State of Logistics: Third-party logistics providers (3PL)

According to the leading analysts in third-party logistics (3PL) space, the concept of “mega cities” in developing countries with above average per capita income rates of growth such as Shanghai, Bangkok, Mumbai, Hanoi, Jakarta, and Sao Paulo will drive consumer demand for finished goods globally.

Today, forward-looking U.S. based 3PLs such as Jacobson, Menlo Worldwide, UPS, and OHL have invested heavily in expanding international operations to meet the new challenges.

“Today, China has about 90 cities with more than 250,000 middle class consumers,” observes Alan Amling, global director for contract logistics marketing at UPS. “By 2020, China will have more than 400 cities with a quarter million middle class residents—and 50 will have more than a million.”

Amling notes that as companies position to capitalize on this demand, their 3PL partners will need to ensure that they have the right infrastructure and expertise in place to facilitate these business strategies.

“A key value that 3PLs can provide shippers as we move forward is market knowledge across multiple regions and industries,” says Amling. “Another value is to help companies take advantage of the growth opportunities they decide to pursue.”

Not only do some global 3PLs have existing infrastructure in global markets, but they also have the in-country expertise to help companies navigate trade regulations, get products to end customers, and provide post-sales services. Should that keep domestic 3PLs from going global? Amling doesn’t think so.

“If the 3PL strategy is to provide an end-to-end experience for shippers, they have to enter this arena,” says Amling. “As supply chains become more global and more complex, we’re seeing a trend toward companies reducing the number of 3PLs they use, but expecting these 3PLs to do more.”

That said, there’s a lot of opportunity in the market, and putting up a global network may not be the right move for all 3PLs. He notes that there will continue to be opportunity for local and regional providers to be integral components of company supply chains. Amling asks: “The real question is with 95 percent of the world’s consumers now outside the U.S., can domestic shippers afford to avoid going global?”