Pop Quiz: Test Your 3PL Knowledge
How well do you know the third--party logistics market? With the help of several logistics studies, APL Logistics, Oakland, CA, has assembled this brief questionnaire to help you assess your 3PL IQ.
True or false: Companies that outsource their logistics are in the minority.
That statement may have been true 15 years ago. But today, nearly 90 percent of Fortune 100 companies use 3PLs, according to Dick Armstrong of Armstrong & Associates. And approximately two--thirds of logistics expenditures in North America will be allocated to outsourcing by 2007, according to a study by Cap Gemini Ernst & Young and Georgia Tech.
True or false: Most U.S. warehouses/logistics facilities are located in--house.
It’s true. Although the use of 3PLs is on the rise, only about 10 percent of the 6.2 billion square feet of warehouse space in North America is allotted to public or contract warehousing, says Dick Armstrong. The rest is privately owned and operated.
The length of a company's contract with a 3PL can be:
A). Less than a month
B). 30 days
C). 60 days
D). One year
E). Three years
F). Five years
G). Any of the above
The correct answer is G, any of the above. Contract lengths with 3PLs can run virtually any length, although if your warehousing contract is less than 30 days, you’re technically using public rather than contract warehousing. The most common contract length is three to five years, according to Armstrong & Associates.
Which of the following is the most prevalent form of 3PL contract?
C). Activity--based costing
It's B. Although times have changed in many areas of the outsourced logistics world, transactional or unit pricing--where clients agree to pay their 3PLs a fixed fee per unit--is still the most frequently used form of pricing.
Which of the following have been acquired by or merged with other 3PLs in recent years?
A). GATX Logistics
E). Airbourne Express
F). Roadway Corp.
H). All of the above
The correct answer is H, all of the above. Growth through merger or acquisition is a huge trend in the 3PL industry, and recent consolidation activity has been especially busy.True or false:
It's more common to use one 3PL than several.
That's false. Nearly two--thirds of Fortune 500 com--panies use multiple 3PLs, according to a recent Northeastern University/Accenture study. Their biggestreason for doing so: Not being able to find a single provider whose service offering is broad enough. Many of the world's larger 3PLs are expanding their service offerings to offset this fact.
Who outsources more, companies in the United States or Europe?
Companies in Europe do. U.S. companies spend nearly half of their logistics budgets on 3PLs, according to a survey of Global 1000 companies by the Georgia Institute of Technology and Cap Gemini Ernst & Young. But 65 percent of large European companies' budgets go to the same.
Which of the following selection criteria most drives companies' choices of 3PLs?
A). Systems capabilities
B). Global capabilities
E). On--time performance
The answer is C. Money talks. In 2003, companies rated price as the number one 3PL selection factor, according to the Association for Logistics Outsourcing. (By contrast, companies had ranked price 11th in 1993). This selection criterion is consistent with the findings of a 2003 Northwestern/Accenture study, which reported that finances were companies' key concern.