When General Motors signed over its global logistics activities to a single provider in December 2000, operations managers everywhere could have been excused for thinking they should follow suit. Why not offload the headaches of selecting carriers and consolidating loads? Why not roll up current outsourcing agreements into one convenient, worldwide contract?

The headlines since then have only reinforced those sentiments. The media are full of articles about supply lines stretching far into China. There's been ample coverage of the growing capabilities of the large third-party logistics (3PL) players—and no shortage of news about consolidation among them. The big 3PLs are indeed getting bigger: In 2005 alone, Maersk acquired P&O Nedlloyd, DHL parent Deutsche Post bought Exel, and Deutsche Bahn acquired BAX Global.

But GM's initiative is exceptional, and headlines are no substitute for hard market data. For most shippers whose sourcing, manufacturing, sales, and distribution operations are rapidly dispersing across the globe, logistics efficiency is not simply a question of partnering with one highly capable 3PL.

First, there's the question of whether such an entity actually exists. Although many of the largest 3PLs have expertise and facilities around the world, industry observers advise shippers to revisit their definitions of the term "global."

"Most 3PLs are strong in one geography and weak in others," says Ben Gordon, founder of mergers and acquisitions advisory firm BG Strategic Advisors. "Even the global giants tend to be weak in emerging markets such as Central Asia and the former Soviet Union." Confirms Ken Chay, director of marketing strategy for APL Logistics: "The short answer is that currently no 3PL can credibly claim to be everything to everyone everywhere."

Second, shippers' demands are outstripping 3PLs' efforts to meet them. In racing to build global service networks, 3PLs have responded with everything from acquisitions in other countries to forging alliances with foreign providers to initiating their own operations in new geographies, notes Professor Robert Lieb, supply chain management professor at Northeastern University, in his most recent annual study of the 3PL sector. "The task of designing, building, and effectively operating these broad networks is challenging, to say the least," he says.

A third point: Many shippers lack the skills needed not only to conceive of a global logistics network but also to evaluate, select, manage, and collaborate with a sophisticated 3PL. And few have the insights or the data required to properly compare the benefits of a multinational 3PL's efficiencies of scale with the benefits of working with local logistics providers that have close ties to the shipper's customers.

Of course, that hasn't stopped shippers from wanting the logistics equivalent of the sun, moon, and stars from their 3PLs: broader global services that integrate well across geographies and across capabilities, and at ever-lower costs. Last year was the first time in a decade that logistics and supply chain managers put price ahead of value-added services as the most important criterion for selecting a 3PL, according to 2005 Third-Party Logistics, a report from The Logistics Institute (TLI) at Georgia Institute of Technology, Capgemini, SAP, and DHL. The study notes that over the past decade, "globalization"—characterized by market expansion, new sources of supply, advanced security processes, and supply chains redesigned for greater efficiency—has become a leading factor in driving businesses to use 3PLs. Continued...

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