By Clifford F. Lynch
For all the talk about globalization over the past decades, it’s only
recently that supply chains have become truly global. It’s not that companies
didn’t have foreign operations in the past; they did. But only rarely did
their logistics activities extend much beyond a single country’s borders.
Today, that’s changed. Everybody seems to be going global. Logistics people
who once couldn’t locate Zhongdian on a map suddenly find themselves arranging
multimodal moves from the area. And they’re expected to do it quickly and
without running afoul of trade regulations, currency restrictions or
documentation requirements. Small wonder that many end up turning to specialists
The result has been soaring demand for third-party international services.
When announcing the results of the latest third-party logistics survey at the
Council of Supply Chain Management Professionals’ annual conference, John
Langley of Georgia Tech noted that among third-party logistics (3PL) service
offerings in North America, customs brokerage/clearance had become the third
most popular, behind outbound transportation and tied for second place with
warehousing. A full 63 percent of the respondents reported that they outsourced
customs-related functions, compared to only 42 percent in 2002. It’s a similar
story with freight forwarding, now number five on the list. Right now, 56
percent of survey respondents who use 3PLs outsource freight forwarding, up from
43 percent in 2002.
But that’s only part of the story. The study also showed that when it comes
to global trade services, shippers want more. Along with customs clearance and
freight forwarding, they want a full menu of options: ocean transportation,
import documentation, shipment tracking and warehousing, to name a few.
The market has taken note. The big 3PLs are expanding their menus and taking
their message on the road. At the CSCMP annual meeting alone, attendees could
hardly turn around without bumping into a representative from a full-service
global service provider like BAX, UTi, Expeditors or UPS.
What’s striking about this market sector is the level of foreign ownership.
The top five global service providers are based overseas: Exel (Britain), Kuehne
& Nagel (Switzerland), Schenker (Austria), DHL Danzas (Germany), and P&O
Nedlloyd (Denmark). But wherever their headquarters may be, these companies are
undeniably interested in the U.S. market. Several have already made significant
inroads into the United States through acquisition and expansion. For evidence
of that, you need look no further than UTi Worldwide’s acquisition of Standard
Corp. or Kuehne & Nagel’s acquisition of USCO.
Where does this leave U.S. third-party providers? I asked several domestic
warehouse companies at the CSCMP conference if they viewed the foreign-owned
competitors as a threat. Though none termed them a serious threat, they’ve
clearly given it some thought. Most said they would probably respond by joining
forces with some kind of international service provider to form alliances of
their own. But finding a partner may prove harder than they think.
A few of the domestic providers I talked with simply did not see the foreign
infiltration as a problem. They believe if they stick to their niche and provide
excellent service, they will survive and even thrive.
Given its explosive growth, the marketplace will no doubt have room for
providers of all sizes and shapes for some time to come. But that doesn’t mean
the traditional domestic providers can safely ignore incursions onto their turf.
Though logistics would certainly not be the first industry to be overwhelmed by
foreign competition, there’s no reason to send up the white flag. If 3PLs want
to influence the battles’ outcome, the time to start strategizing is now.