Executive Briefings

The Near-Term Outlook for Outsourcing

Despite the recession's constraint on corporate pocketbooks, the future of outsourced logistics services is bright, says Cliff Otto, president of Saddle Creek Corporation, a logistics services provider. And shared space, an old concept, is seeing a surge of renewed interest from customers.

Logistics services providers have taken a hit from the recession, primarily in the reduction in inventory. Nevertheless, inquiries keep coming in from prospective clients, Otto says, so providers need to be prepared. Cost reduction is one of the main benefits a provider can offer a customer. A 3PL that has the right technology and infrastructure can leverage that investment to drive cost out for its clients.

There is new-found interest in the concept of shared space, Otto says. "For much of the '80s, companies wanted 3PLs to operate the job, but they wanted to own the box. Now, they want to drive out costs. Well, sharing space helps them do that."

Final product configuration is another area companies are exploring as a means to reduce costs. "Many manufacturers are delaying that as long as they can. That means that some packaging has to be delayed to the end of the distribution process, which opens a huge opportunity for 3PLs to help and to add services."

Admittedly, there is a lot of commonality in 3PLs, whether they are centered largely around transportation, warehousing or freight forwarding. Because they often bundle similar services, you need to determine their financial stability when shopping for a provider. And, Otto says, you must decide whether you prefer an asset-based provider or one that isn't. In his view, the former is better. "That investment in plant and facilities should be an indicator of potential services, and that that 3PL is deeply committed to this space."

The near-term outlook in outsourced logistics services is very good, Otto believes. "We find that 60 percent of those companies outsourcing see no need to change that. We think that, and the level of inquiries we get, says the outlook is very positive and attractive."

To view this video interview in its entirety, click here.

Logistics services providers have taken a hit from the recession, primarily in the reduction in inventory. Nevertheless, inquiries keep coming in from prospective clients, Otto says, so providers need to be prepared. Cost reduction is one of the main benefits a provider can offer a customer. A 3PL that has the right technology and infrastructure can leverage that investment to drive cost out for its clients.

There is new-found interest in the concept of shared space, Otto says. "For much of the '80s, companies wanted 3PLs to operate the job, but they wanted to own the box. Now, they want to drive out costs. Well, sharing space helps them do that."

Final product configuration is another area companies are exploring as a means to reduce costs. "Many manufacturers are delaying that as long as they can. That means that some packaging has to be delayed to the end of the distribution process, which opens a huge opportunity for 3PLs to help and to add services."

Admittedly, there is a lot of commonality in 3PLs, whether they are centered largely around transportation, warehousing or freight forwarding. Because they often bundle similar services, you need to determine their financial stability when shopping for a provider. And, Otto says, you must decide whether you prefer an asset-based provider or one that isn't. In his view, the former is better. "That investment in plant and facilities should be an indicator of potential services, and that that 3PL is deeply committed to this space."

The near-term outlook in outsourced logistics services is very good, Otto believes. "We find that 60 percent of those companies outsourcing see no need to change that. We think that, and the level of inquiries we get, says the outlook is very positive and attractive."

To view this video interview in its entirety, click here.