Mid-Market 3PLs,

Offering Many Services,

Are On the Rise

BY THOMAS A. FOSTER

The mid-market third-party logistics providers are on a tear, but consolidation and competition are cre-

ating market turmoil that will not go away.

When Global 2000 supply chain executives consider third-party logistics providers, they naturally focus on the world’s 25 largest 3PLs, which last year posted sales of $97bn and controlled about 30 percent of the world’s logistics budget. But for the rest of the supply chain industry, the field of potential 3PLs extends to hundreds of mid-market players with annual sales between about $20m and $200m that specialize in warehousing, brokerage, transportation management and many other niche activities.

“Every segment of the mid-market is thriving nicely with double-digit growth that has not been experienced so widely for some time,” says Joel Hoiland, president of the International Warehouse Logistics Association (IWLA), the oldest and perhaps the largest association representing mid-market 3PLs. IWLA membership traditionally has comprised warehousing companies, but it is

growing into other outsourcing specialties.

With this newfound success, the mid-market is also finding a certain amount of uncertainty brought on by heightened customer expectations, mergers and acquisitions, consolidation pressures, demands to expand services and geographic coverage, as well as new entrants. These trends have both positive and negative connotations for the industry.

First, the Positives On the positive side, the mid-market is finding business opportunities even with the largest customers. For example, DW Morgan is a $20m, non-asset-based 3PL based in Pleasanton, Calif., that has found a solid niche with large high-tech customers, even giant companies like Cisco. According to DW Morgan president and chief strategist Grant Opperman, these high-tech customers usually select his company because they need agility and flexible solutions that larger competitors with an established suite of set serv-

ices cannot offer. Morgan provides its customers whatever they need from transportation management to service parts support to technology implementations.

“We are a pure advocate for the client,” says Opperman. “We can act quickly and not be concerned about supporting a lot of assets or big-name software investments. We can hook up systems very quickly to allow all segments of a supply chain to collaborate and to accelerate change. The larger 3PLs don’t usually approach their customers this way.”

Brooks Bentz, an associate partner in Accenture’s supply chain management practice based in Boston, agrees that many large companies have come to prefer mid-sized 3PLs, if only because they will have more leverage with the logistics provider. For example, Bentz helped a global equipment manufacturer select its 3PLs.

“They were a multibillion-dollar company, so they initially wanted to work with one of the largest 3PLs,” he says. “We rec-

36 AUGUST 2005