What's ahead for 3PLs?

By Staff -- Modern Materials Handling, 4/1/2000

From the perspective of some, there's nothing but upside for third party logistics (3PLs) providers.

"Economies of scale and process expertise are 3PL core competencies," says Joel Sutherland, vice president of J.B. Hunt Logistics, one of the larger 3PL companies today. And as more and more companies consider outsourcing whatever may not be a core competency, strong growth in 3PL services is a certainty, Sutherland adds.

At the International Warehouse Logistics Association annual meeting, Sutherland cited statistics from Armstrong & Associates that estimate $40 billion was spent on 3PL services in 1998. That number increased 16% to $46 billion last year. Together, warehousing and transportation accounted for two-thirds of those 3PL dollars. The balance was for software and international activities.

Sutherland also says that in 1992 only about 2% of available dollars for distribution and transportation activities were outsourced. By 1998 that number went to 8% and is expected to hit 13% by 2002.

Users of 3PL services got some important benefits for their money, notes Sutherland. He cited a study from Lazard Freres last year that showed 3PLs reduced need for personnel by 20%, reduced transportation and distribution costs by 16%, and improved customer service 14%.

Use of 3PL services is industry dependent. For instance, a University of Tennessee study in 1999 shows that over 80% of the computer industry is using or considering using 3PLs. Similarly, both the consumer goods and retail industries scored over 70%.

In short, says Sutherland, supply chain management is the focus of the future. And 3PLs will be there to stake their claim to improved efficiencies and lower costs for all supply chains.