3PLs Flourish As Manufacturers Stick To What They Do Best

June 10, 2007
Manufacturers are learning sometimes it's better to let somebody else do the work.

The idea behind third-party logistics providers (3PLs) is as basic as wanting to have somebody else do the work for you. Rather than employing and managing a staff of transportation or distribution workers, many manufacturers turn at least a portion of their key logistics tasks to an outside firm that specializes in logistics services. It's all a part of the "core competency" strategy that has manufacturers concentrating on developing and making their products, and then letting an outside firm direct exactly how those products will get to the customer.

Going the 3PL route has become an increasingly popular strategy, as the domestic market for 3PLs has more than doubled since 2000, from $56.6 billion in 2000 to $113.6 billion in 2006, according to supply chain consulting firm Armstrong & Associates Inc. Of that amount, fully one-third is spent by the automotive industry; in fact, General Motors and DaimlerChrysler both employ at least 30 3PLs.

U.S. 3PL Market 1996 To 2006 ($ Billions)

Who Ya Gonna Call For Logistics Help?
Following is a list of some of the major third-party logistics (3PL) providers to the North American marketplace:
A.N. Deringer
APL Logistics
Arnold Logistics
BAX Global
BNSF Logistics
Cardinal Logistics
Cat Logistics
C.H. Robinson
CEVA Logistics
Cornerstone Logistics
CRST Logistics
DHL Logistics
DSC Logistics
EGL Eagle Global Logistics
Expeditors International
Jacobson Companies
J.B. Hunt Dedicated
Kenco Logistics Services
Kuehne + Nagel
Landstar Logistics
LeSaint Logistics
Menlo Worldwide
Meridian IQ
NAL Logistics
Ozburn-Hessey Logistics
Pacer Global Logistics
Penske Logistics
Ryder System
Saddle Creek
Schneider Logistics
Swift Dedicated
Unyson Logistics
UPS Supply Chain Solutions
Werner Dedicated
Source: Armstrong & Associates, Inc. Armstrong & Associates has calculated that 80% of all North American companies and at least 70% in other industrial areas of the world use a 3PL for at least one logistics task. The global 3PL market as a whole stands at $391 billion.

The main reason why manufacturers use a 3PL is to avoid the costs of expanding their distribution systems, according to a survey conducted by market research firm Eyefortransport. Other prevalent reasons for adopting a 3PL are to coordinate warehousing, manufacturing and inventory management; to remain competitive with transportation and distribution capabilities; to accommodate frequent shifts in customer demand; and to avoid losing money and customers due to late shipments.

Among manufacturing companies, high-tech/electronics companies are seen as the sector with the most growth potential for 3PL activity, says Eyefortransport, followed by industrial products manufacturers, consumer packaged goods makers and pharmaceutical/health care companies, respectively.

See Also

About the Author

Dave Blanchard | Senior Director of Content

Focus: Supply Chain

Call: (941) 208-4370

Follow on Twitter @SupplyChainDave

During his career Dave Blanchard has led the editorial management of many of Endeavor Business Media's best-known brands, including IndustryWeekEHS Today, Material Handling & LogisticsLogistics Today, Supply Chain Technology News, and Business Finance. He also serves as senior content director of the annual Safety Leadership Conference. With over 30 years of B2B media experience, Dave literally wrote the book on supply chain management, Supply Chain Management Best Practices (John Wiley & Sons, 2010), which has been translated into several languages and is currently in its second edition. He is a frequent speaker and moderator at major trade shows and conferences, and has won numerous awards for writing and editing. He is a voting member of the jury of the Logistics Hall of Fame, and is a graduate of Northern Illinois University.

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