How to tell a forwarder from a 3PL...
At the CLM annual conference in Chicago this past fall, I attended a presentation that was billed to be a "Guide to Third Party Logistics Providers".
There were a about a hundred people in the room and as the presentation got rolling. We were all looking forward to getting behind the smoke and mirrors of forwarder and carrier press releases and finding out more about who was doing what in the 3PL industry.
Unfortunately, it didn’t happen. The moment the slides started going up on the board, it was clear that something was amiss. Relatively smaller companies were showing up as leaders in third party logistics and huge transportation providers, whose logistics division are as big as independent 3PLs were showing up lower on the list. What was going on?
I asked the question in the middle of the presentation: where did you get these numbers? (Showing "logistics" revenues).
"From the providers", came the answers.
"Ah", I said to myself.
One company, a San Francisco based freight forwarder and customs broker was shown on the list as one of the biggest "logistics" providers on the planet. Eclipsing industry giants. How’d they do that?
By counting virtually every stick of their revenue as "logistics" revenue. If it involved freight forwarding, or customs brokerage, or more than one service, it was "logistics". No figures were broken out showing services such as:
Warehousing
Order fulfillment
Light assembly
Carrier Management
Or any of the other services we’ve come to expect when we hear the word "logistics"; it’s just transportation. Which is fine -- that is still the biggest chunk of the logistics pie but it’s no wonder the true users of 3PL services are more confused than ever about who is actually doing what in the industry.
So, how do you tell a Third Party Logistics Provider from a Freight Forwarder or are they the same?
What it comes down to is getting behind the smoke and the mirrors of the press releases and asking some basic questions.
The concept behind integrated logistics management or "supply chain management" is that you look at the process and not a single function. As we’ve discussed in previous articles, you can optimize a function such as traffic, but degrade the overall logistics process. Many times, those improvements can only come from an outside "third party" with the professional distance required to engineer a solution.
Can your "freight forwarder" do that? Perhaps. They are experienced as "third parties"; but do they have experience outside of transportation?
What percentage of their revenues come from non-transportation based services?
Can they provide examples of programs that were sold to prospects NOT in the traffic department?
How many square feet of warehousing do they operate that is NOT part of their basic freight forwarding operation?
"Lies, Damn Lies, and Statistics"
One final note… a recent ranking of the top 25 freight forwarders in the world that I saw in this past issue of World Trade Magazine showed a relatively unknown company listed as one of the top 25 as follows:
Number of worldwide employees 400
Number of worldwide offices: 316
I wonder how they get anyone to cover the offices at the global management meetings?
Transportation Development Group
Toll Free at: 800-949-4834Telephone 310-302-0808Fax 310-302-0809E-mail: Info@logisticstraining.com
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