Recent M&A activity in the logistics services space has made large, global 3PLs even larger, absorbing smaller providers in the process. This trend, combined with the increasing tendency among shippers to consolidate 3PL partners, begs the question: Are mid-sized 3PLs still relevant?
Well, as a mid-tier provider, you can probably guess where we come out on this question.
Size has many positive benefits. It can provide economies of scale in purchasing, drive operational efficiencies, and reduce the sting of large capital investments.
But the relentless pursuit of growth for its own sake can backfire. When Wall Street investors and other funding sources supplant the customer as the number one focus of the provider, it undermines any advantages associated with size and scale.
Mid-tier 3PLs are doing quite well, by the way. It’s one of the reasons they have been prime acquisition candidates. And major companies, such as Materne, regularly favor mid-tier players over mega-3PLs for large contract awards.
Here are just some of the things these shippers are looking for:
Buyers and sellers of logistics services approach the market from opposing angles. Buyers desire flexible logistics services (overhead, equipment, direct labor and space). Sellers, in general, desire the opposite – dedicated arrangements that minimize risk. It is the mid-tier providers that are able to retain/maintain the ability to provide flexible solutions. They are more willing to customize a solution.
Buyers of logistics services can put their careers at risk if they choose the wrong provider. That’s why the ultimate choice of provider often comes down to chemistry and culture fit. A strong culture, partnership, responsiveness and winning attitudes are more likely at all levels within a mid-tier company. Because large contracts are relatively more important to them, smaller providers bend over backwards to ensure clients are serviced well and don’t seek alternatives.
Mid-sized providers are nimble, with lean organizational structures that allow quick decision making and direct access to senior leaders.
Some mid-sized logistics providers specialize in certain market segments (CPG logistics, building materials, food and beverage, electronics), offering customers expertise not necessarily found in larger 3PLs that “specialize” in 10 industries.
Goldilocks was right
Mid-tier 3PLs are not only relevant in today’s logistics outsourcing landscape, they may be the best choice available. These providers combine the customer-centric culture of smaller providers with the depth of experience and systems capabilities of the largest global logistics providers.