Changing with the times

By Staff -- Logistics Management, 8/1/2000

Shippers are very fussy customers

when it comes to contract distribution. Third-party logistics (3PL) companies are increasingly called upon to provide a host of services, from handling global distribution to final-product assembly.

A new business for third parties is online retailing. A number of Web retailers now want 3PLs to fulfill customer orders placed over the Internet, and providers have moved quickly to meet that demand. Besides performing warehousing and shipping functions, this new breed of 3PL also handles such nonlogistics tasks as credit-card clearance for online merchants.

In the face of increased customer demands, contract distribution providers have begun looking for economies of scale. No wonder that some leading international 3PLs have decided to join forces. Last year, Deutsche Post, the German postal service, bought third-party provider and global freight forwarder Air Express International (AEI), which Deutsche Post combined with its Danzas subsidiary. The Ocean Group plc, parent of international forwarder and logistics provider MSAS Global Logistics, bought NFC plc, parent of Exel. The merged 3PL is called Exel plc.

Although those mergers may spark a further wave of consolidation this year, our readers feel that at least three 3PLs in the current field deserve honors for excellence. Earning medals this year in our Quest for Quality survey are FedEx Global Logistics, UPS Worldwide Logistics, and DHL Logistics. Both DHL and FedEx were award winners last year.

Our readers score 3PLs on somewhat different criteria than they do carriers. 3PLs are judged on carrier selection/negotiation, order fulfillment, transportation/distribution, inventory management, and logistics information systems. Of those five criteria, respondents attach the most importance to transportation and distribution, which was given a weight of 3.70 for survey tallying purposes. Order fulfillment came next at 3.60, followed by carrier selection/negotiation (3.10), logistics information systsems (2.80), and inventory management (1.80).

This year, the overall ranking for 3PLs dropped from its 1999 score of 33.74 to 32.08. In fact, third parties fared better than last year in just a single category—carrier selection. The score in that category rose from 6.05 last year to 6.55.

The scores for 3PLs slipped in the four other areas. Order fulfillment inched downward from 7.83 to 7.75. The transportation/distribution ranking declined from 8.64 to 8.13. Inventory management likewise went from 4.89 to 3.73. Finally, the score for logistics information systems fell from 6.32 to 5.92.

If those scores reflect current business conditions, shippers have become more demanding of 3PLs, as evidenced by the overall score reduction. Nonetheless, this year's three winners, each of which has deep experience as a transportation provider, have still been able to meet those high expectations.