There are several advantages to using a third-party logistics (3PL) company compared to running your own logistics and supply chain network:

Expertise: A 3PL company has specialized expertise in logistics and supply chain management, including transportation, warehousing, and inventory management. They have knowledge of best practices and can provide valuable advice and guidance.

Cost savings: Outsourcing to a 3PL company can be more cost-effective than building and maintaining your own logistics network. 3PLs have economies of scale, and they can negotiate better rates with carriers, warehouses, and other service providers.

Flexibility: A 3PL company can provide flexibility in managing your logistics and supply chain. They can adjust their services to meet your changing business needs, such as seasonal demand fluctuations or sudden changes in shipping requirements.

Scalability: A 3PL company can scale their operations to match your business growth, without requiring you to invest in additional infrastructure, resources, or personnel.

Focus on core competencies: Outsourcing logistics and supply chain management to a 3PL company allows you to focus on your core competencies and strategic goals, rather than being bogged down by operational details.

Access to technology: Many 3PL companies offer advanced technology platforms and tools, such as transportation management systems (TMS), warehouse management systems (WMS), and real-time visibility dashboards. These technologies can improve efficiency, reduce costs, and provide better visibility into your supply chain.

Risk mitigation: A 3PL company can help mitigate risks in your supply chain, such as loss, damage, theft, or delays. They can provide insurance, security measures, and contingency plans to ensure your products are safe and secure throughout the supply chain.

Regenerate response

This was revealed during an interview with Jim Cramer on Mad Money

At this time they do not have any interest in selling their LTL business, they are just looking to sell their North American, Europe, Tranportation and Logistics.

XPO Logistics CEO Bradley Jacobs believes Wall Street is undervaluing the global logistics company and the four segments will stand better alone as smaller pure plays.

With the continued dominance of Amazon and the ongoing changes in the Logistics Industry it is interesting to see a giant like XPO looking to break up in order to maximize shareholder value.

Many people in the market for outsourced logistics services are looking for more information on makes a great 3PL. The first thing for you need to get a firm understanding of is what a 3PL is and what they are not. Then take a deep look at what you are truly looking for in support of your supply chain. Maybe you think you are looking for a 3PL but what your organization needs is a 4th party logistics company.

What kind of 3PL services do you need?
In the beginning you need to do your homework to understand what services you truly looking for. How many pallets of product are you looking to store? How often will the product leave the warehouse or “turn” as it is known? There will be certain 3PLs that are stronger for larger operations vs. lower volume engagements. Also, once you get estimates seriously look at whether you could run the fulfillment operations yourself cost efficiently.

What kind of logistics vendor will your company work best with?
If you are a smaller operator many times (but not always) the largest 3pl companies may not give you the attention and support that you are looking for. Take a look at the types of companies that the 3pl works for to get an understanding how your business will fit into this vendors overall client portfolio. As you get further into the selector process ask for references from companies they work with similar to yours. There are the obvious questions like is your product perishable or require refrigeration (If so there are companies that specialize in this segment) Do you have strict security requirements? (typical of consumer electronics and other segments, if so there are 3PLs who will have stronger capabilities than others)

What technologies do they use?
How do you use technology today as part of your supply chain. Are you already using software solutions that you need support/compatibility for. Are you looking to get upgraded logistics technology as part of your partnership or will basic EDI/RF technology meet your needs?

What kind of cultural fit is there?
What is your company culture, ex: established organization with ingrained process, fast paced startup? When talking with prospective 3PL’s you want to get a sense for whether these are the type of people that will work best for your company and whether their working styles are compatible.

How does customer service and communication factor into these offerings?
What does their 3PL customer service offering look like? Are you looking for the 3PL to provide white label customer service and speak directly with your customer base? If so you need to look for a company who specializes in this. What level of communication are you looking for with your vendor? Some vendors work to rely more on technology over classic communication which can work very well if this is aligned with your organizational culture, but be sure to be upfront about what you are looking to achieve to find the best fit for your company.

Like many complex business to business services it is never easy to say what makes a good 3PL because it really does vary based on your specific needs. But there are underlying themes like technology, customer service, culture that once you understand where they fit into your priorities you will get a better feel for what companies will be a good fit and which would work better for companies with different logistics requirements.

Need help finding the right logistics provider for you? Get help prescreening logistics vendors and get competitive quotes here

As logistics professionals we typically deal with China significantly more than most other professions. China has been, and will continue to be, one of the most important traders in the world. Therefore, it is of utmost importance that we make sure that our communications run smoothly in order to secure the most efficient logistics processes. “How difficult can that be?” – you might be asking. Good communications with China are not difficult, considering that there are thousands of emails and calls daily between the West and China. However, there are key factors that are important to understand about the Chinese culture, so we can make the most out of our communications and relationships.

First of all, we have to understand that there is a big difference in the thinking structure of our Eastern stakeholders and us – the Westerners. There are studies about dialectical thinking, which explain those differences in thinking structures. A particular study by Nisbett in The Geography of Thought, states that the dialectical thinking for Westerners involves having a contradiction resolution as the goal, while for the Chinese the goal is to use contradiction to understand the relation among situations or things, and to integrate oppositions.  As an example in the Western world, we typically view contracts in a much more rigid light, whereas in China for many a contract is seen as just as the beginning of a business partnership and subject to interpretation.

Also when communicating in English always work to keep communications simple and effective and not assume that everyone is 100% fluent. The most important recommendation is to keep your messages structured, and use bullet points and lists. Instead of three questions in a paragraph, send three paragraphs, and mark each one as an item.  Then, it becomes easier for everyone to read and to answer each question. It is a simple way to start but an effective one.

It is also highly recommended that if you are going to partner with businesses in China that you schedule regular in person visits (at least quarterly) to vendors and 3PL providers in China. As with all business there is never a substitute for in person meetings to build relationships and ensuring adherence and adoption of policies.

Logistics in China is only going to continue to grow in importance. Over the next 10 years as we begin to see China’s economy shift away from manufacturing and into a service based economy, a growing upwardly mobile middle class will create countless opportunities for those specializing in supply chain management and logistics.

For years industry insiders have predicted that the logistics sector is on the brink of commoditization, relegating 3PL companies to mainly short-term contracts for execution based services at the lowest price. While this is a trend happening in many industries and certainly the logistics industry is seeing some of this, the reality is more complex. Drastic shifts in the business landscape and technology have led more companies than ever to outsource their logistics activities and the services and expectations of logistics service providers in warehousing, trucking, and integrated providers have never been higher.

According to recent estimates by Armstrong and Associates, the cost of logistics services accounts for 8.5% of United States GDP, 9.2% for Europe, 11% of South America and more than 17% for Greater China.

Third Party Logistics revenue is estimated to increase 6.4% from 2013-2016.

The biggest industries projected to be key drivers of this growth:

• Industrial- 10.6%
• Healthcare – 8.9%
• Technology – 8.6%
• Foods/Grocery – 8.2%

With the dynamic nature of logistics and the increasing needs of organizations to manage their supply chains, the 3PL industry seems poised to continue its expansion.

The 16th annual 3PL industry study was released at this year’s CSCMP conference in Philadelphia. With more than 1600 shippers and 700 representatives from 3PL companies this years study covers the current state of the third party logistics market, emerging logistics markets, high tech/electronic, talent management and strategic assessment.

Key findings are that 64% of shippers from trucking, to rail, and ocean are increasing their use of 3PL services and an average of 42% of total logistics expenditures are spent on logistics outsourcing. At the same time, 24% of respondents reported a return to insourcing 3PL solutions and 58% report they are reducing or consolidating the number of 3PLs they use. Today’s 3PL marketplace is experiencing significant change and established 3PLs are adjusting their business models to provide greater value to customers. The report still shows a desire among shippers for third party logistics providers to improve their IT and technology offering to allow better visibility into inventory.

Current state of the market:

“While 69% of shipper respondents are satisfied with the openness, transparency, and communication received from 3PLs, only 62% of 3PLs are satisfied with these characteristics in their relationships with customers.”

Electronics:

“74% of electronics companies cite visibility as the top service they would like to see from 3PLs, no matter the size or location of the shipper.”

Talent Management: 

“41% of shippers and 36% of 3PLs are concerned or significantly concerned that their organization has a number of stars, but their culture/history has not encouraged them to work collaboratively as a team (team effectiveness).”

The 2012 3PL study was supported by:

• Capgemini
• Penn State
• Panalpina
• Heidrick & Struggles
• Eyefortransport

Logistics Management recently spoke with Dick Armstrong of logistics consulting firm, Armstrong & Associates, who recently announced the top 5 biggest North American 3PL companies by warehousing space in 2010.

Top 5 Largest Third Party Logistics Providers

1. DHL Exel Supply Chain – 94.6 million sq. ft. of warehousing space
2. Jacobson Companies – 35 million sq ft. of warehousing space
3. GENCO – 34.7 million sq. ft. of warehousing space
4. Ozburn Hessey Logistics – 30.1 million sq. ft. of warehousing space
5. Caterpillar Logistics Services – 29 million sq. ft. of warehousing space

Source: Logistics Management