In today’s uncertain global economy, having multiple providers can pose a serious risk to the integrity of the food supply chain. “The more providers a company has operating their global supply chain, the more chance there is that one of those providers will face financial difficulties,” says Butts. “Having one 3PL provider can streamline communication, which makes the global supply chain a lot easier to manage.”
3PLs: A Value Proposition
Using a 3PL is an obvious choice for companies starting to go global because an international 3PL already has a foothold in particular countries and understands the national laws and regulations, notes Simonson. “Trying to do this on your own is very risky and companies could make a lot of costly mistakes. Working with a 3PL means you won’t have to invest a lot of capital in something you are not sure will work. Let’s face it—it’s not cheap to keep a global supply chain running optimally.”
What about savings using a 3PL? “I don’t know that there is a savings,” acknowledges Simonson. “The big win using 3PLs is that they control the supply chain through origin to destination, providing more certainty. This is what they are selling. It’s all about the certainty and security they provide as an end-to-end provider.”
Controlling all of the handoff points involved in a global supply chain could be a major challenge to individual companies, but this capability is in the DNA of 3PLs, who do this every day. “We are particularly good at integrating all of the required multi-modal services,” says Butts. “One of our core competencies is inland distribution in North America, Europe and Asia.”
C.H. Robinson has about 47,000 contract carrier relationships in all modes of transportation. Butts notes that this extensive portfolio of service providers is necessary for C.H. Robinson to be able to bring cost-effective solutions to its clients consistently. “It’s that dynamic balance between service and price that we continually monitor for our clients,” he says. “Because if you ship something by air into New York City and then wind up getting an ineffective method of shipping the products inland, you will sub-optimize your transportation spend. So we have the ability to select just the right combination of carriers that allows our customers to fine-tune their supply chains cost-effectively.”
Having a 3PL manage the global chain can allow companies to reduce the staff necessary in some critical areas. For instance, Butts points to routine, mundane, and non-value-added aspects of logistics and the supply chain that a 3PL can handle more cost-effectively.
“We can execute according to scale and we can offer a more effective way to handle these repetitive tasks using a variable cost model,” he says. “We are also a resource for knowledge and expertise relative to the industry that would be very expensive for an individual company to maintain. For instance, the changing dynamic of expertise in detailed subject matter would require a full staff or the need to hire a consultant. Companies can get these expensive functions off their cost model and onto ours so these costs become variable costs for them.”
Specialized services can also help food companies streamline their supply chains. For instance, Crowley offers services including warehousing, pick-and-pack, and distribution capabilities.
“Once the goods arrive in the U.S., we can store various products in our warehouses,” Weist says. “A customer might have several containers of one type of product and several other containers of another product. We pick and pack according to their requirements and arrange for deliveries to their individual stores. This offers customers a speed-to-market initiative that gets their products where they need to be when they need to be there. As a 3PL we can help customers decrease their lead times and their inventories by warehousing their products so they can keep their costs down.”
Smaller companies could benefit by using a 3PL, continues Weist. “They usually do not have the assets or the expertise to handle the extensive required functions. It is expensive for them to have the staff required with expertise in domestic and overseas customs, USDA requirements, and how to work with multi-modal transportation providers.”