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Inward Investment Guides

An Explosion of 3PL Services: How Are These Expanding to Meet Customer Needs?

A host of new services are turning 3PLs into company "partners" in the logistics process.

William Atkinson (Logistics Distribution Warehousing 2007)
(page 2 of 3)
The Future Is Green
When asked what new value-added services seem to be gaining the most, virtually everyone responds with "green." Customers want 3PLs to be more focused on environmental issues, and forward-thinking 3PLs are complying, not only because they want to respond to customer demand, but because there are ways to increase the flow of "green" (money) by "going green." Finally, more companies in general are becoming environmentally conscious.

"The industry needs to look at the green and sustainability movement from two perspectives," explains Christensen. One is environmental. The other is economic. "There are a large number of companies that are completely missing the economic perspective," he emphasizes. "There is a lot of money to be saved, but they don't yet realize the opportunities." One example: There is a lot of value in being able to tear down and separate returned product components, then reuse or sell them rather than discard them.

Melville of Total Logistic Control strongly agrees: "A lot of customers are beginning to focus heavily on supply-chain sustainability-green initiatives," he points out. "This has been gaining a tremendous amount of momentum in just the last few months, and we expect it to continue."

The company has found that most large customers have sustainability initiatives internally, and they are being funneled to the distribution groups, which are passing them on to the vendors. In addition, according to Melville, many retailers are looking at sustainability. "This, of course, drives manufacturing, which then drives the whole supply chain," he continues. An example of this would be the adoption of slightly different materials or different work practices.

Glenn Mauney, senior vice president of GENCO, Pittsburgh, Pa., a 3PL provider, also sees the trend toward green. The company offers services in three areas: outbound logistics (contract warehousing), basic transportation services, and reverse logistics, which involves the processing of returned goods as well as asset recovery (reselling returned products and recapturing the value). It is in this third area that GENCO is seeing significantly increasing requests from customers and opportunities for growth related to environmental initiatives.

"Reverse logistics involves the recovery and disposition of items coming back through the channel," explains Mauney. One reason for the popularity of the service is that consumers are demanding that companies have solid returns policies in place. Another relates to Sarbanes-Oxley, i.e., there needs to be a focus on accounting for all inventory, including pockets of returned goods sitting idle in a warehouse somewhere. A third reason, though, which GENCO has seen take on more importance in the last year, relates to green initiatives.

One element of green relates to the disposition of products, especially electrical items (electronics and appliances). "While there has been an awareness of and a movement toward this in Europe for quite a while, it is now just gaining traction in the U.S.," says Mauney. "Some large companies such as Wal-Mart are focusing on this." Thus, while green opportunities cover initiatives related to distribution, packaging, and destruction of packaging material, the big growth area, as noted, relates to returned goods.

"In the future, the liquidation and disposition of goods will become more popular," continues Mauney. One option is to destroy product, which is expensive and requires landfill or other forms of destruction, e.g., shredders. A second option is to recover the value by selling a product on the secondary market. A third is to recoup the product, which includes recovery, cleaning it up, repacking, and putting it back into the channel, such as is becoming the case with electronic products and appliances via Internet auctions. More and more companies, according to Mauney, are seriously exploring these profitable alternatives.

Working Together
Of course, unless you find a way to work cooperatively with 3PLs, the number and types of services they offer will be meaningless. The key, according to the experts, is to trust enough to be open and honest.

"Some companies work with a consultant, and then at the last minute drop RFPs in the laps of 20 3PLs," notes Melville of Total Logistic Control. "There is nothing wrong with this, but it does give the customer a very one-sided, reactionary, tactical solution." However, if the customer goes to two or three providers early on and discusses issues, the customer will end up getting much more from the relationship. "We have found through experience that the earlier we can get involved with a prospect, the more value we can bring, and the better solution the customer gets," he explains.
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