William B. Cassidy | Jun 29, 2010 10:37AM EDT
Trucking companies that once kept third-party logistics providers at arm’s length are pulling them in for a closer embrace as they seek new sources of freight.
Armstrong and Associates, a research and consulting firm, told the trucking industry SMC3 summer conference in West Palm Beach, Fla., 93 percent of Fortune 100 companies use at least one third-party logistics company. And Evan Armstrong, president of the firm, said many use far more. General Motors has 49 3PLs, Procter & Gamble 42 and Wal-Mart 39, according to Armstrong and Associates research.
"For companies with multiple supply chains, it's very hard to single source with one provider," Armstrong said at a June 24 panel on 3PLs at the conference.
The inverse is also true; one 3PL can give a carrier access to multiple shippers.
When Con-way Freight expanded its business with Caterpillar Logistics last month, it not only gained greater access to freight from $32.4 billion Caterpillar but also to more than 65 other companies that contract Cat Logistics to manage their supply chains.
Relying more on 3PLs for freight can be a difficult step for trucking executives that built their freight business on direct relationships with shipper customers.
Carriers often responded to the growth of third-party logistics with "open hostility," said Bruce Kennedy, vice president of enterprise strategy at YRC Worldwide.
Many carriers feared they would lose control over pricing and their direct relationship with shippers.
"It's only over time that many of us have changed," said Kennedy. Brokers or logistics intermediaries account for more than a third of YRC Worldwide's revenue, he said.
Carrier attitudes toward 3PLs are likely to vary with the type of logistics provider or broker. YRC Worldwide last year divided its 2,000 3PLs into four groups: supply chain managers, brokers and forwarders, price negotiators and "rate resellers."
Relationships among brokers, supply chain companies and truckers need to be clearly defined, said Donald Maltby, executive vice president of logistics services at Unyson Logistics, a subsidiary of intermodal company Hub Group.
"3PLs have to bring value to the carriers, shippers and receivers, and they should be held accountable for that," Maltby told the SMC3.
"All aspects of the carrier relationship need to be laid out before you go into a plan, because if you don't, it will fall apart," he said.
-- Contact William B. Cassidy at wcassidy@joc.com.
