Company reliance on 3PLs rising

By Staff -- Modern Materials Handling, 3/1/2006

The number of companies relying on third-party logistics (3PL) providers has recently shown a notable increase, according to a survey conducted jointly by Capgemini and the Georgia Institute of Technology.

Between 1996 and 2001, the percentage of 3PL users remained relatively constant among North American respondents to the survey—between 68% and 73%. But from 2002 to 2005, the percentage of North American users has risen to 80%.

In addition, the latest survey shows continued improvements in overall service levels. Moreover, 3PL users continue to view a collaborative partnership approach with their 3PL providers as key to improving performance

The survey also shows that pricing is now the most important attribute when selecting a 3PL provider. A year ago, value-added services was ranked first.

Erik Van Dort, global sector leader of distribution at Capgemini and co-author of the report, says that 3PLs' top concern should be enhancing their technology offerings.

"Nearly 90% of North American 3PL users say that IT is important for 3PL providers," he explains. "And only 40% are pleased with their 3PL's technology services. This is a significant area of concern."

Van Dort continued that 3PLs indicated that they are concerned with customer retention. He mentions that while 3PLs can offer cost savings to new clients in the first two years of the contract, the logistics providers need to provide more value-added services following the two-year period.

"The challenge is to maintain the 3PL relationship with clients and continue to provide strong results," Van Dort asserts. "You don't want clients looking elsewhere."