More competitive than most
Dedicated services now provide specialist support for Third Party Logistics. What makes them different? Richard Gilliard of Renovotec explains
Third party logistics or 3PL – the action of outsourcing logistics and distribution activities to a third party – is a highly competitive and price-sensitive business environment in which the customer demands speed and flexibility, often at short notice.
Above all, 3PL has unique conditions and specialist needs.
It is also now a major supply chain market. Global 3PL revenues were $802 billion in 2016 and are forecast to exceed $962 billion in 2020*. 3PL company mergers and acquisitions are increasing as the industry responds to growth.
According to some analysts 3PL is growing because manufacturers are choosing to concentrate on their core business, sub-contracting those areas where they have less expertise. Growth in e-commerce is also driving 3PL through an increase in demand for fast delivery, efficient inventory management, freight forwarding and individualised shipping time. Globalisation in a number of industry sectors including e-commerce, food and beverage and manufacturing is accelerating the trend, with international freight management expertise now an established 3PL offering. ⱡ
Technology is playing a key role, enabling cost-cutting and improvements in efficiency. 3PL providers must be nimble and proactive, continuously improving their operations to meet market demand for more orders to be completed in less time.
The Third Party Logistics support industry: an emerging force
Cost reduction is high on most 3PL agendas, and is almost always achieved with the help of technology: for example installing scanners on forklift trucks that enable say 500 picks to be completed as against 340 without them. Or the simple installation of handheld device cabinets that automate daily log-in in and log-out, saving time and boosting productivity. 3PL is one area of warehousing and logistics that benefits measurably from creative thinking and proactive planning.
It is quite common for Third Party Logistics to be asked at a moment’s notice to react to a commercial opportunity – typically, a new or expanded 3PL contract – perhaps on a major scale, and with speed. The 3PL company may find this challenging, and might lose out to a competitor as a result.
Fortunately there are now specialist warehousing and logistics services that provide dedicated support for 3PLs, helping them to respond to a change in their customer’s circumstances or react to an all-new opportunity.
The situation – the opportunity – might demand multiple additional trucks on the road, plus a large team of additional warehouse employees. A newly acquired warehouse might require the very rapid installation of a wireless network, access points and other infrastructure, with multiple truck mounts and dozens of handheld devices ready for use the following day. An organised 3PL support service provider can provide these dedicated 3PL services and will hold a range of devices in stock, in readiness.
A scenario of the kind described above could be potentially disruptive (or at worst, damaging) for the 3PL’s business given the need to service its other customers: but a 3PL support service, whether short or long term makes response viable.
Other 3PL support services include rental options that do away with the need for capital investment, to support typically shorter, finite 3PL contracts.
When buying new hardware the support company will have the purchasing power and knowledge to get the best deal for the 3PL organisation.
Other elements of any best-in-class 3PL support service should include guaranteed 48 hour response to any tender request, in support of a 3PL’s own response-to-tender; network site survey completion within 72 hours; a one-stop return materials authorisation (RMA) process; and next-day product delivery, made possible because the 3PL support company holds stock.
Dedicated Third Party Logistics support services of this kind are still quite new in the supply chain, but are here to stay because they meet a need. They are good for 3PL because they enable flexibility and enhance competitiveness in an industry that thrives on both.Find Out More
*Consultancy Armstrong & Associates, cited by Logistics Management and Supply Chain Management Review executive editor Patrick Burnson – firstname.lastname@example.org ⱡ https://www.gminsights.com/blogs/third-party-logistics-3PL-industry-trends