‘Getting the basics right is critical’

The 3PL business model
faces many threats, says
logistics specialist Martin
Bailey.
“Many 3PLs have
moved away from their
core expertise. They have
been so busy trying to
show that they are in the
complete logistics space
that they have forgotten
they need to do the basics
right.
“They still need to be
good, low-cost, safe and
effective truckers and
warehousemen. As their
opposition are also in the
intellectual space, they
no longer have a logistics
advantage, and they thus
need to show they can do
the basics well.”
As a case study, Bailey
painted a picture of the
XYZ 3PL. This operator
is running an aggregated
distribution network
for several fast-moving
consumer goods (FMCG)
manufacturers.
“Most of the retailers
have now set up their own
networks to undertake
this function,” he told
FTW. “The retailers have
the benefit that they
can control the inbound
network and the outbound
network – where no 3PL
can compete.
“With their ‘power’,
the retailers are going to
dominate this business,
and the 3PLs are going
to be scrapping for the
remaining business –
which is, unfortunately,
unprofitable small-volume
supply to the small stores
without their own retail
DC infrastructure.”
That, he pointed out,
is just one major threat
of many, but proves that
often the 3PL has ventured
too far out of his core
domain.
However, Bailey
estimates that 3PLs now
provide some 50-60% of
SA’s logistic processes.
“If we consider that
logistics probably
contributes in excess of
R100 billion within the
SA economy every year,
their future still has a
massive effect on our
supply chains.”