Shippers, logistics providers: 3PL model alive and well
The trend toward outsourcing supply-chain management functions to third-party logistics providers is still actively pursued by the country’s largest shippers.
“We stand behind the 3PL model,” said Chuck Kossen, vice president of supply chain in North America for Novartis’ Consumer Health Division, at a meeting of the Council of Logistics Management in Chicago this week. “It gives me a much quicker ability to meet market changes.”
Kossen is responsible for the logistics management of Novartis’ $1 billion Gerber baby products operation. Three of the company’s five U.S. baby foods regional distribution centers are managed by 3PLs. Each of these distribution centers manage between 15 and 20 outbound truckloads a day.
Novartis believes 3PL-operated warehouses offer “flexible space” to meet the changes in its business. “It’s hard to flex a DC when you own the four walls,” Kossen said.
He added that 3PLs offer a flexible workforce, shipment consolidation, transportation “rate synergy,” and niche services.
3PLs similarly believe their business has lots of potential for expansion, both in the United States and globally. “Demographics will drive outsourcing in the United States,” said William T. Gates, chief executive officer for Standard Corp., a UTI Worldwide Co.
In 2001, the logistics outsourcing potential in the United States was estimated at $900 billion and upwards of $2 trillion globally, but today only 4.5 percent of this business has been outsourced to 3PLs.
Some 3PLs have evolved into so-called “4PLs,” which they coordinate supply chains involving other 3PLs. “I think that’s the direction we’re headed,” said Michael S. Chen, senior vice president of OOCL Logistics, in an interview with Shippers’ NewsWire.