The global third party logistics (3PL) market has been forecast to reach a value of US$1.35 trillion by the 2018, with the industry being fuelled by the increasingly globalised nature of trade that enhances the need for greater freight capacity and effective logistics management.
A 3PL provider is a firm that provides service to its customers of outsourced logistics services for part, or all of their supply chain management functions. 3PL providers typically specialise in integrated operation, warehousing and transportation services that can be scaled and customised to customers' needs based on market conditions and the demands and delivery service requirements for their products and materials.
The third-party logistics market includes freight forwarders, courier companies, as well as other companies integrating & offering subcontracted logistics and transportation services. Hertz and Alfredsson (2003) describe four categories of 3PL providers:
- Standard 3PL provider: this is the most basic form of a 3PL provider. They would perform activities such as, pick and pack, warehousing, and distribution (business) - the most basic functions of logistics. For a majority of these firms, the 3PL function is not their main activity.
- Service developer: this type of 3PL provider will offer their customers advanced value-added services such as: tracking and tracing, cross-docking, specific packaging, or providing a unique security system. A solid IT foundation and a focus on economies of scale and scope will enable this type of 3PL provider to perform these types of tasks.
- The customer adapter: this type of 3PL provider comes in at the request of the customer and essentially takes over complete control of the company's logistics activities. The 3PL provider improves the logistics dramatically, but do not develop a new service. The customer base for this type of 3PL provider is typically quite small.
- The customer developer: this is the highest level that a 3PL provider can attain with respect to its processes and activities. This occurs when the 3PL provider integrates itself with the customer and takes over their entire logistics function. These providers will have few customers, but will perform extensive and detailed tasks for them.
Emerging markets, particularly, China, Brazil, India, and Mexico, are witnessing increasing activity within the 3 PL market. largely due to the sluggish growth in the industrialised markets. Growth is attributed to the steady economic growth and the rising domestic consumption across these regional markets.
Favourable government policies and increasing investment in infrastructure development activities are driving growth in the logistics industry, and enhancing the significance of contract logistics service providers. Within Asia, China represents the largest and fastest growing 3PL market.
For more information on the third party logistics market, see the latest research: Third Party Logistics Market
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