It’s a ‘walls and wheels’ revolution

The straightforward warehousing business, very often tied to a trucking concern, has evolved in recent years into a more complex, holistic business, generally termed 3rd party logistics (3PL), according to Martin Bailey, director of Industrial Logistics Systems (ILS) and former academic logistics specialist. “Most 3rd party logistics providers,” he told FTW, “originated out of a core trucking industry. 3PLs quickly realised that the vagaries of the trucking industry left their businesses under threat – after all, it was really easy for a customer to move from one trucker to another, with minimal fuss.” But these truckers quickly realised that, if they had “walls and wheels” – that is they controlled the warehousing processes – it was far more difficult for the client to move his business. “With walls,” Bailey added, “came the interleaved information technology (IT) processes, and the better 3PLs then moved into the related IT networks to ensure they could control the business processes.” His studies have shown that, in parallel with the warehousing IT needs, many 3PLs also tried to gain a competitive edge by introducing tracking and routing and scheduling systems. “They now realised they were logistics businesses rather than simple transporters and storage contractors,” Bailey said. “However, their opposition were doing the same thing, so they needed to do something else to differentiate themselves, and grab the prime contracts.” This led to many of the 3PLs trying to move into the intellectual space – perhaps buy/create some freight forwarders, some logistics consultants, a 4PL business, and the like. “The idea is that, if you can analyse the infrastructure needs better than your opposition, you can create a significant advantage,” said Bailey. “You also want to try to understand the business needs before the customer issues an enquiry, and try to differentiate yourself by being ‘more intelligent’.” There are now several 3PLs who have a complete suite of expertise, according to Bailey. “They are truckers and warehouse experts (often still the prime sources of income), systems experts, track & trace experts, customs experts, modal experts, and have a bunch of eager consultants who can tell clients how to improve their operations. It seems like a sure formula for success – and many of the 3PLs are making good money.”