Supply chain management: 3PL marketplace under pressure

This is the first of a two-part series. The second installment will appear tomorrow, on the eve of her much anticipated SOL presentation at the National Press Club in Washington
By Patrick Burnson, Executive Editor
June 13, 2011 - SCMR Editorial

As she prepares her 22nd annual “State of Logistics” report, supply chain expert, Rosalyn Wilson, provided SCMR with an exclusive forecast for the third-party logistics (3PL) sector.

Wilson, senior business analyst at Delcan Corportation, is also a frequent SCRM contributing blogger.

This is the first of a two-part series. The second installment will appear tomorrow, on the eve of her much anticipated SOL presentation at the National Press Club in Washington.

Supply Chain Management Review: Will 3PLs be more reliant on intermodal options in the coming year as a hedge on energy costs?

Rosalyn Wilson: I am not certain that they will be more reliant on intermodal because of energy costs, but I think there will be a definite increase in intermodal because of tight capacity in the trucking sector.  Intermodal will be the pressure relief valve as volumes grow faster than capacity (both equipment and drivers) can expand. I think energy is going to continue to be very volatile, but as we have seen over the last few days, fuel prices are just as likely to drop downward for no apparent reason, as they are to climb. The sad truth, though, is that each time we go through these cycles, the bottom seems to inch up.

SCMR: Will shippers have fewer modal choices as a consequence?

Wilson: Shippers are more interested in purchasing a transportation service that meets their desired combination of price and delivery specifications, than they are in having their shipments moved by a certain mode. So, to the extent that they can move their freight to meet their requirements, they will continue to be mode neutral. Where I do think there will some reduced choices is in moves that require special equipment, because many carriers are divesting themselves of equipment that does not generate the highest revenues. Compared to the choices shippers have had the last few years, they will feel like their options have decreased because there are fewer carriers competing for their business.

SCMR: What key competitive advantage do “mega” 3PLs have?

Wilson: Generally the largest 3PLs have made significant investment in IT solutions and have strengthened their offerings as the market has required it. They tend to have a wider global reach with stronger contacts or people on the ground to facilitate shipments to and from overseas markets. Most of the mega 3PLs now have strong brand recognition, which often gets them in the door easier and almost guarantees them a slot on RFP shortlists. The mega 3PLs also have volume advantages and arrangements with more carriers, so can often get better rates. They also tend to have a larger degree of vertical integration, offering other services, such as warehousing.

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About the Author

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Patrick Burnson
Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).

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