TABLE OF CONTENTS Another supply chain entity that exemplifies the virtues of the outsourcing philosophy is third-party logistics (3PL). Originally designed to provide transportation and related services to regional importers and exporters, 3PL has evolved into a worldwide industry that complements customer initiatives through a host of primary and value-added services. Whether operating a vendor-managed inventory facility, aiding in product postponement projects or executing a precision merge in transit services, the modern 3PL firm operates in a truly global environment, with major players tallying sales north of $7 billion per year.
Interestingly enough, the same financial appeal that has spurred the growth of the contract manufacturing business is also innate to the 3PL business model. There are considerable gains to be achieved from both an income and asset utilization perspective when properly utilizing the services of a world-class 3PL firm, many of which actually complement the contract manufacturing model. Not unlike its kindred spirit in the contract manufacturing arena, use of a 3PL provider offers several opportunities and challenges, all of which are a function, once again, of process design, accountability and tactical execution. Whereas the logistics business was put in its proper historical frame in Chapter 2, the focus of the remainder of this chapter is the operational and financial implications of working with 3PL firms as part of an outsourcing initiative.
As the 3PL business became more global in scope, the attraction for organizations to engage such services grew in kind. Growth in the 3PL business implies having operations in...
