Contract distribution has witnessed steady growth in the past few years as more and more shippers have turned over their logistics activities to trusted outsiders. Shippers today use third-party logistics companies (3PLs) for warehousing management, transportation management, shipment consolidation, and even final product assembly. And in an age of Internet retailing, third parties are even being asked to handle order fulfillment for products sold on the World Wide Web.

At the same time, contract distribution has become global in scope. As companies expand their operations into new locations worldwide, they've sought out the foreign expertise that contract distribution providers can offer. It's no surprise that U.S.-based third parties are expanding their overseas operations. By the same token, many foreign-based 3PLs have bought companies in the United States to gain access to the world's largest market.

Despite upheaval in the marketplace caused by 3PL mergers and acquisitions, shippers in our survey once again went with the tried and true, bestowing accolades on the same three 3PLs they honored for service quality last year. Earning gold medals again this year were DHL Logistics, UPS Logistics, and FedEx Logistics.

It should be noted that our readers grade 3PLs on 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/distribution, which was given a weight of 3.5 for tallying purposes. Next in importance comes order fulfillment, with an attribute ranking of 3.3, followed by logistics information systems (3.1), carrier selection (3.0), and inventory management (2.1). Those numbers are used to weight the raw scores to produce the final numbers.

This past year, the overall customer satisfaction score for 3PLs shot up from 32.08 to 33.99. Third parties received higher marks in three out of five categories this past year than they did last time around. Their grade for carrier selection and negotiation moved up from 6.55 to 6.68. Their inventory management score climbed from 3.73 to 4.63, and the logistics information systems rating soared from 5.92 to 6.98.

On the other hand, scores fell for order fulfillment and transportation/distribution. The rating for order fulfillment dropped from 7.75 to 7.62, while the transportation/distribution rating dipped slightly, from 8.13 to 8.07.

It will be interesting to see whether 3PLs can maintain their high standing among shippers in a slowing economy. As companies increase their demands, especially for international services and technology, 3PLs will have to work hard to maintain their quality tradition.

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