When seeking out better logistics solutions for your company, you may tend to gravitate toward the larger, flashier 3PL providers, thinking that the size of a company has a direct relationship to their efficiency and technological capabilities.
But the truth is that bigger is not always better.
Our break down of large, mid-size and small 3PLs will give you a clearer picture of the state of the third party logistics provider landscape and allow you to make a more educated choice for your provider.
Large 3PLs Can Only Go So Far
Large 3PLs, those that are from $500 million to $1 billion, have been making an impressive showing in recent years. While partnering with a major company can certainly reduce your risk, the ability of a 3PL to manage your supply chain only carries them so far. When held against many smaller 3PLs, they are severely lacking when it comes to things like customer relations, flexibility and operating margin. Sure, they have the financial backing to be global, but a global reach is useless if you can’t pack the punch needed for the company to do its job.
While financial backing can get you a lot of things, it will only carry a company so far.
When money is the sticking point, a company tends to lose sight of other aims and vital elements begin to fall to the wayside and fail. This leads to a breakdown in the system that undermines the 3PL’s initial goals for its client.
Many Mid-Size 3PLs Are Struggling
Many medium sized 3PLs, those that are $250 million to $500 million, are struggling the most in this game. They are too large to have the benefits and flexibility of a small 3PL, yet lack the strength and financial backing of a larger 3PL. Simply put, they are stuck in the middle with nothing that really stands out about the company or services they provide.
In the end, many of these companies will be edged out by the sheer size of the big name corporations or outshined by the service of smaller 3PLs. With the market still in recovery mode, it can be tough to compete with other companies providing logistics solutions because there really isn’t room for any middle ground. Eventually, many mid-sized companies will find themselves being acquired by a large rival or scaling back their operations in order to stay competitive.
A Case for Small 3PLs
In the case of third party logistics providers, bigger is not necessarily better. In fact, bigger 3PL providers can often be problematic. Of course small companies do have their own quirks, but there is something to be said for 3PLs that have a net revenue of less than $250 million. Because these companies are smaller they have certain advantages that larger providers cannot touch.
Stronger customer relations, for one. The smaller scale of these 3PLs allow them to build an experience that is founded on building relationships with clients-- that means your business sees more focused, personalized care. They become a tight knit extension of your company with your best interest in mind as opposed to a faceless entity that is so large its clients are nothing but numbers.
You're also like to see more flexibility from a smaller vendor. A smaller 3PL has greater flexibility so it can adapt to the customer needs quickly and efficiently. Their adjustment to the needs of the market is faster.
And let's not forget about operating margins. The obvious benefit of a small 3PL is that the business will have lower overheads, and most likely, lower operating margins as well. And there's much to recommend a partner that offers superior operating margins.
Finding the right logistics solutions is not always a cut and dry affair. So many factors come into play, and what looks good at first glance can turn out to be a tragic mistake. When choosing a 3PL for your business, you may find that you can get a better experience by opting for a smaller provider.
A smaller 3PL means a closer provider-client relationship. A better relationship means better care, closer attention and logistics solutions that are tailored to a client that the provider knows well.
Great things really do come in small packages.