SIGNPOST # l Outsourcing Is a Process
To give definition and shape to this new dimension of global outsourcing, Inbound Logistics presents a two-fold approach. First, we engage and drill down on empirical data culled from our annual 3PL Market Insight Survey to offer one perspective of the market drivers shaping global outsourcing trends. We then marry this analysis with anecdotal case studies of out- sourcing best practices in action. Second, we capture reader insight from our yearly Top 10 3PL Survey to identify how and why shippers value 3PL partnerships, thus bringing our 3PL industry focus full circle. IL’ s in-depth analysis of the 3PL Zone holds no bounds; neither does outsourcing’s growth potential. The U.S. 3PL market continues to expand by leaps and bounds, totaling $102 billion in revenue in 2006. It’s A Good Life Providers responding to IL ’s 3PL Market Insight Survey validate this trend – more than 80 percent indi- cate at least 10-percent sales growth during the past year, and 36.6 per- cent report growth in excess of 20 percent. These numbers closely match last year’s findings. Profitability still lags behind sales (63.4 percent of 3PLs report revenue growth exceeding 10 percent com- pared to 65 percent last year), a reality attributed to rising operational costs, ongoing consolidation in the segment, and, as one 3PL reports, “increased cost pressures from customers that are also under pressure to reduce supply chain costs.” 3PL profitability overall,
SUBMITTED FOR YOUR APPROVAL… logistics outsourcing is morphing in ways that businesses and their supply chain partners find increasingly difficult to manage on their own. For manufacturers and retailers, the converging forces of globalization and growing domestic consumer demand are pushing supply/demand chains to new sourcing and manufacturing locations while pulling greater volumes of inventory through capacity-choked pipelines that wax and wane at market will. Already dazed by spiraling transportation costs, and at the risk of running too lean, businesses are exploring new ways to reinvent their supply chains to build additional flexibility into their networks. Lacking the scalability and control necessary to handle these initiatives on their own, companies often turn to 3PL partners that can be both visionary and elementary in their approach to managing end-to-end product movement. Shippers seek partners that can take the lead, for example, in finding and engaging contract manufacturers in China, while also helping locate extra capacity stateside. Successful partnerships raise expectations, and 3PLs are relentlessly charged with finding innovative ways to expand their value proposition to customers both new and old. In this emerging scenario, the outsourcer and the logistics intermediary rely on each other to explore and engage new supply chain strategies and services as well as enter new markets – while growing their businesses along the way. Manufacturers and retailers are willing to piggyback on their 3PL’s assets and experience to grow market share and expand their global presence; in turn, service providers are keen to drive solution designs up the chain, organically mining new growth opportunities. Such reciprocity inevitably demands a level of collaboration, imagination, and innovation that takes logistics partnerships beyond the realm of traditional outsourcing to another dimension – one where time and speed are relative, but visibility and accountability are absolute. There’s a signpost up ahead. You’re about to cross into Inbound Logistics ’ 3PL Zone.
64 Inbound Logistics • July 2007
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