Manufacturers are relying on 3PLs to help them compete in a rapidly accelerating marketplace.
Manufacturers have long used third-party logistics companies to manage some or all of the basic supply chain operations, whether it be transportation planning, product packaging and assembly, cross-docking or freight bill auditing. As margins grow ever tighter and the need to deliver products faster and in smaller lot sizes have squeezed manufacturers’ resources, their reliance on 3PLs to manage more of the supply chain has increased significantly. Whereas 36% of companies’ total logistics expenditures went to 3PLs two years ago, today that number has reached 50%, according to the 20th Annual 3PL Study, produced by Penn State, Capgemini Consulting, Penske Logistics and Korn Ferry, with participation from IndustryWeek.
With industry consolidation making competition among 3PLs particularly fierce, 3PLs are attempting to differentiate themselves by tackling enterprise-wide projects that go well beyond the plant or warehouse level. For instance, Penske Logistics is working with Ford Motor Co. to streamline the automaker’s operations by developing and managing a centralized logistics network, involving all inbound material handling for 26 plants.
Over a period of 18 months and using Six Sigma quality practices, Penske redesigned Ford’s logistics network by creating 10 order dispatch centers and consolidating shipments to plants. By serving as a single point of contact for all Ford logistics, Penske was able to train 1,500 suppliers on a common set of procedures. The 3PL also implemented new technology solutions throughout Ford, including routing, order tracking, logistics management and metric reporting solutions. The payoff was an inventory reduction of 15%.
Having a single point of contact allows Ford to more clearly understand how its logistics operations impact the entire company, points out Grant Belanger, Ford’s director of material planning and logistics.
John Langley, director of development at Penn State’s Center for Supply Chain Research, says 3PLs and manufacturers must be well aligned to achieve great efficiencies and effectiveness in their relationships.