Outsourced logistics is often associated with the large, global operators that manage vast, multi-modal supply chains for the world's largest manufacturers and retailers. While these very large third-party logistics (3PLs) providers are indeed managing more and more of the world's most complex supply-chain activity, there is an equally impressive outsourcing movement gaining momentum among hundreds of smaller operators that focus on specific industries and highly specialized tasks. Just like their larger brothers and sisters, these mid-sized 3PLs offer their customers the benefits of outsourcing:
• Freeing up staff and capital to focus on core activities such as marketing and manufacturing
• Leveraging the economies of scale of a 3PL's expertise and shared services
• Greater visibility and control over service levels, costs and inventory.
The following five examples illustrate the wide range of outsourced services and the companies that are benefiting from these 3PLs on the rise.
Building on Fulfillment
PFSWeb is an eight-year-old 3PL that is leveraging its technology and fulfillment expertise to expand its service offerings in both in the business-to-business (B2B) market and the business-to-consumer (B2C) market.
"We are very deep in our capability to provide an entire business solution for a product from its manufactured source to its consumed point anywhere in the world," says PFSWeb CEO Mark Layton.
For example, the Plano, Texas-based 3PL signed up IBM's fledgling small printer business as its first customer in 1996. After a five-year hiatus, IBM wanted back into the small printer business as rapidly as possible and with no increase in staff.
"We helped them to become a global competitor in a matter of months," says Layton, who adds that PFSWeb's parent is a wholesale distributor for computer consumables. "Because of our product knowledge and our relationships around the world, we were able to place IBM inventory in multiple channels. They were able to identify end-users for direct sales, as well as targeted dealers, distributors and retailers."
Each channel had different logistics requirements based on the package size and specific information interfaces. For example, a large retailer demanded EDI messages. Wholesale distributors had a completely different interface requirement.
"We had all the relationships and all the technology hooks," says Layton.
PFSWeb still handles fulfillment and kitting for the small IBM printers out of its one-million-square-foot DC in Memphis. PFSWeb now also handles the procurement function from IBM's Asian manufacturers, as well as managing inventory and orders.
"When Ingram Micro calls IBM for these printer products, they are actually calling our order desk," says Layton, who adds that the company also does credit and collection for the product line. "It's an entire turnkey operation."
PFSWeb's B2C business has been a high growth area that includes web hosting, e-commerce transaction execution as well as order fulfillment. Its largest B2C client is the U.S. Mint, for which it handles 20,000 to 30,000 packages of collectable coins on a daily basis to customers all over the world.
Its most interesting B2C success story is with Roots, the Canadian sportswear company that supplied the U.S. Olympic team with much of its outerwear for the 2002 Winter Games. Just before the games, Roots wanted to try to sell a few U.S. Olympic Team products over the internet to U.S. consumers as a way to enter the market. Roots projected demand at about 5,000 units, and it asked PFSWeb to handle the entire campaign as a test over the Olympic period.
"It was a very small project for us, but we took it on because we had a relationship with the client," says Layton. "Roots ended up selling millions of units, especially the official hat. We developed a robust web store in a matter of 48 hours after they realized what was happening. Fulfillment was handled through our infrastructure."
According to Layton, about 40 percent of the company's revenue still comes from fulfillment, but other technology-related revenue streams are growing. The company has also expanded with operations in Toronto and Liege, Belgium.
For example, PFSWeb is partnering with large 3PLs such as Panalpina, Kuehne & Nagel and Menlo Logistics to provide them with technology capabilities that customers are demanding.
|"Home Depot doesn't want 1,700 local delivery relationships with thousands of invoices."|
- Ron Howard of Ensenda
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