Wednesday, September 16, 2009

Savvy shippers using 3PLs to squeeze out costs

A new study indicates that smaller and midsize companies are increasingly turning to third party logistics providers (3PLs) as a way to enhance their profitability in today’s increasingly challenging economy – discovering a strategy which the largest corporations have utilized for years.

“In the current recessionary environment, companies are looking more and more to cut costs and are looking at logistics outsourcing as a way to reduce costs,” said a report from Armstrong & Associates, a Wisconsin-based consulting firm. “We’re seeing it especially with small and mid-sized companies that previously hadn’t considered outsourcing.”

As a result, the 3PL industry has emerged as a counter-cyclical business category which has posted strong numbers in the face of economic turmoil, growing 5.5 percent in 2008 and projected to add another 4.5 percent in the coming year.

In 2001, 73% of the Fortune 100 used 3PLs, a percentage which jumped to 93% by 2008. Of the firms ranked 401–500 (and we’re still not talking about small business here), 3PL usage went from just 24% in 2001 all the way up to 65% in 2008. Across the board, the smaller the firm, the greater the growth in use of outsourced logistics services. The complete breakdown is included below.

With cash tight and funds for new initiatives hard to come by, bringing in an outside expert to see if shipping can be done cheaper, faster, or better can be a no-cost way to drive significant savings to the bottom line – and for a smart manager to emerge as something of a hero.
U.S. Fortune 500 Use of 3PLs
Fortune Ranking     2001       2008
1–100                       73%         93%
101–200                  53%          80%
201–300                  47%          75%
301–400                  33%          71%
401–500                  24%          65%
Source: Armstrong & Associates
1(800)989-0054 ext 105

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