Third-party logistics providers thriving

By Staff -- Modern Materials Handling, 4/1/2007

Business in the third-party logistics (3PL) industry is booming. According to the International Warehouse Logistics Association (IWLA, www.iwla.com), more than half of U.S. and Canadian 3PL providers enjoyed double-digit sales growth last year, and 2007 looks to be nearly as promising.

Two major factors are fueling this growth, according to IWLA president Joel Anderson:

1. Focus on core competencies: As manufacturers strive to become as lean as possible, they choose to focus on their core operations and outsource the rest.

In addition to outsourcing warehousing and transportation, many are also paying 3PLs for such services as assembly, packaging, labeling and customization.

2. Increased international trade: “The lengthening of the supply chain means we need more intermediaries,” says Anderson.

An industry growing this rapidly is bound to experience merger and acquisition activity.

Nearly two-thirds of IWLA members claim to have been approached about a merger opportunity last year.

“Third-party logistics is being recognized as an industry that’s making money,” says Anderson. “It’s developed a track record of strong growth and an expectation of strong growth, and that attracts venture capital.”

Consolidation in the industry is not affecting service levels, however.

“This is still a hyper-competitive world,” says Anderson. The field of competition remains wide, and new 3PLs are still entering the market, he says, so even large 3PLs have to work hard to earn their customers’ continued business.