Wednesday, April 21, 2010

Why I don't like 3PLs (but we kind of are one)

The idea behind a 3PL (3rd Partly Logistics) company is a pretty simple one. You shouldn't be focused on trucking or freight forwarding or LTL shipments because that's not what you're best at. You're good at making and/or selling what ever it is you make or sell. It makes sense to outsource anything that isn't your area of expertise.

In Good To Great, Jim Collins calls this idea hedgehogging - you do whatever it is you do best and stop trying to do all of those other things you can't do better than anyone else. So, why is it then that I don't like the 3PLs? The title of the blog is a little mis-leading. What I really don't like are non-asset based 3PLs. These are the companies that are really just a bullpen of people on the phone taking freight from the customer and giving it to the closest truck they can find out on the load boards. The problem I have with that is there's no vaue add! In most cases the brokers don't ever meet their customers or their drivers. The profit they make to sustain their salaries is either at the expense of a customer overpaying or the trucking company that actually hauled the freight getting underpaid.

But wait, we're a logistics company, right? Yes, but we are also a warehouse and a trucking company. I think being a service company that actually has a hand in the service you're providing is important. Our employees know what your freight looks like, because frequently (but not always), it's on one of our own trucks. Being both a trucking company and 3PL at the same time gives a company the ability to take on a big customer that might have more freight than you can move with your own trucks. It also means if some freight needs to hang out for a few days waiting for letters of credit or delivery appointments, it can hang out on your trailer without leaving a driver in the lurch without any freight to haul until the problem is resolved.

The 3PL is the middle management of the economy, and we all know how we feel about middle management!

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