The market for third-party logistics (3PL) providers continues to grow, driven by the myriad services they offer that can help companies of all sizes manage increasingly complex and global supply chains. Several 3PL organizations are based in or have significant operations within the state of Florida.
The U.S. third-party logistics market is expected to grow from about $150 billion in 2016 to $200 billion by 2022, while the global market will top $1 trillion by 2022, Global Market Insights reports. “The industry is certainly growing, and in a combination of ways,” says Joe Puleo, chief commercial officer, North America, with DHL Supply Chain. Puleo says his firm is seeing a significant increase in first-time outsourcers, as well as growth from existing customers.
operations enables companies to focus on their core competencies while reducing capex, managing inventory, and mitigating risk.” – Arun Hegde, Head of Global Business Development,Global Market Insights
Among the services third-party logistics (3PL) providers can offer are multi-mode transportation and/or transportation management, warehousing, freight consolidation, order fulfillment, and other value-added services, like secondary packaging, says Cliff Otto, chief executive officer with Saddle Creek Logistics Services, based in Lakeland, Fla. Asset-based providers use their own trucks and warehouses, while providers that are non-asset based contract with third-parties to offer services. “A good 3PL should really be able to handle any and all portions of the supply chain, from purchasing to final delivery,” Otto says.
This is key, as many shippers and manufacturers are looking to simplify and minimize the complexity inherent in extended, global supply chains, says Robert Doyle, president of Doyle Distribution and a board member of the International Warehouse Logistics Association. 3PLs that offer a range of services can help their clients remove cost and boost the efficiency of their supply chains.
What’s more, “companies of all sizes can be good candidates for logistics outsourcing,” Otto says. Smaller companies can let the 3PL handle logistics while they focus on marketing, product and channel development, and business expansion. Larger companies can use a 3PL to integrate services and focus on continuous improvement, he adds.
One of the primary drivers behind the 3PL market is a “growing awareness of the financial and performance benefits of working with a 3PL,” says Arun Hegde, head of global business development with Global Market Insights, a Delaware-based research firm. “By outsourcing these operations, companies can manage higher order volumes more economically and ensure increased streamlining.”
The resources 3PLs can offer, such as strategically located facilities, state-of-the-art technology, and industry expertise, enable them to provide “overall logistics cost reductions and service improvements,” says Kerry Byrne, president of Total Quality Logistics (TQL), which operates seven Florida offices. A company with a single warehouse can spread the costs of a warehouse management system, forklifts, and material handling equipment only over its own customer base. A 3PL that makes the same investment can spread the costs over multiple customers.
The expertise residing within many 3PLs can help shippers reduce costs and streamline processes. For instance, Miami-based Ryder System, Inc. has worked with customers to cut in half the time required to bring loads into the United States from Mexico. “The time savings come primarily from a well-managed process and secure supply chain,” says Gene Sevilla, vice president of international supply chain solutions. The 3PL can leverage programs available through U.S. and Mexican Customs. These include the Customs-Trade Partnership Against Terrorism (C-TPAT) and Nuevo Esquema de Empresas Certificadas, (NEEC), Mexico’s equivalent of C-TPAT.
Once the load clears U.S. Customs, a carrier is waiting to move it to its final destination. Absent a well-planned and efficiently executed process, a shipper’s goods may wait anywhere from several hours to a couple of days on either side of the border.
Third-party logistics providers also can help companies ensure compliance with the continued proliferation of regulations, such as the requirement, effective December 2017, that most truckers use electronic logging devices. “The regulations may be secondary to the shipper, but they’re primary for us,” says Patrick O’Malley, vice president and chief commercial officer with Landstar, a provider of integrated transportation management solutions headquartered in Jacksonville, Fla.
Organizations can turn to 3PLs to assist their ecommerce operations. “To compete with the likes of Amazon, companies need to find ways to deliver quickly, cost-effectively and seamlessly. 3PLs can be a valuable resource in this regard,” Otto says. They can offer the supply chain visibility, automation, and distribution networks required to provide seamless service across all channels, he adds. For instance, the software used to manage omni-channel distribution must be able to handle orders ranging from full pallets going to businesses, as well as individual SKU’s destined for consumers.
Along with multinational enterprises, more mid-sized companies are engaging 3PLs, Sevilla says. Globalization plays a role; in 2015, some $147.4 billion in trade flowed through Florida’s airports and seaports, Enterprise Florida reports. As supply chains criss-cross the globe, managing them in-house can become less feasible. A smaller U.S.-based company with operations in Mexico may work with a 3PL to handle warehousing, cross-docking, international transportation and customs clearances, Sevilla says.
“When both parties work hardon the front end to ensure the
cultural ﬁt and establish strong
relationships, it usually resultsin the best outcome.”
– Joe Puleo, Chief Commercial Officer, North America, DHL Supply Chain
While Ryder concentrates its services in North America, when a shipper’s transportation requirements extend to other regions of the world, it will contract with local providers to provide transportation management services, Sevilla says. Ryder then oversees and manages the operations.
Most successful 3PLs have invested heavily in technology to meet their clients’ needs for timely information and end-to-end supply chain visibility, Doyle says. For instance, radio-frequency identification (RFID) allows shippers to track goods down to the item level, Sevilla says. They can hold less in inventory, since they can be confident of the status of goods making their way through the supply chain.