Though few companies will look back at 2009 as a banner year for profits, the successful third party logistics companies of the future may mark this year as the foundation for their success. For the first time in thirteen years, third party logistics providers have reported negative gross revenue growth compared to the previous year. According to the study that generated that statistic, three out of five 3PL companies are experiencing drops in both gross and net revenue. However, the studys author points out that highly effective third party logistics companies use periods of negative growth to reset expectations while making impactful investments in their enterprises.

According to industry expert Dick Armstrong, warehousing specialists and other value-added third party logistics companies seem to be riding out the recession well. Their year-over-year declines track as low as three percent, compared to the industry average of eight percent. Strong 3PL companies are still profitable, even if overall revenues are down. Armstrong notes that when those companies invest their profits in critical areas, they can set the stage for future success. Key investments include:

• Global operations. Third party logistics companies can use a break from growth to send key personnel around the world, scouting for new locations, new customers, and new business partnerships. By preparing for eventual growth across the entire global economy, supply chain services companies and other 3PL specialists can be ready to meet sudden spikes in demand for their clients products.
• Information technology. As IT spending cools across multiple industries, 3PL companies can use downtime to implement new systems and to enhance existing tools while minimizing disruption to their clients businesses. Another benefit to making investments during an economic downturn is a faster return on investment in information technology. Many IT projects cost less during a recession, since hardware and consulting costs drop due to lack of demand in other industries.
• Customer relationships. Most importantly, account managers at third party logistics companies can use a cooling off period to invest time in analyzing their clients businesses. Helping clients ride out a recession through careful cost analysis and incremental margin improvements plants the seeds for a relationship that thrives during boom times

Third Party Logistics Companies Battle Client Meltdowns

Maintaining a profit base from which to invest requires close partnership with clients who may be facing tougher challenges than the 3PL industry. A survey of leading logistics professionals conducted in early 2009 indicated an overall lack of confidence in the global economy. Respondents also suggested that an economic rebound among their clients might not happen until early 2010. In that kind of scenario, the third party logistics companies that add the most value for their customers can expect to earn even more business once confidence is restored.

For companies currently seeking third party logistics providers, experts suggest evaluating the kind of investments in resources and relationships made by prospective vendors. An efficient, hungry company that has a clear exit strategy for the recession can lift the spirits and the profits of its client companies. By making stronger partnerships, the most effective third party logistics providers can lead other industry sectors back to a period of revenue growth.

Sources

Gati Express

Modern Materials Handling

Supply Chain Market