OUR SAY: The hungry 3PL providers market

It’s been a tough year for the Who’s Who in Contract Distribution. But inevitable rationalisation might hurt even more



By Jason Whittaker | November 2, 2009


The 2009 Who’s Who in Contract Distribution directory has more listings than any other year in its decade-long existence. And yet many will tell you the number of 3PLs — that is, genuine logistics operators with the capability and systems business demands of an outsourced solution — is shrinking.


The market speaks loudly in this year’s survey of an incredibly tough business environment. Confidence has collapsed with the economy; consumers spent stimulus handouts in some areas but cut back in others, business slashed production and inventories, hacking deep into transport and warehousing volumes.


And yet some will tell you the worst is yet to come. Not in economic terms, perhaps, but in down-and-dirty, dog-eat-dog market rationalisation.


The global downturn put the brakes on what was, until a year ago, a trend to consolidate the provider pool. Credit markets recoiled and businesses battened down the hatches as the financial storm raged. But under sunnier skies, market raiders will emerge with chequebooks in hand.


Paul Little’s hunger is particularly voracious. The Managing Director of the $6.5 billion Toll Holdings monolith reigns supreme as the king of Australasian logistics. Still, his totalitarian empire pushes for further colonisation.


That’s just the cold reality of business, and all power to Little and anyone else with the cash and smarts to go after more of a lucrative market.


The marketing pitch that size and scale offer better, more integrated offerings to customers is, for many, no doubt true. Supply chains reliant on offshore production — or selling to export markets, for that matter — have benefited from the multi-modal, cross-border, end-to-end solutions companies like Toll, Linfox and at least half a dozen others players scattered throughout the Who’s Who directory can provide.


Meanwhile, the retail giants who loom large on the logistics landscape will attest so-called factory gate pricing strategies — essentially taking more control over inbound freight — work to streamline supply channels and improve efficiencies. They’ll argue, too, that none of these strategies discriminate in the 3PL market, whether providers are big or small.


But the combination of more powerful end customers and fewer independent logistics providers worries many. There are questions of competition, particularly in rates, and whether grassroots service is jeopardised as the big get even bigger.


Is market rationalisation really in the best interests of an economical, efficient freight network?


Is big actually better?


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