CHECKINGIN
Vol. 27, No. 7 July 2007 THE MAGAZINE FOR DEMAND-DRIVEN LOGISTICS www.inboundlogistics.com
STAFF
Keith G. Biondo publisher@inboundlogistics.com Felecia J. Stratton editor@inboundlogistics.com Amy Roach Partridge apartridge@inboundlogistics.com
PUBLISHER
by Keith Biondo | Publisher
EDITOR
ASSISTANT MANAGING EDITOR
A h, conventional wisdom. Not long ago, observers of the third-party logistics segment predicted the demise of many Tier II and Tier III 3PLs. Smaller players could not keep up with the increasing complex- ity required to serve customer demands, they said. In addition, they predicted merger and acquisition activity would create a pool of large 3PLs dominating the segment and forcing smaller players out of the game. Neither has happened. Contradicting what observers expected, mid-size brokers, warehouses, and even carriers successfully evolved into logistics solutions providers, and have not only survived, but are prospering. Why? Here are five reasons. 1. The economy stays strong. We are experiencing the “greatest global eco- nomic boom in history,” according to a recent Fortune article. That economic expansion creates opportunities for all 3PLs. And, even when economies cool down, companies look to 3PLs to help them slash inventory. 2. Smaller players have capacity. As big as the national players are, they repre- sent only a small portion of distribution center capacity in the United States. 3. Companies spend more money on 3PL services. In the United States, 3PL users currently direct 48 percent of total logistics expenditures to outsourc- ing, which is lower than the overall global average of 55 percent, according to a Georgia Institute of Technology study. If the United States follows the global trend, the market will continue to grow domestically. In fact, IL’s lat- est research shows continuing growth in the size of the 3PL market ( see page 99 for details ). 4. The outsourcing concept enjoys growing acceptance, for at least some of today’s transportation and logistics challenges. 5. Inbound logistics creates opportunity. Domestic 3PLs are benefiting from the growth in what ProLogis calls “import-driven warehousing” and we call inbound logistics. Following an inbound logistics philosophy creates over- all savings, scalability, and growth opportunities. But along with that created value comes greater logistics complexity, which 3PLs can – and do – help disentangle. Tier II and smaller 3PLs also spur growth by creating market sub-segments that the larger logistics players do not or cannot excel at. One example is in the financial niche, where some 3PLs act as banks for their customers for lon- ger periods than the more financially sophisticated players. By paying carriers quickly when shippers pay slowly, they are able to command capacity when it is scarce. Customers appreciate the float, and that makes them loyal. Bottom line: if the demand is there, 3PLs–large, mid-size, or small–will continue to grow. For details, check out our expanded 3PL coverage starting on page 63. ■ Mid-Size 3PLs: What Does Not Kill You Makes You Stronger
Joseph O’Reilly
EUROPEAN EDITOR
Mark Rowan
EDITORIAL ASSISTANT
Merrill Douglas John Edwards Lisa Harrington Amanda Loudin Deborah Ruriani Lisa Terry
CONTRIBUTING EDITORS
Michael Murphy mmurphy@inboundlogistics.com
CREATIVE DIRECTOR
Shawn Kelloway production@inboundlogistics.com Sonia Casiano scasiano@inboundlogistics.com
PRODUCTION/DESIGN ASSISTANT
PUBLICATION MANAGER
Carolyn Smolin
CIRCULATION DIRECTOR
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10 Inbound Logistics • July 2007
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