What's the right role for global 3PLs? (page 4)

-- Logistics Management, 2/1/2006

Page 4 of 4

Roles, Rules are Changing

So what is the right role for the global 3PLs? The superficial answer is that the largest multinationals can add value wherever their process specialization is useful and wherever that specialization is truly consistent worldwide. It's widely agreed that the capabilities of the largest providers are improving rapidly, and it's fair to expect that their role in the logistics mix will increase. In particular, there is growing demand for their expertise as managers of smaller, regional players. "Five years ago, it wouldn't have been acceptable to have logistics partnerships with other regional providers and call it a 'global solution.' Today, it's often essential for legal or financial reasons to have a single, unified level of control and accountability across the global supply chain," says David Mabon, senior vice president of sales and communications at Kuehne + Nagel's U.S. logistics unit.

But the reality is that many large 3PLs are struggling to meet their profitability goals—witness TNT's recent announcement that it will sell its logistics business. Integration of recent acquisitions remains a distraction for other 3PLs' management teams. And nobody has fully cracked the code on supply chain visibility, RFID initiatives notwithstanding. As such, regionals and local 3PLs will continue to play crucial roles, especially where their close relationships with carriers or customs brokers yield cost savings and process efficiencies.

Perhaps the most pressing need of all is for logistics managers to re-evaluate their own roles. Hand-offs to third-party providers—regional or global—don't relieve them of overall responsibility for cost control and improved asset utilization. Indeed, it could be argued that broader 3PL relationships instead create expectations of strategic gains, such as faster new-product introductions and new market opportunities.

That may be the exception now, but exceptions have a habit of turning into rules.

Author Information

John Kerr frequently writes on supply chain and logistics strategies.

A Stronger Case for 4PLs?

As the largest third-party logistics providers (3PLs) expand their capabilities across service areas and geographies, they are better positioned to act as lead logistics providers, or 4PLs. That is the kind of relationship that General Motors forged with CNF in 2000, creating the Vector SCM joint venture that eventually will manage all of GM's inbound and outbound logistics activities.

Shippers are gaining confidence that more of their logistics providers are suited to 4PL roles. More than 70 percent of the respondents to the most recent survey on third-party logistics conducted by The Logistics Institute and Capgemini, in collaboration with SAP and DHL, believe that large 3PLs can add value by managing other 3PLs and by helping to integrate their supply chains. That's up from 57 percent who felt similarly in 2004.

However, few shippers believe it's a straight line from 3PL to 4PL status. Their main reservation is that 3PL providers have yet to provide convincing evidence that they can deliver value beyond their core services.

To read the full report, go to www.3plstudy.com.

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