With international trade booming, third party logistics companies have taken on an increasingly important role for retailers. Retailers need flexible links to suppliers with low-cost production. These suppliers are often in remote regions. At the same time, retailers need rapid delivery channels for an ever-expanding distribution network of consumers.
About 100 3PL Companies now control almost a third of an estimated $270bn that is spent on outsourced value-added logistics services each year around the world. Within this group of global 3PLs.
Not surprisingly, the seven largest global 3PLs are all European-based companies.. U.K.-based Exel holds the top spot on the list with revenues of $8.3bn.
The importance of freight forwarding to supply-chain management is also a key variable in choosing the largest global players. First, the revenues used throughout this article are turnover (gross revenue). These revenues included purchased transportation, a major expense for most of the 3PLs on our list. Second, global supply chains rely heavily on freight forwarding activities for their construction. Most of the key events in any international supply chain are controlled by the freight forwarder.
The services third party logistics companies offer:
• Air Freight Forwarding
• Ocean Freight Forwarding
• Transportation Network Planning and Optimization
• Transport Execution/Freight Bill Payment
• Carrier Management
• Merge in Transit
• Security Systems and Control
• Incoterm Control – shifting from Ex works (EXW) to delivered duty paid (DDP)
• Letters of Credit/Negotiable Bills of Lading
• Cargo Insurance
• Customs Brokerage and Licensing
• Duty Drawback
• Value Added Warehousing , Inventory Control and Supplier Management.
Impact of 3PL Companies
The world’s largest manufacturers and retailers have solidly adopted the logistics outsourcing concept, and they prefer to do business with other larger companies, including their third party logistics companies.
The globalization of 3PLs will spread around the world, although more slowly in many areas where 3PLs have gained limited market entry. The modern outsourced logistics model, where manufacturers and their 3PLs have become business partners with shared authority and responsibility over entire supply chains, has yet to be adopted in many regions. This model is the norm in the U.S., Western Europe, Australia, Singapore, Hong Kong and some parts of Mexico and Brazil. Outside of these areas 3PLs are still treated functionally: The 3PL is hired to perform one task such as warehousing.
In many developing nations, the problem is a lack of infrastructure. For example, in much of Latin America, warehouses are rudimentary. They often lack docks, material handling equipment, and have no IT systems to manage inventory or provide information sharing with carriers or customers. Even in highly advanced parts of the world such as Japan, 3PLs still primarily perform functional roles.
As large corporations expand their businesses and their processes to all regions of the world, the need for better logistics continues to transform 3PLs and forces them to become supply-chain partners. In most cases, this transformation is accompanied by acquisition.