Still Room for Smaller 3PLs

Still Room for Smaller 3PLs

Copyright 2004, Traffic World, Inc.

Today''s shippers are moving items from Shanghai to Cleveland and all points in between, and that''s pressuring third-party logistics providers to expand overseas and offer global services. Big 3PLs such as $8.3 billion Exel are getting bigger, largely by acquiring competitors.

Must smaller 3PLs choose between being bought or buried? Not according to warehousing consultant Ken Ackerman. The president of Columbus, Ohio-based K. B. Ackerman Co. sees benefit to shippers in using smaller, midtier 3PLs.

"This is a business that requires nimble players, people that can react and move fast," Ackerman said. "A lot of these giants are by no means nimble. They''re like a battleship that has a big turning radius," he said.

Shippers also shouldn''t worry too much about their logistics provider being gobbled up by a larger player, said Ackerman. "I don''t think this industry is consolidating," he said. "For every consolidation there is a new startup. In my business I hear at least once a month of a company getting into this business. It is a highly fragmented industry. I don''t expect to live long enough to see anything else."

Ackerman is at variance with analysts who see a wave of acquisitions - topped by the recent purchase of Tibbett & Britten by Exel in Britain and the acquisition of Wilson Logistics by TNT Post Group - restructuring the market. "There is definitely going to be a demise of the middle market," said Jon Langenfeld, an investment analyst at Robert W. Baird & Co. "You need to be at one end of the spectrum or the other."

Langenfeld noted that the trend toward consolidation at the top is visible across industry lines, comparing Exel''s purchase of T&B with Yellow''s acquisition of Roadway.

Some analysts suggest smaller 3PLs may need to form alliances to fend off larger competitors but Ackerman says that may not be necessary. Large, multinational 3PLs are following their current customers overseas, not entering new markets to win new customers, he said.

"There is a lot of smoke and mirrors on globalization," said Ackerman. "The model the Japanese follow, and I think a number of others like Exel and APL Logistics have followed, is you don''t go into Mexico and hunt for Mexican (customers). You go into Mexico and hunt for Procter & Gamble." By contrast, "when McDonald''s goes into Milan they want to sell to the Milanese," he said.

Midtier 3PLs may find the best way to hold onto shippers is the old fashioned way - by providing superior customer service. For TSI Logistics, that essentially means becoming a shipper''s traffic department, said Luther Brown, president of the Stockbridge, Ga.-based company.

Like its bigger counterparts, TSI is following customers overseas. "Several customers we are working with are in a global environment and are asking us to expand into the European market," said Brown. "They are also talking to us about going to Australia," he said.