Reprinted from SUPPLY CHAIN DIGEST, September 27, 2007
Expert Insight: Supply Chain InView by Ann Drake
3PLs as One-Stop Shops
High Transportation Costs Lead to Expansion of 3PLs Traditional Responsibilities
One ripple effect of higher transportation costs that are impacting all facets of the supply chain is that more customers are looking to 3PLs to provide services traditionally provided by co-packers. These are value-added services (VAS), such as packaging, labeling, kitting, display building, etc.
This trend is competing with the well-worn model, where products leave the manufacturer and go to a co-packer before arriving at the 3PL – or where product goes from the manufacturer to the 3PL and then takes a side trip to a co-packer when needed. In the new model, customers want to eliminate one or two legs of the journey by asking the 3PL to provide more services on site; therefore, viewing their trip to the logistics center as “one-stop shopping.”
In addition to the potential for saving costs associated with transportation, the option of assigning more value-added services to 3PLs on-site offers another benefit. For the growing number of businesses that want to adopt practices that are more sustainable and environmentally sound, reducing the need for extra product movement serves that purpose.
Not all 3PLs are equipped to handle the responsibility – nor do some want to try. To successfully provide these extra services may require increased engineering expertise, more space dedicated to packaging or other operations, additions to the labor force, and/or a greater level of automation. The 3PLs who do want to take on this added role must be willing and able to be resourceful, adaptable, and creative.
Some recent challenges we have faced in the category of value-added services include: learning how to assemble musical instruments on site, designing a way to best assemble a mixed-SKU pallet for Sam’s club, adapting an each pick system to process components for a plasma TV kitting operation, and deploying additional personnel to handle a customer’s product return. Extending capabilities beyond the traditional responsibilities of “logistics” is another example of the way in which 3PLs are playing an expanded role in many manufacturers’ competitive business strategies.
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