Box A
U.S. Third-Party Logistics Providers Industry

Box A
U.S. Third-Party Logistics Providers Industry

An important segment of the movement of U.S. international freight is the third-party logistics providers industry. The Council of Supply Chain Management Professionals defi nes thirdparty logistics (3PL) as the "outsourcing all or much of a company's logistics operations to a specialized company." Such outsourcing, allows shippers to focus on their core business activities while entrusting transportation, warehousing, customs-related, and other value-added activities to specialists able provide such services. In the United States, the use of 3PL providers by both large and small businesses has increased over time. Figure 12 shows the gross revenues of the U.S. 3PL industry from 1996 to 2008.

Classification of 3PLs. The third-party logistics providers (3PL) industry could be categorized into asset-based and nonasset-based companies. Asset-based 3PLs own their own trucks and distribution centers. They are more suitable for large corporations requiring long-term contracts and value-added international transportation management services (Cain 2007). Asset-based 3PLs often work in conjunction with freight forwarders. Nonasset-based 3PLs do not own the vehicles or equipment used in providing their services. These firms are the majority of 3PLs. They contract with trucking companies, other carriers, and distribution centers for whatever they need to fulfill their services. This provides them more fl exibility than the asset-based fi rms and they are able to offer expedited and customizable supply chain solutions. Nonasset-based operators include air freight forwarders, truck freight brokers, intermodal marketing companies, and distribution entities (Cain 2007).

Outsourcing to 3PLs. Over the past decade, many companies have turned to outsourcing services not core to their line of business (Capgemini et. Al. 2009). Transportation and warehousing are the two most frequently outsourced activities. Table 17 summarizes the most common outsourced operations. Table 18 shows the leading global 3PL providers in 2008.

Summary. Third-party logistics (3PL) providers are an important class of logistics intermediaries operating in the freight industry. These fi rms receive more than $100 billion in revenues and make more than $50 billion in payments to transportation carriers. While 3PLs are important to the freight industry, there is little information about the commodities they help transport and the value and tonnage of those commodities.

References

Cain, R. 2007. Are You Ready for a Third Party Logistics Provider?" Multichannel Merchant, Sept 26, 2007. Available at http://multichannelmerchant.com/opsandfulfillment/3PL_outsource/index.html.

Capgemini, Georgia Institute of Technology, Oracle, and Panalpina, The State of Logistics Outsourcing, Results and Findings of the 14th Annual Study, 2009. Available at http://3plstudy.com/index.php?p=2009-3pl-study as of Nov. 1, 2009.