Third Party Logistics

The Changing —and Challenging — Role of 3PL

Outsourced logistics services have shifted into overdrive. Also known as third-party logistics, or 3PL, market research firm Armstrong & Associates tags it as a $161.2 billion industry in the U.S. alone. It is a behemoth of an industry.

According to Armstrong, revenues were up in 2015, thanks to lower fuel prices compared to the previous year. A number of mergers and acquisitions in 2015—totaling more than $100 million—have also driven more of a focus on efficiency and profitability.

“The industry is growing significantly,” said Robert Voltmann, president and CEO of Transportation Intermediaries Association. “Our market report every quarter shows that 3PLs have captured seven percent market share over the past five quarters, directly from the trucking industry.”

That shift is driving significant changes in 3PLs and sectors of logistics that touch them. “Shippers are looking more to 3PL to manage carrier selection, manage risk and manage the supply chain,” Voltmann said.

According to the 2016 Third-Party Logistics Study sponsored by Capgemini Consulting, Penn State, Penske, Korn/Ferry and IndustryWeek, competition within the logistics industry is ramping up due to tightened capacity. The study showed that a large portion of respondents—44 percent—have enhanced relationships to guarantee shipping lanes and on-time shipments; 40 percent have increased rates; and 29 percent said assets have not been available to move shipments when needed. Similarly, 29 percent have engaged with a larger number of 3PLs to get access to gain capacity.

According to the report, “3PLs are working to differentiate themselves by providing sustained value, innovative solutions and information to facilitate data-driven decisions. Information sharing between 3PLs and shippers is increasing, and shippers are more willing to make adjustments to improve carriers’ efficiency and possibly obtain a better rate.”

View full article in MHI Solutions