"Cautiously Optimistic"

Trends to watch in third-party logistics

For this issue's cover story on "The Road ahead for 3PLs," I was fortunate to be able to speak with several long-term observers of the industry and pick their brains about the future directions for third-party logistics providers. Each had a particular take on the evolution of logistics services, but a few common threads emerged, many of which are covered in the article starting on page 6 of this issue.

One trend not addressed in the cover story is the increasing internationalization of third-party logistics. John Miller, senior vice president for global business development with Flash Global Logistics (www.flashlogistics.com), says that his company's clients have been looking outside North America for business opportunities, given the downturn that has hobbled the U.S. economy. These customers turn to a company like Flash, which has established infrastructure in new and emerging markets, in order to enter those markets more quickly and with less upfront investment, since Flash can act as the importer of record, moving product into these countries and providing sales and support.

Joe Gallick, senior vice president of sales with Penske Logistics (www.penskelogistics.com), agrees that many shippers that once viewed countries like China solely as a source of supply now are seeing greater opportunity for sales in those markets. And these companies are coming to rely on their 3PL partners to crack those markets. "We might have gone to China to address an inbound logistics issue, but we find ourselves addressing more of a distribution logistics requirement for our customers that are selling their products in China," Gallick says.

The strength of exports out of the U.S. market, and weakening of imports as U.S. consumer spending has swooned, also has prompted 3PLs to rethink some aspects of how they service their clients. "In the port drayage world, there's a trend toward street turning inbound containers with an export load, which wasn't traditionally done in the day of strong imports," offers John Ferguson, vice president-international with Schneider National (www.schneider.com). "But now, with every dollar being looked at, matching up an import inland container with an export has become a real requirement of shippers, so we've found ourselves looking at that as well."

Perhaps it is these new opportunities that had all the experts interviewed for the cover story agreeing that the mood in the industry is "cautiously optimistic" about prospects moving into 2010. At the same time, Robert Lieb, professor of supply chain management at Northeastern University (www.northeastern.edu), warns that the lack of consensus on when the rebound will come or how dramatic or gradual it will be may tempt 3PL executives to overly focus on dealing with the current economy at the expense of planning for the future.

"Some of your time and energy at this point ought to be devoted to scenario-building ," Professor Lieb says. "Let's say the economy comes back at a 3 percent rate or a 2 percent rate, what does that mean for you in terms of what you have to put on the street, the size of the work force and so on? You can't ignore that this is part of the normal business cycle and at some point the economy will come back."

How are you planning for the upturn, or finding new opportunities in the current market? Write me at [email protected].

— Andrew K. Reese
Editor, Supply & Demand Chain Executive