Should You Be Worried about the Consolidation of the 3PL Industry?

Published : December 17, 2015

3PL consolidation

Staying competitive is one of the biggest challenges facing every company, even those that provide vital services in the logistics sphere. Simply moving goods from one point to another is no longer enough to ensure prosperity in an omni-channel era. Shipping solutions must be as diverse and customer-pleasing as the products themselves. To that end, the 3PL industry has begun to mirror its non-service clients, absorbing and buying out peers in a bid to remain attractive to customers, both current and potential. What does this mean for you, as a client on that roster?

There May Be Growing Pains...

Whenever two companies merge, or one is acquired by another, there are going to be at least a few compatibility issues. Computer systems may need to duke it out, warehouses might need to be relocated, managerial duties can be phased out or expanded. In that resettling period, the logistics systems you currently have linked to your own in-house systems may be less than reliable. This means that you'll have to be proactive when you become aware of a current or future merger that might affect your relationship with a 3PL provider. Yes, it's good customer service on their part to approach you with solutions, but their timetable also might not be as urgent as your own. As Robert C. Lieb notes in an article for CSCMP's Supply Chain Quarterly, expansion into new service sectors and locales may be very disruptive for a company at first, so a "wait and see" approach might be prudent, at least temporarily.

But There Are Benefits Too.

When one 3PL company buys out another, the "new" company typically has something the buyer wants—attributes like better coverage of a geographic area, a proprietary organization system, or a talented team that's high-profile enough to turn heads and raise buyout capital. While the buyer is obviously trying to elevate their own company, these type of mergers can also benefit clients, who receive access to those expanded offerings and expertise.

If, for example, you've been mulling over an international sales push but hesitated because you had trouble finding trustworthy foreign 3PL providers, an international buyout from a familiar domestic company could instantly clear the way. The shipping solutions offered by the new merged company would give you the same assurances as state-to-state shipping with the domestic provider, giving you the most precious business commodities of all: stability and predictability.

Your 3PL Company Might Not "Win"

One of the drawbacks of a merger and acquisition-rich market is the potential for your favorite company to end up on the chopping block. Granted, this scenario is most like for businesses using use smaller, regional 3PL companies, especially in light of industry stresses like the truck driver shortage. But the ongoing financial woes of the United States Postal Service seem to hint at big moves for logistics and fulfillment in the coming years, and those moves might involve one of the leading 3PL providers getting absorbed for management's sake. While collaborative loyalty is great for business, you should always be prepared to shift gears as painlessly as possible if a partner drastically changes or vanishes altogether. In short, don't make their merger problems your operational problems.

No matter how efficient you are at manufacturing, stocking and sales forecasting, your customers won't see or appreciate all that hard work if your shipping solutions fall by the wayside. Consolidation doesn't have to be disruptive—and can even be largely beneficial—but that will only happen if you stay alert to potential mergers and acquisitions in your 3PL sphere. Give your rep a call today and let them know you're on board with any potential consolidations—provided they keep you in the loop and give you time to react.

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Topics: Shipping Solutions

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