‘Getting the basics right is critical’

The 3PL business model faces many threats, says logistics specialist Martin Bailey. “Many 3PLs have moved away from their core expertise. They have been so busy trying to show that they are in the complete logistics space that they have forgotten they need to do the basics right. “They still need to be good, low-cost, safe and effective truckers and warehousemen. As their opposition are also in the intellectual space, they no longer have a logistics advantage, and they thus need to show they can do the basics well.” As a case study, Bailey painted a picture of the XYZ 3PL. This operator is running an aggregated distribution network for several fast-moving consumer goods (FMCG) manufacturers. “Most of the retailers have now set up their own networks to undertake this function,” he told FTW. “The retailers have the benefit that they can control the inbound network and the outbound network – where no 3PL can compete. “With their ‘power’, the retailers are going to dominate this business, and the 3PLs are going to be scrapping for the remaining business – which is, unfortunately, unprofitable small-volume supply to the small stores without their own retail DC infrastructure.” That, he pointed out, is just one major threat of many, but proves that often the 3PL has ventured too far out of his core domain. However, Bailey estimates that 3PLs now provide some 50-60% of SA’s logistic processes. “If we consider that logistics probably contributes in excess of R100 billion within the SA economy every year, their future still has a massive effect on our supply chains.”