To some (such as shippers), they're service providers. To others (like carriers), they're customers. When it comes to how they fit into the logistics market, third-party logistics providers (3PLs), which both buy and sell logistics services, are at once square pegs and round pegs.
As such, 3PLs have never really found their niche with any of the traditional trade groups, which tend to be organized around either buyers or sellers of distribution-logistics services (but not both). That could change soon. In this month's DC VELOCITY Thought Leader Profile, Joel Hoiland, head of the Chicago-based International Warehouse Logistics Association (IWLA ), describes his organization's effort to reposition itself as a home for those wayward 3PLs. Aside from the IWLA , the only other organization that's still actively courting 3PLs as members is the Material Handling Industry of America (MHIA) in Charlotte, N.C. Organizers of what are easily the largest and most successful annual trade shows in the logistics market (the ProMat and North American Materials Handling shows), MHIA's leaders recognize the emerging importance of 3PLs and have opened their membership to them—a membership that would carry the substantial benefit of the right to exhibit at MHIA's shows .
Both the IWLA and the MHIA are undaunted by other groups' past failures to bring in 3PLs as members. From the American Trucking Associations to the Transportation Intermediaries Association to the IWLA itself (which in the mid-1990s attempted to launch a new group known as the North American Logistics Association), various groups have tried and failed to create a true 3PL association. In hindsight, those failures may have been due to a fundamental misunderstanding of 3PLs—what they do, what they need from an association, and how they interact with other parties in the logistics world.
As part of their business plans, 3PLs typically offer services to their customers that they cannot provide on their own. Most 3PLs, after all, grew out of traditional single-focus logistics services companies. Many evolved from transportation-based companies that once existed solely to haul freight. Others were once public and/or contract warehouse companies. To meet customers' demands for a single-source logistics provider, they've all had to expand their service menus well beyond their traditional core offerings. Some transportation companies have set up distribution centers, for example, and some warehouses and distribution centers have begun offering integrated transportation services to their customers.
But often times, 3PLs end up out sourcing tasks required to meet their obligations to customers. That makes economic sense. A warehouse-based 3PL, for instance, can't go out and buy tractors and trailers when ever a client needs transportation. In stead, it hires another company to haul the freight.
Yet 3PLs are not your typical "middle men," at least not in the traditional, negative sense. They don't take from one company, hike the price, and then turn around and sell the service to another company. Rather, their role is to add value to their customers' operations while driving costs down, not up.
In any event, they're not a force that can be ignored: One estimate pegs 3PLs' annual revenue at nearly $15 billion, and they're widely considered to be the fastest-growing segment of the logistics market. Their unique position makes 3PLs unlike any other type of buyer or provider the market's ever seen, and it explains why they have yet to find a trade group that's a good fit. Let's hope the industry can fix that hole.