The modern corporate landscape has seen more and more companies take up 3PL Management in the management of their supply chain. Top companies are acknowledging that by using third party logistics management companies, they can significantly add to their bottom line as they can now concentrate on their core competencies.
To understand the role of logistics management in enhancing a corporation's bottom line, it is critical to analyze how 3PL management has evolved over the years (particularly with respect to advancements in technology.)
History of Logistics Management
Less than four decades ago Software/Technology/IT, international shipping, warehousing, and trucking were separate functions. Corporations that shipped products across continents and around the globe used to view and manage the four functions as different components, from the point of origin up to delivery.
The 1980s – Evolution of the Transport Industry
According to some industry experts, the Motor Carrier Act of 1980 was responsible for the emergence of 3PL management companies. The trucking industry was deregulated through widespread reforms that included collective vendor price setting, entry controls, and reductions in price controls.
These changes occasioned a significant increase in the numbers of logistics management providers from fewer than 20,000 in 1980 to over a million today. It resulted in an industry that is extremely fragmented as the more complex logistics environment allowed 3PL companies to offer differentiated value-added logistics services that included, warehousing, transportation, reporting, and tracking.
The 1990s – Offshoring and Globalization
In the 1990s, global logistics management started taking shape with many companies expanding their market reach to serve rapidly developing markets around the globe. The development of economies such as China, India, and Mexico was a huge incentive for companies with some moving their entire production capacities to these developing countries.
Offshoring resulted in the need to manage an increasingly complex global supply chain that was continually expanding. Logistics management companies had to adapt to offer logistics services both on the international and domestic front.
The 2000s – Growth in Technology
Developments in IT in the 2000s due to the increasing use of the worldwide web and the internet made it possible for 3PL providers to provide solutions to connect diverse supply chain functions. In order to competently meet the needs of international corporations, logistics companies began to integrate order management functions, logistics and transportation, and inventory management with emerging technology platforms.
Supply chain management was transformed into an essential component due to the efficiency provided by 3PL companies. 3PL companies continued to adapt and change their techniques to better serve the needs of a continually changing market. These companies now make use of sophisticated inventory management, tracking and reporting technologies, and logistics software to provide transportation, order management, and warehousing services that would be too costly for the ordinary company to purchase, use, and maintain.
3PLs in the Modern Day
According to an Armstrong & Associates Report as of 2013, approximately 85% of American Fortune 500 corporations employ logistics management companies to manage their supply chain functions.
Major logistics management companies are better able to leverage global infrastructure and partnerships to offer greater flexibility. The core competence of the modern day 3PL management company is to offer supply chain solutions to both large and small corporations that. By making use of logistics management companies, a company stands to add value to its bottom line since it can focus on its core business thus reducing costs associated with logistics.