. |
| • |
Ninety-four
percent of Western European companies use
3PL services. |
| • |
In
North America, 43 percent of a company’s
logistics dollar is spent on a 3PL service. |
| • |
In
Western Europe, 51 percent of a company’s
logistics dollar is spent on a 3PL service. |
| • |
Using
a 3PL service provider reduces costs on average: |
|
|
Logistics
costs are reduced by 11.8 percent. |
|
|
Logistics
assets are reduced by 24.6 percent. |
|
|
Order
cycle length is reduced from 7.1 days to 3.9
days. |
|
|
Inventory
is reduced by 8.2 percent. |
| • |
Using
a 3PL service provider increases differentiation
in these areas: |
|
|
Flexibility/Special
services |
|
|
Unique
delivery capability |
|
|
Improved
customer service |
|
|
Improved
reaction time to opportunities |
|
|
Use
of better technology |
|
|
Supply
chain management |
Current
3PL Providers (1)
The 3PL marketplace contains many well-known companies
that have logistics divisions. There are also large
3PL providers that focus solely on supply chain
solutions and smaller 3PL companies that exist at
the local and regional level.
3PL
Provider of the Future
The current annual revenues of United States-based
3PL providers are $60 billion (3). Researchers
predict that this number will grow as 3PL providers
increase their service offerings. To improve customer
service, 3PLs must focus on management and relationship
processes, global offerings, comprehensive solutions
for the entire supply chain, and information technology
(3). In the future, the customer will expect more
IT-based services. 3PL providers will invest in
electronic markets, supplier management systems,
and supply chain planning systems to utilize web-based
customer service (3).
Ninety percent of survey respondents say that
logistics represents a strategic, competitive
advantage for their company (3). The respondents
also say, “giving up some control of your
supply chain through a joint client-and-provider
management structure will actually give you more
control of your business (4).” 3PL providers
representing the highest customer service will
offer “integrated, end-to-end solutions that
provide significant financial and operational
performance improvements (3).”
References:
(1) Sullivan, Laurie. 3PLs on the Move –
Manufacturers report favorable results from logistics
outsourcing. EBN, November 23, 2003.
(2) Wilson, Rosalyn and Delaney, Robert. 14th
Annual State of Logistics Report. June 2, 2003.
(3) Langley, John Jr., Allen, Gary, and Tyndall,
Gene. 7th Annual 3PL Study. 2002.
(4) Clyde, Witt. Two Studies Reveal Trends in
3PL Services. Material Handling Management, January
2003.
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