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Consumer Goods Logistics, Freight Transportation

Supply Chain Outsourcing Impacted by Changing 3PL Business Models

Alex Stark | February 12, 2014
Although third party logistics providers (3PL) have been an essential part of the supply chain for decades, their roles are changing.  Handling everything from raw material to finished products, they are becoming a fundamental ingredient in their customers' supply chain operations.  According to a recent paper by Capgemini and KANE – Supply Chain Trends Impacting the Consumer Products Industry – changing 3PL business models in supply chain outsourcing is one of the five forces that consumer products companies must understand and be prepared to leverage.

The bulk of 3PL work is still the tactical execution of fulfillment and transportation services, but 3PLs are adapting their business models to offer advanced services, for example:

  • Kitting and pre-assembly work coupled with just-in-time delivery of component parts to support lean manufacturing.
  • Full on 3PL contract packaging, from package design to materials purchasing to product completion.
  • Buying returned products for cash and managing their final disposition.
  • Providing the software to enable global supply chain visibility across a customer's organization.

The Capgemini/KANE report on supply chain trends suggests that consumer goods manufacturers who still regard their logistics providers as purely tactical partners may want to examine how 3PLs could help in a more strategic way.  3PLs have not only expanded their capabilities, but their investments in software and engineering resources often dwarf those of the customers they serve in the consumer goods space.  The challenge for shippers is to determine just how to capitalize on these capabilities to the fullest. 

Leveraging Your 3PL: Ideas to Consider

Make your 3PL a valued member of your core team.  When shippers kept most logistics responsibilities in-house, naturally all relevant managers attended the planning meetings.  Everyone involved with the infrastructure of the supply chain was on the same page.  But now, with the advent of supply chain outsourcing, why not have your 3PL provider in attendance as you set your course for the short and long term?  Once key providers are involved, they will start to think and act like part of your core team and your value for dollar will increase.

Look for opportunities to combine steps in the supply chain to reduce the number of logistics providers and speed cycle time.  A breakdown of your supply chain will help to eradicate redundant steps.  The range of services now available from 3PL providers can accommodate daily tasks that were previously performed in-house or by an external supplier.  Carrier management, inspection, final product assembly and packaging can often be integrated into 3PL-operated distribution operations with no degradation in quality.  This ability to combine formerly discreet services creates a leaner supply chain and can get your product to market quicker, and with enhanced efficiency.

Supply Chain Trends: What Does the Future Hold?

Supply chain outsourcing is changing.  In the past, shippers approached their logistics provider with a specific idea and said, "We'd like you to do this."  As 3PLs became more sophisticated, shippers changed their approach to "We want to do this, how can you help us do it smarter and for less?"  Going forward, shippers might do well to leverage the full power of their 3PLs partners and simply say, "Here's the problem, let's determine, together, the best path forward."

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