Impact Of 3PL In Market

The market and third party logistics providers have come to a place and a time where the demands and the capabilities have reached a point and convergence that compliments each other and enables a robust suite of capabilities to the smaller participants in the market that would not have been available the smaller retailers.  These changes have been developing for a long time and we are now reaching a point of maturity in the third party logistics providers That allows these providers to offer a cafeteria style service offering that will not only support the current needs of the market but also lay the groundwork to not only support the future demands, it also provides the framework required to shape the market.  This is a truly disruptive force on the market that must be take seriously in order for retailers to maintain a place in the market.

These are exciting and scary times at once, exciting because of the potential of the market and the providers, scary because of the impact to the retailers that choose to ignore the disruptive potential of these converging practices and capabilities.  These are especially scary, or more accurately, these should be especially scary times for the legacy retailers that have developed a supply chain to support their demands themselves because this strategy really makes no sense from a capability and a cost perspective.  At this point it really doesn’t make a lot of sense for most retailers to attempt to maintain the level of changing demands in the supply chain themselves and this means that the future of the market will be determined by a combination of service providers and functionality along with extreme flexibility.

These large legacy retailers must now evaluate their capabilities against the demands for services on the supply chain to determine how to meet the demands.  As with any other type of outsourcing, the retailer must evaluate their needs and requirements with the third party logistics providers’ services and capabilities that can meet their current demands.  This, however, is only one part of the equation that must be taken into account during the evaluation and selection process. Another very significant piece of the selection process is the vision and capabilities of the service provider and I would say this is the most important piece of the selection process - how can the service provider help the retailer to meet the velocity and volume of change in the supply chain?  Is the provider driving change in the market or chasing change in the market.

One additional point to be taken into account when selection a service provider is that there is no requirement to completely outsource the supply chain.  The large legacy retailer first starting down the journey of selection must take a page from others than have already gone down the path and identify their own strengths and the activities and functions that make the retailer special.  These activities and functions that make the retailer special can and should be retained by the retailer and then outsource the activities and functions that can be viewed as commodities for instance. This is a good starting point the builds the capabilities and the relationship and then as capabilities change they can be transition to the service provider rather than developing internally.  Remember the market requirement is speed to market and in this matter the visionary service provider can provide the means to meet these demands.