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3PL news: Many moving parts in today’s 3PL puzzle, say experts and execs


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By Jeff Berman, Group News Editor
July 08, 2010

When it comes to things that can impact supply chain operations and business processes for shippers and logistics and transportation services providers, it is fair to say there is not a shortage of issues to keep an eye on.

That was made particularly clear at the recent eyefortransport 3PL Summit held in Atlanta. At this event, LM had an opportunity to discuss industry trends and issues with myriad 3PLs and industry experts.

One of the biggest top of mind issues at the event was the current fluctuation in diesel prices. While the current situation with the price per gallon of diesel under $3 and oil barrel prices below $80, the current situation is a far cry from the brutal Summer of 2008, but watching fuel prices is still vital for supply chain stakeholders.

“In general we are seeing little blips [in price changes], and the biggest challenge for anyone in the business is that when there are movements in fuel prices we are still vulnerable to movements that have no basis for rationality,” said Art Van Bodegraven, president of Van Bodegraven Associates, in Powell, Ohio.

  “And ultimately we are going to see fuel prices that look like what the doomsday guys were saying a couple of years ago; it is going to happen for no particular reason; it is going to happen and we need to be constantly on top of it.”

What’s more, Van Bodegraven said that it is not going to be easy to model price increases; it is going to happen and needs to be “watched like a hawk.” And among the things making it difficult to model are issues impacting oil and gas like drilling and offshoring. And keeping flexibility with the design of networks is going to be paramount because of these uncertainties, he said.

And Derek Leathers, Chief Operating Officer of Werner Enterprises, said that even with the ongoing uncertainty regarding oil and diesel prices, Werner is planning for “fairly stable” pump prices for the rest of this year.

“We don’t see $4.75 prices per gallon [like in 2008] returning between now and the end of the year,” said Leathers. “At the same time, though, we don’t know where prices are going to go so whatever we can do to be more efficient and burn less fuel is a better approach.” 

Leathers also said that a major trend occurring is unpredictable demand issues, explaining that when faced with tight capacity, small single digit increases in demand can significantly impact shippers ability to move freight.

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As for ways of dealing with vast fluctuation in demand, Leathers said it is imperative for shippers and logistics and transportation service providers you cover their forecasts with some degree of scenario planning, rather than run the risk of getting caught in a pinch, which Leathers said is occurring in the marketplace. 

In order to better manage demand, Leathers said leveraging technology to optimize transportation networks on a load-by-load basis is highly important.

This was echoed by Dick Kane, president and CEO of 3PL provider Kane Is Able.

“Technology is the key to all our businesses and if you take a 3PL perspective our job is to reduce supply chain costs and add value for shippers,” said Kane. “And as we know it is a small margin business so driving the efficiencies that need to be driven to reduce costs—with 50 pct of costs being labor—so whatever we can do to reduce labor costs is helpful.”

Kane said that as the 3PL industry has gotten more sophisticated, more players have been looking to technology as a competitive advantage. Many shippers, he said, are not investing into supply chain technology, as they feel that is part of the services 3PLs should and need to be providing for shippers.

Another issue receiving a fair amount of interest is balancing demand with supply as inventories ramp up, said Nari Viswanathan, vice president of supply chain research, at Boston-based Aberdeen Group.

“There was a situation before where companies cut down their inventories to a very, very low level and now that they are seeing increases in demand,” he said. “And supply chains have become so long, they cannot just increase their inventory and capacity and they are scrambling to find the transportation capacity to meet their demand.”

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).

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