Shippers Demand Global Third-Party Logistics Services

By Staff -- Logistics Management, 1/1/1998

As U.S. companies become more global in their sourcing and selling, their need to control operations that may be halfway around the world is growing. How can they find reliable overseas management that meets their standards? For more and more companies, third-party logistics is the answer. By working with qualified logistics providers, manufacturers can ensure consistent logistics operations and information management on a national, regional, and even global basis. This trend is strengthening, not only in traditional logistics hubs like Western Europe, but also in areas like Latin America and Southeast Asia, where logistics management is still new.

One third-party logistics provider that has been at the forefront of this trend is UPS Worldwide Logistics. A subsidiary of United Parcel Service, UPS WWL was founded just five years ago to provide global supply-chain solutions to multinational companies. In a recent interview, the managing directors of Worldwide Logistics' Asian, European, and Latin American operations talked about their customers' changing needs and how they are driving the globalization of logistics services.

UPS Worldwide Logistics is expanding rapidly, but its growth is fueled entirely by customer demand, says Scott Rasco, managing director, Asia. "We are not building facilities to support UPS; we are developing custom solutions for multinational customers. For example, we have recently opened operations in five new countries [in Asia] specifically for a multinational customer." Similarly, in Europe, the company now operates half a million square feet of warehouse space, all of which is dedicated to meeting the specific requirements of multinational customers, adds William Caplan, managing director, Europe. "It's not one of our goals to build a pan-European network--our customers don't require that," he says.

WWL does not own all of the facilities it sets up for customers. Many are managed through alliance partners or selected vendors, giving the company the flexibility to respond to customers' changing needs without investing in costly fixed assets. Importantly, customers don't see that as a negative, Caplan says. "We haven't heard from any of our customers any demands to own every bit of the supply chain. What they're paying us to do is manage very complex solutions," he says.

The WWL executives say they are seeing more demand for logistics networks that connect those regions with North America and with each other. For example, says John Maldonado, managing director, Latin America, his group is linking manufacturing in Asia to markets in Brazil and production in Brazil to markets in Europe.

What is the next frontier for global third-party logistics? Maldonado sees Latin America as an area with explosive growth potential for third-party logistics. The multinationals have experience with logistics and outsourcing through their parent companies, but logistics is still a new concept for domestic suppliers. "We find ourselves educating the market on what logistics can do," he says.